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Wells Fargo: 3 Stocks That Could Climb Over 50%

A speculative fever from the bulls pushed the market to historic heights, but have the bears now been vindicated? Following a record breaking five-month rally, stocks have dipped from their record highs. The recent decline had been preceded by warnings, which had been making the rounds for weeks, that a reality check was overdue. Weighing in for Wells Fargo, senior global equity strategist Scott Wren stated, “We have not had much give back in this gigantic run that we’ve had. So inevitably the stock market sell-off was bound to happen.” This, however, is not to say that exciting plays can’t be found in the current financial environment. “Certainly, pullbacks are opportunities in our minds,” the strategist explained.Taking Wren’s strategy to heart, the analysts at Wells Fargo are pounding the table on three stocks. According to these pros, each could gain over 50% in the year ahead. Running the tickers through TipRanks’ database, we wanted to find out what makes them such compelling opportunities.Houghton Mifflin (HMHC)As a leader in pre-K-12 educational content and services, Houghton Mifflin combines digital innovation and research to make learning more engaging and effective. Given the need for digital and remote schooling solutions, Wells Fargo sees big things in store for this name.Representing the firm, analyst William Warmington believes Q2 billings are not a cause for concern, with the result falling in-line with his expectations. The limited selling activity in April and May was to blame for the weak result. That being said, Warmington believes the figure will improve at a “greater-than-usual” pace given the return of normal seasonal demand levels in June and the delay of orders from Q2 to Q3.Warmington does mention that the acceleration to digital will play a key role in the company’s success. According to the analyst, at least half of school districts are going completely virtual or hybrid, which will drive increased demand for flexible and digital learning solutions. To this end, districts have bumped up their device-to-student ratios, enabling greater adoption of digital instructional materials, in Warmington’s opinion. He noted, “We view these hardware investments as a critical step in accelerating the adoption of HMHC’s digital products.”Expounding on this move to digital, Warmington stated, “We believe HMHC is well positioned to meet this need/demand primarily through HMH Anywhere, an online integrated learning platform that (1) enables instructional materials to be delivered digitally and (2) will primarily be sold on a subscription basis, reducing volatility and production/delivery cost.”The implication? Warmington argues the shift to digital has the potential to “improve HMHC’s revenue visibility and margins and ultimately drive a re-rating of the stock.”Adding to the good news, HMHC repaid $150 million of revolver borrowings with free cash flow generation, which reduced leverage and improved liquidity. Warmington also highlights that it is going through “another cost structure review with results expected by Q4 2020, potentially further lowering breakeven billing level (currently $1.23-1.28 billion) and positioning for margin improvement over the cycle.”Although falling

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