Overview
TD Cowen has spotlighted two stocks in the small- and mid-cap universe that it believes the market is discounting too deeply. The bank’s work centers on firms whose near-term difficulties, in TD Cowen’s view, obscure stronger underlying trends and potential catalysts that could drive performance in upcoming quarters.
Casella Waste Systems - Rationale for a Buy
TD Cowen maintains a Buy rating on Casella Waste Systems Inc (NASDAQ: CWST), arguing that the negative sentiment surrounding the company is excessive. The firm notes that Casella has delivered revenue growth that has outpaced peers by roughly 1,000 basis points annually over the past three years. Despite that track record, the stock currently trades at a valuation about 45% below its peak level not seen since 2018.
TD Cowen counters concerns about landfill pricing pressure related to rail-based waste export by pointing to the composition of Casella’s revenue: third-party landfill revenue accounts for only about $90-$100 million, while collection revenue tops $1 billion. The bank expects a recovery in the company’s underperforming Mid-Atlantic region and improvement in margins, and it highlights the potential for EBITDA gains that could significantly exceed management’s guidance. Specifically, TD Cowen sees the possibility that EBITDA improvement could be large enough to double Casella’s $15 million guidance through 2028.
On forward estimates, TD Cowen’s 2027 revenue growth projection of 10% is meaningfully above the 7.5% consensus, and its EBITDA forecast runs roughly 2.5% higher than the Street. The firm’s view is reinforced by recent analyst activity: Barclays upgraded Casella to Overweight after citing strong first-quarter results and momentum on synergy capture, while Stifel reiterated its Buy rating, noting sequential improvement in third-party landfill pricing.
Alaska Air Group - Transient Headwinds and Upside
TD Cowen also identifies Alaska Air Group (NYSE: ALK) as a name with upside potential once temporary pressures subside. The firm highlights two principal near-term headwinds: elevated West Coast jet fuel costs and weather-related disruptions in Hawaii that affected spring break travel demand. TD Cowen quantifies fuel-related impacts as a $0.70 per share headwind in the first quarter and a $3.00 per share headwind in the second quarter.
With major merger integration milestones largely complete, TD Cowen expects management to be able to prioritize operational execution. The bank points to Alaska’s exposure to stronger corporate and premium demand, along with Seattle long-haul expansion that could enhance the carrier’s loyalty value proposition, as structural positives. TD Cowen anticipates that one-time cost pressures will fade, and it sees the company’s second-half 2026 results and the planned September 29 Investor Day as potential catalysts for a re-rating.
Recent corporate developments cited by the bank include the appointment of former T-Mobile CEO Mike Sievert to Alaska’s board and the launch of a new daily nonstop service between Seattle and London. UBS has also raised its price target on Alaska’s shares, according to the information TD Cowen references.
Implications and Context
TD Cowen’s selections underline a focus on firms where the bank believes short-term obstacles obscure longer-term earnings and revenue trajectories. For Casella, that is concentrated on operational geography and the relative size of revenue streams; for Alaska, it is related to transient fuel and weather effects combined with strategic network expansion and the conclusion of integration work.
The bank’s forecasts diverge from consensus in material ways: a higher revenue-growth outlook for Casella in 2027 and slightly higher EBITDA expectations, and a view that Alaska’s near-term EPS pressures are temporary and will alleviate as cost disruptions abate.
Conclusion
TD Cowen’s analysis identifies Casella Waste Systems and Alaska Air Group as small- and mid-cap companies where the firm sees upside as specific catalysts play out. The bank’s stance rests on historical revenue strength, revenue mix considerations, expected margin recovery, the winding down of one-time cost pressures, and operational catalysts including capacity expansion and investor events.