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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| June 1, 2018
How do you find fresh investing inspiration in these choppy times? Right now, political uncertainty in Italy has sent global markets into a tailspin, and the U.S. has just put a global tariff tiff back into play. However, even in these conditions, there still are several stock picks that look like compelling opportunities right now.
Credit Suisse analyst Andrew Garthwaite, who still sees stocks as a valuable source of returns, recently wrote in a note to clients: “We conclude that a US recession is unlikely until Q3 2020. Remain overweight equities.”
So if it’s still game-on for bulls, which stocks are worthy of a closer look? We used TipRanks’ market data to compile a list of 10 of the most intriguing stock picks right now. TipRanks tracks the latest stock ratings from more than 4,700 analysts. As a result, we can pinpoint the stocks that Wall Street’s top analysts believe are set to rally in the coming months.
Let’s take a closer look at their favorite stocks now:
Data is as of May 31, 2018. Click on ticker-symbol links in each slide for current share prices and more.
Market value: $66.8 billion
TipRanks consensus price target: $76.65 (33% upside potential)
TipRanks consensus rating: Strong Buy
Highflying semiconductor stock Micron (MU, $57.59) revealed multiple positive catalysts at its annual analyst day on May 21. First came an earnings guidance raise for its fiscal third quarter, then news of a deal with Intel (INTC). The icing on the cake? A massive $10 billion share buyback program. Micron now expects revenue this quarter of $7.7 billion to $7.8 billion (up from a prior range of $7.2 billion to $7.6 billion). Shares subsequently jumped almost 8%.
Analysts rushed to boost their MU price targets, with Rosenblatt Securities’ Hans Mosesmann (view Mosesmann’s TipRanks profile) offering the highest price target of $115 (84% upside potential). After the meeting, he commented, “Micron executed one of its best investor days we can remember by cementing the case of the structural change in the memory/storage industry with both significant Micron specific operating profit improvements, and a $10 billion share repurchase authorization starting in FY19.”
For Mosesmann, this firmly rebuts fears that the memory market was about to enter a downturn cycle. On the contrary, he believes we are looking at a prolonged cycle for the memory/storage markets with sustainable profitability. Data-center storage and AI has increased demand, while supply is more limited as the manufacturing process becomes increasingly complex.
“Micron is generating roughly $10 billion in (free cash flow) per year going forward and with the improved balance sheet and $10 billion repurchase program for FY19 we believe investors will start to view the shares in a different light in a sustainable fashion” Mosesmann writes.
This “Strong Buy” stock currently boasts 20 buy ratings, versus just three holds and one sell.
Market value: $40.7 billion
TipRanks consensus price target: $146.44 (12% upside potential)
“Ride the tide,” advises Oppenheimer’s Andrew Uerkwitz (view Uerkwitz’s TipRanks profile) when it comes to video games giant Electronic Arts (EA, $130.91).
This five-star analyst has just attended a Battlefield reveal event for the latest installment in the franchise, Battlefield V. He managed to get a sneak peak on some of the upcoming features for the game, which is due for official release in October.
“We believe BFV is a solid improvement over the proven formula of BF1 and retains the core mechanics that made the BF franchise successful,” Uerkwitz writes. In particular, EA has made a big effort to include live service (i.e., constantly updated content), but this time for free. Indeed, EA introduced the Tides of War system in BFV to continuously service gamers with new maps, time-limited unlockable items and new modes that are embedded with narrative storytelling to improve immersive game play.
The bottom line: “Overall, we see the potential for this title to set up both near and long term outperformance for the BF franchise. The live service component looks intriguing and should be closely watched by investors.”
Encouragingly, Electronic Arts also scores a “Strong Buy” consensus rating from the Street. To be precise: In the past three months, 10 analysts have published buy ratings on EA, against just one hold rating.
Market value: $46.5 billion
TipRanks consensus price target: $13.33 (15% upside potential)
TipRanks consensus rating: Moderate Buy*
When you think of stocks set to rally, you may not immediately think of old auto stalwart Ford (F, $11.55). But according to JPMorgan’s lead automotive equity analyst, Ryan Brinkman (view Brinkman’s TipRanks profile), that would be a mistake.
“We believe Ford management understands the previous deficit relative to the positioning of the investment story in comparison to General Motors and also that the story is now improved as a result of the recent announcements,” Brinkman wrote in a May 18 research note.
He continues: “We believe Ford is in the process of pulling the trigger, or soon to pull the trigger, on walking away from previously core but loss-making aspects of its business,” adding “We suggest investors pull the trigger on Ford shares now, as its earnings – and its multiple – are likely to inflect higher as it undergoes this transformation.”
Brinkman isn’t alone in this bullish analysis. On May 29, top Jefferies analyst Philippe Houchois (view Houchois’ TipRanks profile) upgraded his F rating from “Hold” to “Buy.” He assigned a $14 price target to the stock, arguing that Ford is getting “no credit for ambitious but credible cost targets and for multiple operating and strategic levers still available to improve market and product exposure.”
*TipRanks-ranked “top analysts” rate F shares a Strong Buy.
Market value: $16.1 billion
TipRanks consensus price target: $119.82 (33% upside potential)
BioMarin Pharmaceutical (BMRN, $90.34) is a biotechnology company that specializes in treating rare genetic diseases. The stock is buzzing right now following a much-sought-after regulatory approval for its drug Palynziq. This is a treatment for phenylketonuria, a rare metabolic disorder that can potentially cause brain damage leading to seizures or mental disorders.
Citi analyst Robyn Karnauskas (view Karnauskas’s TipRanks profile) reacted by ramping up her BMRN price target from $100 to $108. She notes that the drug received a broad label and monitoring only, as a single dose can accelerate patient uptake.
But investors should note this isn’t necessarily a slam-dunk. The impact of Palynziq’s approval will take a while to materialize, writes Leerink analyst Joseph Schwartz (view Schwartz’s TipRanks profile).
BioMarin views Palynziq as a potential blockbuster drug, but Schwartz estimates peak sales of only about $500,000 in 2029. He’s still bullish on the stock, but thinks breakout success for Palynqiz “will require substantial uptake and compliance.”
In total, this "Strong Buy" stock has received 10 buy ratings and only one hold rating in the previous three months.
Market value: $2.3 billion
TipRanks consensus price target: $41.18 (26% upside potential)
Heron Therapeutics (HRTX, $32.60) specializes in the huge market of post-surgical pain management and drug delivery. Its lead product candidate is HTX-001- a powerful combination of local anesthetic bupivacaine and anti-inflammatory agent meloxicam.
“We believe HTX-011 addresses what we see as an unmet need in the postoperative pain market – failure of local anesthetics when inflammation is present” writes top Mizuho Securities analyst Difei Yang (view Yang’s TipRanks profile), who has a $35 price target on HRTX. She is excited about the drug’s potential, as “Recent studies suggest a potential synergistic effect from both components which we see as an important differentiator for the drug over the current standard of care, i.e., generic bupivacaine.”
As Heron’s website states, the drug has been designed to help tackle America’s growing opioid crisis. According to the former U.S. Secretary of Health, Tom Price, 140 Americans die each day from opioid addiction. That’s where Heron steps in: “By delivering sustained levels of both a potent anesthetic and an anti-inflammatory agent directly to the site of tissue injury, HTX-011 was designed to deliver superior pain relief while potentially reducing the need for systemically administered pain medications such as opioids, which carry the risks of harmful side effects, abuse, and addiction.”
HRTX has accumulated 11 buy ratings from analysts over the past three months.
Market value: $517.3 billion
TipRanks consensus price target: $246.07 (24% upside potential)
Top Wells Fargo analyst Ken Sena (view Sena’s TipRanks profile) has these key words to describe Chinese e-commerce giant Alibaba (BABA, $198.01): “A Very Investible Outlook.”
On the back of strong quarterly results, Sena wrote, “Our recommendation of Alibaba factors its large addressable, scaled advantage in transaction and data, and its leadership in China Cloud, where this quarter saw yet another triple-digit growth rate (103%).” Revenue more than delivered, with fiscal fourth-quarter revenues growing 61% year-over-year to $9.9 billion, beating expectations for $9.3 billion.
This strong revenue offset the only fly in the ointment: margins. High spending on new growth initiatives tilted margins below what was expected. However, Wall Street approved of BABA’s focus on investing at the expense of profits.
“We feel the narrative on the stock is shifting from concern over investment spending to a focus on profit growth and long-term opportunity,” wrote top MKM Partners analyst Rob Sanderson (view Sanderson’s TipRanks profile). He called this investment “absolutely worthwhile” and reiterated his buy rating with a $180 price target.
And in respect to Alibaba’s much-hyped “new retail” initiative to combine offline and online retail, Sanderson wrote, “We think this business will ultimately be as high a margin, or better than the existing marketplace model.”
Alibaba has earned 14 buy ratings in just three months.
Market value: $1.6 billion
TipRanks consensus price target: $23.33 (14% upside potential)
From a Street perspective, Evolent Health (EVH, $20.45) is a first-class stock with a lot of potential. Shares are already up 60% year-to-date, but this isn’t the end of the story – far from it. Evolent Health sells software and consulting services to help healthcare providers, such as hospital systems, offer care at lower costs. In the past three months, EVH has received five buy ratings (from top analysts) and one hold rating.
One of these buys comes from five-star Cantor Fitzgerald analyst Steven Halper (view Halper’s TipRanks profile). He sees prices reaching $28 (35% upside potential). EVH recently hosted an upbeat investor meeting showcasing its capabilities and growth opportunities. Following the meeting, Halper is more confident than ever that EVH has ‘significant growth opportunities’ ahead. This is partly because of the transition to a value-based reimbursement system for healthcare providers. This means providers are rewarded for helping patients improve their health rather than the number of services.
Halper writes, “We believe EVH is positioned to execute on its population health growth strategy given the large addressable market. EVH currently has over 30 partners and about 3.1 million lives on its platform. Medicaid and Medicare represent a significant growth opportunity for the company as providers enter partial and full risk arrangements. As U.S. healthcare costs keep rising, there is more pressure than ever to control costs.”
Courtesy Lou Stejskal via Flickr
Market value: $664.1 million
TipRanks consensus price target: $26.17 (11% upside potential)
TipRanks consensus rating: Moderate Buy*
From a family-run store to more than 200 locations in 29 states, Boot Barn Holdings (BOOT, $23.68) shows that cowboy boots can be a lucrative business. In fact, the company’s revenues have tripled over the past six years. What’s particularly promising is that Boot Barn is growing offline and on, with the latest figures showing website traffic of more than 29 million visits in 2017.
Four top-performing analysts have published buy ratings on BOOT in the last three months. These analysts see the stock (on average) spiking 14% to $28. On the high end of the consensus, Jefferies’ Randal Konik (view Konik’s TipRanks profile) raised his price target from $25 to $30. Konik is a fan of the company’s “robust” comps, “healthy” merchandise margin expansion, and “tight” expense discipline.
Also, BOOT now has a unique position in the market because it has managed to unify the fragmented western/workwear market, Konik writes.
*TipRanks-ranked “top analysts” rate BOOT shares a Strong Buy.
Market value: $2.0 billion
TipRanks consensus price target: $14.21 (28% upside potential)
Gulfport Energy (GPOR, $11.11) is one of America’s largest natural gas producers, and the stock offers exposure to two hot plays: 1) Utica shale and 2) Anadarko Basin SCOOP. “We reaffirm our Buy rating and GPOR remains our top pick for natural gas exposure,” top Williams Capital analyst Gabriele Sorbara (view Sorbara’s TipRanks profile) wrote on May 21. He sees prices spiking 44% to $16.
“The Company is well positioned via a strong hedge book, firm takeaway, locked-in services, strong balance sheet and numerous catalysts,” she writes. In Sorbara’s eyes, “Stock underperformance is unwarranted, as we believe this high-quality Company demonstrates capital discipline and is positioned to generate free cash flow and strong production growth during 2018+.” It is this unjustified valuation discount, especially in respect to peers, that drives Sorbara’s “Top Pick” status.
Also bullish: GPOR already executed its $100 million buyback program in the first quarter, then expanded it by an additional $100 million.
Market value: $33.0 billion
TipRanks consensus price target: $275.21 (39% upside potential)
Chip equipment maker Lam Research (LRCX, $198.18) has 100% Street support right now, with 14 consecutive buy rankings over the past three months.
Cowen & Co analyst Krish Sankar (view Sankar’s TipRanks profile) initiated coverage of LRCX with a very bullish $285 price target (41% upside). Lam is poised to benefit from “secular trends like the increasing memory content in storage, mobile and eventually autos,” Sankar writes. “All of this implies increased demand for equipment, especially deposition and etching tools, playing right into LRCX’s sweet spot.”
Sankar anticipates memory wafer-fab equipment to grow 5% in 2019 as DRAM strength this year is replaced by NAND next year. Notably, enterprise servers are now increasing the mix of solid-state drives powered by 3D NAND technology. The mobile market is getting saturated from a unit standpoint, but DRAM content per smartphone is growing as augmented-reality applications become increasingly popular.
Harriet Lefton is head of content at TipRanks, a comprehensive investing tool that tracks more than 4,700 Wall Street analysts as well as hedge funds and insiders. You can find more of TipRanks’ stock insights here.
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