There are pockets of opportunity.
It’s been a chaotic month in the stock market. But while most investors’ portfolios are hurting, analysts have been identifying pockets of long-term opportunity amid the market carnage. Following an unprecedented $2 trillion stimulus package, investors and analysts are feeling a bit more optimistic. Former Federal Reserve Chairman Ben Bernanke said last week he anticipates a “sharp, short” recession and a “fairly quick rebound.” Here are seven of CFRA’s most recent stock upgrades to buy on the dip.
Coca-Cola Co. (ticker: KO)
Global soda giant Coca-Cola is a classic blue-chip defensive stock to buy during times of market uncertainty. Analyst Garrett Nelson recently upgraded Coca-Cola and says the stock’s attractive valuation, strong balance sheet, stable earnings and low beta make it a no-brainer for defensive, long-term investors. Nelson says Coca-Cola’s appealing cash flow and capital returns, including its 3.8% dividend, are especially attractive to income investors now that interest rates have dropped back near zero. Coca-Cola also has sizable growth opportunities in its emerging market operations. CFRA has a “strong buy” rating and $60 price target for KO stock.
Williams-Sonoma is a U.S. specialty retailer that sells high-quality home furnishings and kitchen items. Analyst Camilla Yanushevsky upgraded the stock on March 19 and says Williams-Sonoma’s online-centric business model is perfectly positioned to benefit from consumers’ shifting retail preferences, especially given COVID-19 cocooning. She says the company’s vertically integrated supply chain insulates it from potential coronavirus disruptions or bottlenecks. Finally, she says the company’s strong 2009 performance is indicative of the impact its strong balance sheet and cash position can have in a downturn. CFRA has a “buy” rating and $45 price target for WSM stock.
Sempra Energy (SRE)
Sempra Energy is a U.S. utility and natural gas transmission and distribution company. Analyst Christopher Muir says his recent upgrade is based on Sempra’s strong earnings growth outlook driven by new projects and its valuation discount relative to peers. Sempra has also filed for approval to increase its rates over the next three years, which could boost margins. In addition, activist investor involvement with the company has triggered strategic reviews that could help unlock value for investors. The stock also pays a 3.5% dividend. CFRA has a “strong buy” rating and $120 price target for SRE stock.
Edwards Lifesciences Corp. (EW)
Edwards Lifesciences is a medical device maker that specializes in transcatheter heart valve replacement. Analyst Kevin Huang recently upgraded the stock and says its COVID-19 sell-off has created a compelling entry point for value investors. In the event of a U.S. recession, Huang says Edwards has a rare combination of a strong cash position and defensive revenue. Huang says Edwards is investing aggressively in innovation as well, which can help the company tap into high-growth markets such as transcatheter tricuspid and mitral valve therapies. CFRA has a “buy” rating and $201 price target for EW stock.
Global Payments (GPN)
Global Payments is a worldwide payment processing and merchant acquiring services provider. Analyst David Holt says the fallout from the coronavirus outbreak is now fully reflected in the stock’s share price, which is down 26.3% in the past month. Holt says more than half of Global Payment’s revenue is not dependent on consumer financial health. CFRA is projecting between 8% and 9% revenue growth in 2020 and 2021, and Holt says its merger with Total System Services should generate earnings growth and shareholder value over time. CFRA has a “buy” rating and $175 price target for GPN stock.
IHS Markit (INFO)
IHS Markit is an information services provider for the financial services, energy and transportation industries. Analyst Colin Scarola upgraded IHS and says the company’s earnings will be resilient throughout the coronavirus outbreak. Scarola says he expects the company’s financial services segment to continue to be its biggest growth driver in fiscal 2020. Elevated financial market volatility and uncertainty creates demand for IHS data and analytics, Scarola says. At the same time, the economic downturn will likely weigh on the company’s oil and auto revenues. Still, CFRA has a “strong buy” rating and $72 price target for INFO stock.
Amgen is a biopharmaceutical company that develops and manufactures oncology and inflammation therapies. Huang says Amgen is the type of “high-quality defensive name” that tends to perform well during recessions. He says Amgen’s biosimilar drug business will be a key growth driver for the company in coming years and could generate more than $2 billion in annual sales by 2023. AMG 510 is a particularly promising oncology candidate, one of many that the company has in its development pipeline that could be catalysts for the stock. CFRA has a “buy” rating and $223 price target for AMGN stock.
Upgraded stocks to buy in April:
— Coca-Cola Co. (KO)
— Williams-Sonoma (WSM)
— Sempra Energy (SRE)
— Edwards Lifesciences Corp. (EW)
— Global Payments (GPN)
— IHS Markit (INFO)
— Amgen (AMGN)
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