Brexit Bargain Buys: 14 More Stocks Picked by Morgan Stanley

Has Brexit got you scared to buy stocks? Friday's market pullback has created a buying opportunity for U.S. stocks, according to Morgan Stanley -- particularly stocks with strong fundamental stories that got swept up in the market volatility created by the U.K.'s vote to leave the European Union.

Morgan Stanley analysts identified 28 domestic stocks under their coverage list that are rated overweight by the investment bank and "whose fundamentals are unlikely to be materially negatively impacted by Brexit," according to a note to clients on Monday.

"We focused on stocks that sold off Friday, June 24, with fundamentals that suggest the reaction was unwarranted or overdone," the report said. "For each of these names, we believe the post-vote weakness creates an opportunity to add to positions."

Here is the second half of Morgan Stanley's list for investors to peruse, which includes stocks the firm likes in the health care, industrial, technology and telecom sectors. Each stock entry includes the percentage decline on Friday, Morgan Stanley's price target and a snippet of the bank's investment thesis associated with each stock.

Acceleron Pharma
Acceleron Pharma

Friday's Decline: 4.5%
MS Price Target: $58
Dividend Yield: n/a

"Acceleron (XLRN - Get Report) is at a development stage with no near-term commercial exposure. We believe its fundamental value is driven primarily by clinical data, de-risking of pipeline assets, and the potential for strategic optionality. We view XLRN as a relatively safe growth story within small-/mid-cap biotech as the company's lead assets advance into Phase 3, supported by a favorable collaborative agreement with Celgene (CELG - Get Report) , a strong balance sheet, emerging wholly owned assets, and increasing prospects for strategic optionality," wrote analyst Andrew Berens.

Alexion Pharmaceuticals
Alexion Pharmaceuticals

Friday's Decline: 8.6%
MS Price Target: $189
Dividend Yield: n/a

"We see the market's reaction to orphan drug companies' exposure to Brexit as significantly greater than the potential fundamental impact from FX (ALXN -8.6% vs. -3% for major biotech on 6/24). While Alexion (ALXN - Get Report) has ~32% of its business in the EU, we expect the top-line impact to be less than 1-1.5%. Thus, we believe ALXN could rebound as the market better digests the limited impact the company potentially faces," wrote analyst Matthew Harrison.

Allergan
Allergan

Friday's Decline: 3.3%
MS Price Target: $300
Dividend Yield: 0.10%

"We expect the impact of Brexit to be immaterial to Allergan's (AGN - Get Report) financial results. Only 1% of Allergan's total revenue comes from the U.K. following the divestiture of the Actavis generics business to (Teva Pharmaceuticals). Additionally, we expect no impact to the Teva divestiture process as a result of the Brexit news," wrote analyst David Risinger.

Allergan is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Jack Mohr, Action Alerts Research Director, wrote in a recently weekly commentary:

The company continues to boast a strong branded business, which is growing at double- digit rates, and owns 70+ mid- to late-stage pipeline drugs that can add to its repertoire. As we have mentioned many times, we also love management's ability to identify tuck-in assets that can drive innovation and complement its already-strong position with customers. We expect these types of deals, along with substantial buyback opportunities, to present themselves once the generics deal closes and Allergan is provided with a wave of cash and, therefore, significant optionality.

As for an update on the timing of the closing of the Teva deal, both management teams (Teva and Allergan) have reiterated their belief that the deal will close by the end of June. On top of this, the companies have been extraordinarily cooperative with regulators in making this process as frictionless as possible (recall that the deal has already been approved in the EU). Teva's recent divestures, which are mandated by the government as a requirement prior to approval of the generics sale, are a key indicator that the deal is moving forward as planned. Importantly, there are several other companies in the space that are interested in acquiring some of the castaway assets. All evidence points toward the deal closing and nothing has changed to make us believe otherwise.

Amgen
Amgen

Friday's Decline: 3.8%
MS Price Target: $195
Dividend Yield: 2.73%

"We expect Amgen (AMGN - Get Report) to outperform despite the concerns from Brexit. Amgen has less than 1% exposure to the British pound and ~15% of its business in the EU. We estimate the top-line impact from FX changes related to Brexit at less than 0.5%. Further, with its major EU distribution center based on the continent, there should be not impact to drug supply from Brexit," wrote analyst Matthew Harrison.

Swift Transportation
Swift Transportation

Friday's Decline: 4.5%
MS Price Target: $25
Dividend Yield: n/a

Morgan Stanley sees "limited downside to earnings and share price" for Swift Transportation (SWFT)   "as a result of the vote for the following reasons: (1) Demand for SWFT's services is driven by US consumer trends -- SWFT has very little direct international/Europe exposure; (2) The company has very limited currency transaction risk (immaterial Mexican peso exposure); and (3) Intraday 6/24 price suggests the stock is trading at ~10x NTM P/E, which is one standard deviation below the historical average of 12.5x, reflecting low investor sentiment and helping to de-risk the stock from further de-rating, in the event of weaker US macro data," wrote analyst Ravi Shanker.

Verisk Analytics
Verisk Analytics

Friday's Decline: 2.7%
MS Price Target: $87
Dividend Yield: n/a

Morgan Stanley believes that Verisk Analytics (VRSK - Get Report)  "has a very high-quality business model (with 82% recurring revenue and the highest margins in our coverage), limited exposure to the Financial Services end market (excluding) insurance (7%), and the vast majority of its revenue is from the Americas (85%) with only 10% exposure to EMEA. Additionally, VRSK has historically outperformed our Information Services coverage during downturns," wrote analyst Toni Kaplan.

Alphabet
Alphabet

Friday's Decline: 4.2%
MS Price Target: $865
Dividend Yield: n/a

Morgan Stanely believes that Alphabet's (GOOGL - Get Report)   "advertiser value proposition and competitive advantages remain unchanged with the voting results," wrote analyst Brian Nowak. "We expect GOOGL's strong moat will allow it to continue to dominate in search advertising while investments in video content should drive longer-term monetization at YouTube, allowing GOOGL to continue to gain share of global ad budgets."

Alphabet is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Jack Mohr, Action Alerts Research Director, wrote in a recently weekly commentary:

While we are aware of the tough comparisons that GOOGL faces in the coming quarters, we continue to like the long-term story and value the company's growth opportunities (YouTube, Google Cloud, etc.) and recent margin awareness as a supplement to the dominant core search business. We reiterate our $900 long-term price target but acknowledge that sentiment has soured in recent weeks and the company will have to win back investors by reporting better-than-expected results.

Apple
Apple

Friday's Decline: -2.8%
MS Price Target: $120
Dividend Yield: 2.44%

"We would expect the Brexit vote to be largely immaterial for Apple (AAPL - Get Report) given the company has minimal exposure to the U.K. (we estimate mid-single digits). Apple is more closely tied to consumers globally and product replacement cycles, and therefore we see near-term weakness as a buying opportunity ahead of the September 2017 iPhone super cycle," wrote analyst Katy Huberty.

Apple is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Jack Mohr, Action Alerts Research Director, wrote in a recently weekly commentary:

India is one of the key catalysts that we believe can drive long-term growth for Apple, and having the ability to operate their own stores will only help Apple market its brand to a consumer base primed for technological advances. We reiterate our $130 long-term price target.

Facebook
Facebook

Friday's Decline: 2.6%
MS Price Target: $140
Dividend Yield: n/a

Morgan Stanley expects Facebook (FB - Get Report)  "to outperform despite the referendum results as the core drivers of our Overweight thesis remain intact. We believe FB will continue to generate high and growing user engagement in addition to continued innovation in its advertising product offerings (carousel ads, dynamic product ads, online video, etc.). This should allow FB to capitalize on its long monetization runway and lead to strong ad revenue growth and continued market share gains, in our view," wrote analyst Brian Nowak.

Facebook is a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Cramer and Jack Mohr, Action Alerts Research Director, wrote in a recently weekly commentary:

Instagram's active user base has doubled within two years, and is up 25% over the past nine months. The updated MAU count implies Instagram is growing at an annual run rate of 35%, which is powerful in and of itself, but even more impressive considering it is growing off a massive base. Importantly, from a monetization perspective, Instagram not only has the quick, low- hanging fruit it can easily attain in terms of ad dollars (i.e., taking share from Twitter and onboarding marketers already attuned to its platform), but it is well positioned for long-term success in that it can leverage Facebook's market-leading ad platforms and marketing tools. Twitter (TWTR - Get Report) is no match (inferior sales, ROI, engagement, resources and technical capabilities). As Instagram continues to ramp up its monetization efforts, it has become a must-have destination for advertisers. The 500 million MAU milestone is just further justification for the platform's growing importance, and the money will follow the engagement. Facebook is an undeniable winner in this game and Instagram is icing on the cake, supporting our long-term conviction in Facebook's growth story. We reiterate our $145 price target.

IBM
IBM

Friday's Decline: 5.6%
MS Price Target: $168
Dividend Yield: 3.82%

"We would expect the Brexit vote to be largely immaterial for IBM (IBM - Get Report) given the company has minimal exposure to the UK (we estimate mid-single digits). IBM is more closely tied to enterprise spending than overall GDP; we are buyers of the stock on weakness and believe the transformation to a more analytics- and cloud-focused business is underappreciated," wrote analyst Katy Huberty.

Proofpoint
Proofpoint

Friday's Decline: 6.7%
MS Price Target: $75
Dividend Yield: n/a

Proofpoint (PFPT - Get Report) "offers a cloud-based email security solution-security generally ranks as the most defensive area of IT spending in our CIO surveys while PFPT has <20% exposure to markets outside the US, so its exposure to the UK/ GBP is modest," wrote analyst Melissa Gorham.

Workiva
Workiva

Friday's Decline: 7.8%
MS Price Target: $16
Dividend Yield: n/a

"The U.S. is now 94% of Workiva's (WK - Get Report) revenue, Canada is 3%, and Europe ~3%. It is a provider of software for submitting filings with the SEC, as well as SOX compliance and similar reporting for corporate boards and investors (in private companies). The stock was down 8% on 6/24, but fundamentals in a potential Europe recession should hold up very well," wrote analyst Stan Zlotsky.

Level 3 Communications
Level 3 Communications

Friday's Decline: 6.4%
MS Price Target: $61
Dividend Yield: n/a

Level 3 Communications (LVLT) "was off 6.4% on June 24, hitting a multi-month low. The recent TW Telecom deal has significantly reduced Level 3's exposure to the euro (2% of revenues) and British pound (4%)," wrote analyst Simon Flannery.

T-Mobile US
T-Mobile US

Friday's Decline: 5.9%
MS Price Target: $47
Dividend Yield: n/a

T-Mobile's (TMUS - Get Report) "double-digit top-line growth is driven by share gain in the U.S. wireless market (no international exposure) as the company continues to provide differentiated service offerings, most recently T-Mobile Tuesdays, and improving network quality. The company is expected to be free cash-flow-positive this year, and we expect clarity on Broadcast auction spending this fall," wrote analyst Simon Flannery.

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