When the market is looking choppy, it's worth tracking the advice of analysts with a proven track record of success. Volatility is set to be a recurring feature of the 2018 markets, and investors need to be prepared.
With this in mind, we set out to find five stocks with big support from analysts that know how to beat the market. We pinpointed these five stocks using TipRanks' Analyst Top Stocks tool- and searched for 'Strong Buy' stocks with recent buy ratings and big upside potential.
U.S. hardware chain Lowe's (LOW) is a key pick for top analysts right now. Notably, five-star Jefferies analyst Daniel Binder upgraded his Lowe's rating from Hold to Buy on February 5. He calls Lowe's his 'Franchise Pick' for 2018- and boosted his price target from $81 to $129. That means he is now forecasting 32% upside potential for this North Carolina company.
So, what caused Binder's to become so bullish? Well, he has just carried out a "deep-dive" analysis which suggests the company can double operating profits and triple earnings within five years. "New agents for change will give rise to good strategic decisions, improved execution and stronger sales and profitability," Binder writes in his investor report. As a result, he is confident that Lowe's margin gap to rival Home Depot (HD) will narrow as sales per square foot improve.
Our data reveals that Lowe's has a Strong Buy top analyst consensus rating with 11 buy ratings and 2 hold ratings in the last three months. On average, these analysts see the stock spiking 12% to hit $109.
Top D.A. Davidson analyst Tom Forte has just reiterated his Amazon (AMZN) buy rating with a bullish $1,800 price target. Given current share prices, this suggests major upside potential of almost 30%. He is enthusiastic about the hire of NBC Entertainment president Jennifer Salke as head of Amazon Studios, and sees the hire boosting Amazon's relatively lackluster content success so far. He says the hire, plus a change in strategy to content with greater mass market appeal, "could result in bigger successes for both its future proprietary TV and movie content."
And ultimately, he believes Amazon is capable of striking gold: "We still see the potential for Amazon Studios to have a blockbuster, in the future, akin to Disney's "Frozen", which it could monetize not only at the box office but also via licensed merchandise, including toys sold on and off its platform." Note that Forte has a very strong track record on Amazon with a 92% success rate and 33% average return per rating.
Overall, Amazon has a 'Strong Buy' top analyst consensus rating. Indeed, in the last three months, the stock has received no less than 32 buy ratings. In this time, only two top analysts have published hold recommendations. Meanwhile, their average price target stands at $1,637 (18% upside from current share price).
3. CVS Health
Drugstore giant CVS Health (CVS) has 100% support from top analysts right now. In the last three months, the stock has received four back-to-back buy ratings from the Street's best-performing analysts. And luckily for investors, on average these analysts are predicting 30% upside potential from the current share price.
CVS Health is currently fighting hard to push through a massive $69 billion deal with Aetna (AET) . Oppenheimer's Mohan Naidu has his fingers crossed that the deal will go through and says: "Increasing confidence on the successful Aetna transaction makes us excited." He believes the deal would "strengthen CVS's position and have significant positive long-term impact."
Naidu has a $92 price target on CVS (32% upside potential). The deal is currently expected to close in the second half of this year.
4. Applied Materials
Semiconductor Applied Materials (AMAT) is looking particularly 'compelling' at these levels, according to B. Riley FBR analyst Craig Ellis. On February 12, he reiterated his buy rating and $71 price target. This indicates big upside potential of over 40%. If Ellis is correct, that memory spending growth is not only tracking well but has upside potential, then once the current market sell-off eases a rare entry opportunity will be at hand.
"We believe the long-term arc of powerful secular equipment intensity dynamics, sharply rising silicon intensity in early-innings next gen AI applications, plus under-appreciated near term overall demand health suggest management's CY18/19 industry WFE (wafer fabrication equipment) growth outlook can be justifiably upbeat and biased toward strong growth" says Ellis. In this light, Ellis sees Applied Materials hitting the targeted fiscal 2020 figures of $19.6 billion in sales and $5.08 in earnings per share.
Bear in mind that our data ranks Ellis as a 'Top 5' analyst out of over 4,700 tracked analysts. On Applied Materials specifically, he scores a 71% success rate and 31.6% average return per rating.
Applied Materials has scored 12 straight buy ratings from top analysts in the last three months. Given the current share price of $49.50, the $68.80 average analyst price target translates into upside potential of almost 40%.
The stars are aligning for leading global payments company Mastercard (MA) . Following very strong fourth quarter results, the company received a slew of buy ratings and analyst upgrades. Global economic growth and the ongoing shift to electronic transactions are driving Mastercard's payment volumes and fee revenue higher, according to Tigress Financial's Ivan Feinseth. He reiterated his 'Strong Buy' rating on Mastercard earlier this month.
And for this five-star analyst the future looks bright too. "We believe the strong business trends in place will repeat themselves in 2018 and will drive further acceleration of Mastercard's strong business performance" says Feinseth. Plus, MasterCard can reap a triple-whammy of new tax reforms benefits, namely, 1) lower corporate tax rate 2) increasing corporate cash flow and 3) increasing consumer spendable income. Feinseith notes that already over 300 S&P 500 companies have announced special bonuses and wage increases to employees.
Overall, MasterCard scores 21 consecutive buy ratings from top analysts in the last three months. The average price target of these analysts: $195.80 (16.4% upside from current share price).
-Analysis by Harriet Lefton.
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