Apple (NASDAQ: AAPL)
Morgan Stanley’s Katy Huberty, the No. 1 ranked analyst in 2020 for technology hardware by Institutional Investor, raised her price target for Apple ahead of the company’s fiscal third-quarter earnings report.
“While share price performance after earnings may be more muted given Apple’s recent outperformance,” Huberty said, “we are buyers heading into the iPhone 13 launch in September.”
The new price target is $166 per share, up from $162 previously, representing an 11%.
Since the beginning of June, the stock has risen nearly 20%, fueled by reports that Apple is ramping up production of its next-generation iPhones. According to Huberty’s note, there are several reasons to believe that the iPhone 13 will be a bigger success than its predecessors.
“We see a combination of mature replacement cycles, increasing 5G adoption, improved retail store traffic, longer battery life and camera quality, and share gains against Huawei as drivers of iPhone outperformance relative to previous s-cycles,” according to the note.
Netflix stock (NASDAQ: NFLX)
Analyst John Hodulik raised his price target on Netflix stock in a note to clients on Thursday, saying the company was poised to beat low guidance for the second quarter and then see subscriptions grow through the end of the year.
“App downloads point to an increase in [management’s] guidance for 1M net additions in 2Q, owing to strength in Asia, and we are raising our estimate to 1.9M from 1.0M. We expect ramping content production and the return of popular series… as well as tent pole films… to help drive stronger sub growth in the future,” according to the note.
Subscriptions to Netflix and other streaming services increased in 2020 as the pandemic forced people to spend more time at home and limited other entertainment options. However, Netflix’s stock has suffered in 2021 as the economy has reopened and pandemic restrictions on Hollywood production have resulted in delayed releases.
On July 20, Netflix will report its second-quarter earnings.
Delta Air Lines stock (NYSE: DAL)
“We were cautious heading into the quarter due to the possibility of cost volatility weighing on investor sentiment. We believe expectations have been reset following the earnings call on Wednesday, albeit with some risk if the recovery stalls,” the note said.
The airline reported an adjusted loss per share of $1.07 for the second quarter on Wednesday, while analysts polled by Refinitiv expected a loss of $1.38 per share. Revenue also outperformed expectations.
When government aid is factored in, Delta actually made its first profit since 2019 during the quarter.
Delta stock, like other airline stocks, has been struggling recently, falling 13% in the last three months. According to Raymond James, improving fundamentals should put a stop to the slide.
“The recent leg down in US airline shares may be more interest rate/inflation-related spillover to value,” the note said, “but we expect improving fundamentals to prevail, particularly given our favorable view on business demand recovery.”
Delta has a price target of $58 per share, which is more than 42 percent higher than where the stock closed on Wednesday.
Best stocks ahead of earnings
The second-quarter earnings season is off to a good start, with every single S&P 500 company reporting results that exceeded analyst expectations. The average surprise is 21% higher than expected earnings per share.
But, according to Wall Street, which companies are expected to be the best of the best?
According to FactSet analyst estimates, companies that are expected to post earnings-per-share growth of more than 20% for the full year of 2021. These stocks are also well-liked by analysts, with buy ratings from 75% of those who cover them. Furthermore, analysts anticipate that these stocks will rise by 10% or more over the next year as they deliver on this profit surge.
The majority of the stocks on the list are in cyclical industries. That is, industries whose prospects are closely linked to economic expansions and contractions. Nike and General Motors are two of the more well-known companies in this category.
According to a Jefferies note issued on Wednesday, Nike is particularly well positioned due to rising global athletic demand, strong pricing power, and low wholesale inventories. According to Jefferies, Nike’s scaling direct-to-consumer strategy will drive margins higher and accelerate cash flows, and the athletic apparel brand will benefit from strong back-to-school and holiday selling seasons.
“With global demand very strong, Nike gaining market share, and the company driving more vertical integration into its business, the probability of continued top-line strength and expanding margins appears high,” Jefferies analyst Randal Konik wrote in a note. “The fact that Nike increased its sales and margin forecasts last quarter (which it did not have to do) demonstrates the company’s visibility and control over its business.”
RBC’s favorite automaker is General Motors, which has a $77 price target. GM is currently trading at around $58 per share on Wednesday afternoon.
“The company’s resilience through three consecutive recessionary events over the last two years” – the United Auto Workers strike, the COVID-19 pandemic, and the chip shortage – “allows investors to have increased confidence in the re-done cost structure, more resilient business model, and management’s ability to execute,” RBC said in a note Tuesday. “This, in turn, can allow investors to focus more on the future, namely GM’s (in our opinion) underappreciated auto-tech capabilities.”
According to Wolfe Research, Amazon is also on the list, as e-commerce trends appear to be more stable despite a two-month pullback following strong trends in March. Analysts believe the e-commerce behemoth will benefit from back-to-school shopping trends as well.
However, the bank stated that the European utilities sector as a whole had “significantly improved” due to factors such as falling interest rates, higher power prices, and the growing traction of climate policies, among others.
“Because most GEMS price in 0-5 years of future growth (the majority of which is already secured or under construction) and offer three decades of above-market earnings growth (5 percent -10 percent pa), we continue to see the space as undervalued and appealing; as such, the inflection point could arrive at any time,” the analysts wrote.
“Careful observation indicates that some GEMS… trade at a discount to the overall European market, despite offering far superior growth potential,” they added.
Among the buy-rated stocks recommended by the bank are:
Goldman’s conviction list includes EDP Renewables, an electricity company based in Madrid, Spain.
Enel, an Italian energy firm that recently signed a 10-year agreement to supply renewable energy to Johnson & Johnson, is also on Goldman’s conviction list.
RWE, a German wind power company, is also on the list.
Solaria is a Spanish solar company that has photovoltaic plants in Greece, Uruguay, and Italy, in addition to its home market.
Orsted, a Danish firm, announced in April that it would purchase Brookfield Renewable’s Irish and UK onshore wind businesses for $684 million.
EDF, a French utility, and Centrica, a British utility, are among Goldman’s “Legacy Activities” picks.
Analysts expect higher earnings from renewable energy companies in the second half of the year, citing factors such as “more clarity” on President Joe Biden’s $2 trillion infrastructure plan and the UN Climate Change Conference, known as COP26, which will be held in Scotland this fa