Best stocks according to Barclays
Barclays said investors should now turn their attention to long-term growth with the resumption of trade.
The firm looked for large-cap stocks with overweight ratings from its analysts that were trading at or below their Barclays price targets by at least 10%. The firm identified stocks whose projected sales growth for 2022 is in the top fourth of the S&P 500.
Furthermore, Barclays looked for stocks that were trading well below their 52-week highs. This combination results in a list of companies with strong growth prospects and potential for stock price appreciation.
The resulting list includes some well-known names in technology and media, such as Disney and Salesforce.
In the first half of the year, these stocks underperformed the broader market, with Salesforce rising roughly 10.5 percent while Disney fell more than 6 percent. The two are also fairly popular on Wall Street, with more than 75% of analysts rating the stocks as buys.
Qorvo, a chipmaker, is also on the list. Semiconductor stocks have gained traction in the last two weeks, with Qorvo shares rising more than 12% since June 18.
Some of the names on the list are similar to other thematic plays that have been popular in the last year. According to Barclays’ metrics, solar panel company Sunrun is a secular growth stock in the booming green energy industry.
Sunrun investors can now buy at a discount, at least compared to earlier this year. On Tuesday, the stock closed just under $57 per share, after trading above $90 per share in January.
Bank of America believes that, even though Uber has underperformed over the first half of the year, the shares are now undervalued based on their valuation against peers and their 15 percent investment in Didi, which recently went public.
′′[W]e believe Uber is on track to achieve breakeven profitability by year end, potentially assisting in the achievement of a higher valuation multiple,” said Justin Post of BofA in a note released Thursday.
According to Post’s analysis, there is “significant upside potential.”
In 2021, Uber shares are down 0.8 percent, while Lyft and DoorDash are up more than 25 percent. According to BofA, this means Uber’s stock is trading at a significant discount.
Bank of America conducted a sum-of-the-parts analysis, comparing Uber’s food delivery business to DoorDash’s 12.5 estimated enterprise value-to-revenue multiple and Uber’s mobility business to Lyft’s 4.3 estimated EV/revenue valuation.
Didi Chuxing, meanwhile, raised $4.4 billion in its initial public offering earlier this week. Didi shares closed nearly 16 percent higher on Thursday, bringing the company’s market capitalization to nearly $79 billion.
According to the firm, Uber owns a significant stake in Didi — approximately 12 percent equity ownership, which translates to more than $9 billion in equity value as of Thursday. According to BofA, Didi adds approximately $2 per share to Uber’s equity value.
Adding the value of the Didi stake to the sum-of-the-parts valuation results in a value for Bank of America that is higher than its $71 price target, according to the firm. Nonetheless, the current forecast implies a 40% increase from here.
According to BofA, the highly contagious and rapidly spreading Covid delta variant may be weighing on Uber’s stock performance, among other things.
′′We believe some of the overhang will be cleared in 3Q with additional reopening and vaccination progress,” Post said.
Uber’s stock closed about 1% higher on Thursday, at $50.59.
Chipotle Mexican Grill
“We remain bullish on the outlook for shares given improved insight into attractive multi-year growth, upside to Consensus earnings, and trust in management’s ability to execute against growth plans,” wrote UBS analyst Dennis Geiger in a note published Friday.
UBS maintained its buy recommendation on Chipotle and set a price objective of $1,700, indicating a 10% increase from Thursday’s closing price of $1,538.23.
Chipotle made news in June when it announced a 4% price increase while raising employee pay. According to UBS, the higher price could help the fast-casual chain’s sales momentum.
Chipotle’s ongoing growth is also supported by internet sales, menu innovation, marketing, and its loyalty program, according to the company.
“Recent digital marketing efforts like as a Tesla giveaway and game, ‘Team Chipotle’ digital-only menu items, and an extended Twitch collaboration are examples of initiatives that should further enhance CMG’s leading digital presence and wider consumer reach,” Geiger said.
Meanwhile, a recovering economy could increase dine-in traffic, according to UBS.
Chipotle stock has up approximately 13% in the last month and will be up 11% in 2021.