Goldman Sachs recommended stocks
“Europe is reopening,” Goldman analysts led by Patrick Creuset wrote in a research note published Monday as part of the bank’s weekly “GS Reopening Scale for Europe” series.
Among the trends and reopening activity highlighted by the analysts, hotel revenue per available room (known as RevPAR) has been above 2019 levels in the United Kingdom “in recent weeks,” while freeway traffic in Spain, Italy, and southern France is also up on 2019. The information is for the week ending August 29.
Nonetheless, while domestic leisure demand has been “strong,” international travel remains sluggish. “Long-haul, business, and U.K.-related traffic remain depressed, leaving the overall EU air traffic recovery trailing the United States and China,” according to the bank.
“Ongoing labor market recovery has been a key trend in the United Kingdom, with job postings 20-30 percent higher than pre-Covid and above-average pay growth as hiring bottlenecks persist,” the analysts added.
Goldman’s list of “Reopening Beneficiaries” are stocks that are expected to benefit from positive and sustained economic reopening, with oil giant BP atop the table of companies that do business internationally. According to the analysts, the stock has a potential 70% upside to the bank’s 12-month price target and is on Goldman’s conviction list.
According to the bank, luxury watch company Swatch Group has a potential upside of 59 percent, followed by airline easyJet at 51 percent and engine company Rolls-Royce at 41 percent.
Airport group Flughafen Zurich tops Goldman’s conviction list, with a potential upside of 38%, followed by French oil company TotalEnergies, with a potential upside of 37%.
According to Goldman, Swiss luxury group Richemont and Spanish security company Prosegur Cash both have a 34 percent upside potential.
The bank also published a list of domestic-focused companies that are expected to benefit from the reopening, with Spanish infrastructure group ACS and French real estate company Unibail-Rodamco-Westfield having a 36 percent potential upside, followed by British retailer WHSmith with a 34 percent potential upside.
The Covid delta variant, according to Goldman analyst Zach Pandl, “will prove less impactful” for countries that have vaccinated their populations than the market has priced in.
“U.K. and European data remain broadly encouraging, U.S. case growth is expected to peak in the coming weeks, and the economic impact of the variant appears to be shuffling the time profile of reopening over the next few quarters rather than derailing the basic trajectory,” Pandl wrote in a research note published on September 1.
Analyst Justin Patterson raised Spotify from sector weight to overweight in a note to clients on Monday, citing the fact that Spotify is growing its user base faster than many of its peers.
“Spotify is experiencing q/q increases in the number of countries where it ranks as the number-one music app or among the top-five music apps, extending its lead over peers in 3Q21 QTD. Spotify’s rank has shifted since mid-August, which we attribute to a combination of promotions and key content releases, according to the note.
Alphabet announced last week that YouTube premium and music had reached 50 million subscribers, a significant milestone for a potential Spotify rival. However, the growth of these services is not eroding Spotify’s lead.
“Over the same time period, Spotify appears to have added 22.3 million new subscribers, compared to 15 million for YouTube. In other words, Spotify may be on track to add 50% more new subscribers than YouTube Premium. This achievement is even more impressive when one considers that Spotify’s subscriber base was significantly larger than YouTube’s, and that Spotify reduced marketing in certain geographies, such as India, in 2Q21.”
Spotify’s stock has underperformed in 2021, falling nearly 21% year to date. However, the stock has gained traction in recent weeks, rising more than 20% since August 19.
KeyBanc set a price target of $340 per share for Spotify, which is more than 36% higher than the stock’s closing price on Friday.
Analyst Hamilton Faber, who rates Netflix as overweight, raised his price target to $780 per share from $690. This is the highest target among major Wall Street analysts, and it is 32% higher than where the stock closed on Friday.
This year, the stock has underperformed the broader market as investors assess the company’s long-term growth prospects following a surge of sign-ups early in the pandemic. However, in a note to clients on Monday, Faber stated that the stock now appears to be on firmer ground.
“We believe the multiple has been impacted by four quarters of declining add forecasts, but we now see the company at an inflection point where estimates can be met. This explains why the stock has outperformed the S&P 500 by 5% since the Q221 results,” according to the note.
Atlantic increased its 2024 subscriber projections and stated that it expects Netflix to have 311 million subscribers in 2025, up from 209 million at the end of the second quarter.
The streaming platform’s growth has slowed in recent quarters in the United States and Canada, but Atlantic believes there is still room for growth in some international markets, particularly Japan.
“In terms of penetration gains, the largest we forecast is in Japan, where we see it rising 25 percentage points from 10 percent now to 35 percent by the end of 2025,” the note stated.
The firm also forecasts that Netflix’s average revenue per user — a key metric for streaming services — will rise by about 5% per year in most markets, including the United States, over the next decade.
According to Business Insider, Amazon is planning to launch its own television sets in the United States as early as October. According to the report, the TV would be compatible with Amazon’s Alexa voice assistant. The report has not been confirmed by Amazon.
According to Morgan Stanley, if the company does launch a self-branded TV, the product could help it maintain its dominance in retail and advertising.
According to Morgan Stanley, here are three ways an Amazon TV could “move the needle.”
- Increase the number of Alexa devices in your living room.
With products like Fire TV and Echo, Amazon has already established a presence in the home. Amazon’s smart-home capabilities could be enhanced by an Alexa-enabled TV.
“If executed correctly, the ability to control devices throughout your home with voice while sitting on the living room couch could be a significant consumer unlock,” Morgan Stanley’s Brian Nowak wrote in a note.
Nowak believes that a TV could increase customer touchpoints and data points with Amazon smart-home products, “further deepening its ecosystem moats.”
- Voice-activated shopping
An Amazon TV with Alexa capabilities could help the company shift consumer behavior toward voice-based shopping by allowing people to browse products visually while also using Alexa.
“People like to see what they are looking for/comparing/buying,” Nowak explained.
According to Nowak, using a TV to supplement voice-based spending could help remove friction for consumers, similar to how Amazon’s one-click shopping improved user experience on desktop and mobile.
- Advertisement on Connected TV
Advertisements on connected TVs are those that are displayed on smart TVs or televisions that are linked to the internet. Morgan Stanley considers Amazon, along with Big Tech rival Alphabet, to be among the companies best-positioned to lead the connected TV advertising industry over the next five years.
“We anticipate that AMZN and GOOGL will develop improved user targeting and performance-driven [connected TV] ad tools to deliver a more transaction-driven TV advertising offering,” Nowak said.
Amazon’s Fire TV stocks and Prime Video subscribers have laid the groundwork for connected TV advertising, and Morgan Stanley believes a self-branded TV is the corporation’s “next step.”
According to Morgan Stanley, the connected TV advertising market is worth $800 billion.