Best stocks to buy now
The Morgan Stanley analysts have chosen companies they consider to be “cheap” at now and offer “quality at a fair price.”
In the best-case scenario, three of Morgan Stanley’s recommendations have a potential upside of at least 20% to the bank’s share price target.
The following are the analysts’ top six stock picks:
According to Morgan Stanley, French catering and services company Sodexo has a potential upside of 23% and is a “quality operator.” It described airport foodservice firm SSP in the same way, and stated that the stock has a potential upside of 7%. According to the bank, SSP stock has increased by 16% since the beginning of the year.
Two of the bank’s picks have a potential upside of 29 percent: Mitchells and Butlers (M&B), a British pub company, and Flutter, a gambling firm that operates brands such as PokerStars and Betfair. It chose M&B as one of the “most appealing” stocks for free cashflow yield, noting that its stock price has risen 32% since the beginning of the year.
Whitbread, a British hotel and restaurant operator, was also chosen by the bank, which estimated its upside potential at 10%, and Evolution, a gambling operator, with a potential upside of 21%.
“With investors continuing to scrutinize what has thus far been a later-than-expected reopening, we revisit our screens looking at multiples in 2019 and 2023. (2020-22 distorted by Covid). We conclude that much of the recovery appears priced in, with only a few names offering good value,” the bank’s analysts stated.
Morgan Stanley’s valuations are based on its forecasts for 2023, assuming a return to normalcy after Covid-19 vaccinations have been administered to populations. “Our bull cases take into account scenarios for structurally higher margins and/or higher market shares post-Covid,” the firm’s analysts wrote. Morgan Stanley has an overweight position in all of the stocks mentioned, indicating that it believes they will outperform.
“Our strategists recommend quality at a reasonable price: Our EU Strategy team believes the macro environment has become slightly less conducive to equity markets as growth momentum begins to peak and QE tapering discussions gain traction,” the analysts wrote. The term “QE tapering” refers to the reduction in quantitative easing implemented by central banks to stimulate economies in the aftermath of the pandemic.
“They also recently downgraded Cyclicals following a record rally that stretched positioning and left relative valuations at or near record highs. They believe that over the summer, this market will become increasingly micro stock picking, and they now recommend a more balanced approach to style and sector selection,” the analysts added.
Carrier stock (NYSE: CARR)
According to Deutsche Bank, investors can rely on air conditioning stocks Carrier to profit from the changing trends in the immovable market.
Nicole DeBlase said in a letter on Tuesday evening to customers that a possible rise in non-residential buildings would enhance the stock in 2022.
“We believe that this, combined with the secular themes of indoor air quality (IAQ) and decarbonization/energy efficiency, can drive a mid-single-digit medium-term revenue CAGR for Carrier’s critical Commercial HVAC business, even before we consider potential share gain,” the note stated.
On the other hand, a slowdown in residential construction is already priced in by the market and will not be a long-term issue, according to DeBlase.
“Resi HVAC downturns typically last only one year and are mild in nature, so we would expect a return to growth as we approach 2023, particularly as new regulations take effect,” according to the note.
Deutsche Bank set a price target of $53 per share for Carrier, which is 15% higher than the stock’s closing price on Tuesday.
Under Armour (NYSE: UAA)
According to Cowen, investors should take advantage of the recent weakness of Under Armor and add a significant upside stock.
Cowen analyst John Kernan reiterated his stock purchase rate and added it to the company’s best list of small and mid-cap designations, noting customers that the stock looks even more appealing following the latest decline.
“The sector’s recent valuation contraction creates an improved risk/reward opportunity, particularly for UAA, which is down 20% since beating Q1 earnings,” according to the note. “We believe management’s guidance and consensus estimates for FY23 have room to grow. Improved marketing and go-to-market processes pave the way for significant growth and returns on capital.”
Cowen maintained its price target of $31 per share, which is roughly 53% higher than the stock’s closing price on Tuesday.
According to Cowen, Under Armour’s new marketing strategy could begin to pay off in the second half of this year and help drive the stock higher.
“Whereas in the past, marketing dollars were focused on large contracts, dollars are now being deployed toward brand activation through “Top Of The Funnel” campaigns that increase awareness and consideration. “We believe this will re-ignite sales growth in the second half and into FY22,” the note said.
Disney (NYSE: DIS) is a sell according to this analyst
After 16 years of owning the media behemoth, Jim Cramer’s philanthropic investment portfolio came out in Disney.
“I believe it is a pandemic game right now rather than a post-pandemic game for how they positioned it. I know they don’t agree with it, but on analyst’s “Squawk on the street,” Cramer said Tuesday, I don’t need a business that’s a pandemic, because they don’t work.
The sale was also attributed by analyst’s “Mad Money” host to how much the stock has risen in a year — nearly 50 percent in the past year, emerging as a major beneficiary of the Covid pandemic.
“It’s gone up significantly,” Cramer said.
Disney shares closed at $102.52 on March 13, 2020, the day then-President Donald Trump declared Covid-19 an emergency. That same week, Disney announced that it would close its parks to prevent the virus from spreading.
The stock is now worth more than $173 per share, down 0.2 percent on Tuesday.
Disney took advantage of the nationwide shutdowns caused by the pandemic by investing in its streaming service, Disney+, which surpassed 100 million subscribers just 16 months after its launch.
“Even though the company has made a good effort to make it not a pandemic story,” Cramer said. “I do feel that when I used to sit here, I used to see ESPN go down and down in terms of number of [subscribers], I think that Disney+ will, the rate of change that it’s going up will diminish as people want to go out.”
He claimed that the company did not make enough of a fuss about the reopening of its Paris theme park last week.
Cramer also believes that Disney should prioritize theme parks, cruises, and outdoor attractions over its direct-to-consumer streaming service.
“They are sending what I consider to be first-run movies to Disney + rather than AMC, and I believe they should go to AMC. “I think they should say, ‘We’re the open story, and whoever wins the NBA, we’re going to take them all down, and we want them to go to Disney,'” Cramer said.
“I’ll go back in if they make it clear that it’s an opening story, because it should be the greatest opening story ever,” he said.