Analysts say buy stocks like Bank of America & Marvell
Matt Murphy, CEO of Marvell Technology
Scott Millian | CNBC
Investors seem to welcome the latest earnings season with fresh optimism despite nagging concerns about inflation, recession and rising interest rates.
In fact, strong quarterly results for a number of major companies helped boost major stock averages for weekly gains.
However, identifying the right investment opportunities requires more than just watching how stocks move. Investors with a long-term perspective should look beyond the immediate hype.
Here are five companies that top Wall Street professionals have chosen to create long-term value, according to TipRanks, which ranks analysts based on their performance.
Knight-Swift Transportation (KNX) is no stranger to the supply chain congestion that has plagued industries since the pandemic began. This was reflected in the recently released second quarter results as well. Weakness in the network’s liquidity has kept its multimodal business — which includes transporting freight by rail in containers and other towing equipment — under pressure.
However, Coin analyst Jason Seidel expects multimedia volumes to recover in the second half of this year, according to Knight peer JP Hunt (JBHT) and CSX (CSX). (See Knight Transportation hedge fund trading activity on TipRanks)
Moreover, the other operating segments, truckload (TL) business and less truckload (LTL) business, have shown tremendous resilience and strength. Seidl highlighted the strong outperformance of both segments, despite spot rates for truckload business. These are payments made by the shipper to move the shipment at the freight market rate.
Knight’s less-than-truck business, which was made more powerful by its acquisitions of AAA Cooper and Midwest Motor Express last year, especially boosted Seidl’s confidence in the company. “KNX expects demand for LTL to remain strong with yields improving well as well, which will help offset weakness in TL. Confidence in LTL has been offset by continued expansion of the terminal, with KNX’s door count now exceeding 4,300,” Seidl said.
The analyst, who ranks fourth among the 8,000 Analyst Followers on TipRanks, maintains a buy rating on Knight, with a price target of $55. “We see KNX’s business diversification relieving pressure on TL’s expected weakness in the year 23,” he said.
Seidl has achieved successful stock ratings 73% of the time, with each rating having an average return of 26.1%.
financial fact (TFC) is the sixth largest commercial bank in the United States, and was formed after the merger of two large banks, BB&T and SunTrust, in 2019. Truist skillfully integrates the assets of the two banks while providing value for shareholders. Moreover, the high interest rate environment has proven beneficial to Trust in the form of higher interest income.
Gerard Cassidy, an analyst at RBC Capital Markets, believes that Truist will be able to focus fully on taking the bank to greater heights once the entire integration process is over. “Furthermore, when the merger is complete and the eight-cylinder TFC is launched, the target of 20+% ROTCE (return on tangible common equity) should be achieved on a consistent basis,” the analyst said. (See real money dividend payout date and time on TipRanks)
The bank’s recently released second-quarter results reflected strong benefits from higher insurance income compared to the previous quarter, along with strong revenue from higher card-related and payment-related fees. However, the decline in residential mortgage income has been disheartening.
However, Cassidy recognized that Truist’s strong underwriting standards and high credit quality would help its credit metrics “outperform its peer group over the next 24 months.”
Cassidy reiterated a buy rating on Trust with a $70 target price. Ranked #26 out of nearly 8,000 analysts followed on TipRanks, Cassidy Ratings has a 68% success rate and 22.5% average return per rating.
Another one of Cassidy’s favorite stock picks is financial services giant Bank of America (buck), whose diverse businesses help her maintain her position in troubled times. Needless to say, the company thrives in a high interest rate environment.
The company’s results for the second quarter showed that higher interest rates drove the growth in net interest margin. Moreover, credit quality continued to remain strong, another factor that prompted Cassidy to maintain a buy rating on BAC stock.
However, the analyst expects the volume of share buybacks to decline in the coming quarters. Therefore, he reduced his price target to $40 from $45. (Check Bank of America stock investors on TipRanks)
However, Cassidy is optimistic about the growth in the BAC sediments. Notably, deposits totaled $1.98 trillion in the second quarter. The analyst expects the company to outperform its peers during the current downturn, in terms of credit quality and profitability. “We expect the converted and ‘risk-free’ BAC airport to weather any economic storm that comes its way over the next 12-24 months much better than the financial crisis,” Cassidy said.
Furthermore, the analyst highlighted the company’s mobile offerings. “In addition, we believe the company’s mobile offering is among the best in the industry, and with increased usage, we expect BAC to see increased profitability and earnings growth,” Cassidy said.
GlobalFoundries Semiconductor Foundry (GFS) has not been protected from global supply chain issues. However, the growing demand for chips is expected to continue to drive business for the company. (See Global Foundries stock chart on TipRanks)
Recently, Deutsche Bank analyst Ross Seymour said he believes the entire semiconductor industry is going through a “purgatory” phase during this earnings season, as investors prefer to stay on the sidelines despite the expectation of fundamental strength in revenue and earnings per share. metrics.
The analyst expects the company to be among those likely to benefit from easing supply chain bottlenecks. However, the supply-side benefits are expected to be offset by a slowdown in demand for the rest of 2022, which prompted Seymour to cut the target price for Global Foundries to $55 from $70.
However, Seymour believes that GlobalFoundries and its peers are expected to be able to meet “strong demand” from the improvement in supply, “providing a tailwind of growth in the second quarter of 22 while still indicating that a balance may be on the horizon.”
Seymour reiterated the buy rating for GFS stocks, bearing in mind the strong long-term outlook. The analyst ranks number 16 among nearly 8000 analysts in the TipRanks database. It has passed 74% of its ratings, generating an average of 24% return per rating.
Another one on Ross Seymour’s top picks list is Marvell Technology (MRVL), a semiconductor company specializing in the production of analog, mixed and digital signal processing products and integrated circuits.
The company has significant secular growth opportunities such as the development of global 5G infrastructure, the cycle of bandwidth upgrades in data centers, and increased demand for faster Ethernet from the emerging market for autonomous and electric vehicles. (See Marvell Insider trading activity on TipRanks)
However, Seymour warns that demand in end markets is declining, even though semiconductor companies have the undisputed core strength. As a result, the analyst recommended that investors remain selective when choosing half stocks to invest in.
With these near-term headwinds in mind, the analyst lowered the price target on MRVL to $65 from $75. However, according to Seymour, Marvel has several underappreciated growth drivers that will help overcome near-term concerns and generate long-term value, making it one of its best defensive options.