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UBS: These 11 stocks are set to rocket higher in 2019
UBS: These 11 stocks are set to rocket higher in 2019
Ethel JiangDec 20, 2018, 16:33 IST
Traders work on the floor of the New York Stock Exchange earlier this week.Spencer Platt/Getty Images
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UBS has published a list of stocks they believe are set to rocket higher next year.
To be included in the list, a stock must have a "buy" rating at the firm and have a catalyst that most investors are ignoring.
Markets Insider picked out the 11 stocks in the US that UBS says will have the most upside potential.
In a recent note to clients, UBS equity analysts highlighted the stocks they believe that are best set to surge in the year ahead.
To be included on the list, a stock must have a "buy" rating and a catalyst most investors are ignoring.
"As well as screening for upside to price target, upside/downside skew, market cap, sector weightings and liquidity, we focused on stocks where we believe our analysts have a truly differentiated view versus consensus," the firm said.
After going through the list, Markets Insider picked out the 11 US stocks that UBS says will have soar at least 35% in 2019.
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Below are the 11 stocks, in ascending order of their upside potentials:
"Wells Fargo's substantial underperformance since 2016 has created a long-term buying opportunity," said analyst Saul Martinez.
"Even with limited revenue growth, efficiency improvements and capital optimization should drive mid to high teen EPS growth and considerable ROTCE expansion in 2019 and 2020. We forecast that Wells buys back 17 % of its shares by year-end 2020, providing considerable support to the EPS and ROTCE trajectory."
"Its initiatives like cross-banner visibility and its marketing campaign are driving the top-line," said analyst Michael Lasser.
"The industry is in a good spot with a healthier car park and the potential benefit from parts inflation. A strong top-line should drive expense leverage across the business. Some of the investment margin drags will roll off and it will see savings from closing duplicative DCs. Plus, inventory optimization and managing its AP/Inventory ratio should lead to improved free cash flow, which should lead to greater share repurchases."
"We think Salesforce is establishing a leading position as an enabler of digital transformations, and this trend will remain a key area for IT budget growth in CY19," analyst Jennifer Lowe noted.
"Our analysis suggests improved efficiency in CY17 and CY18, and continued progress here should lead to better margins in the future. We think strong top line growth plus better-than-expected margins and cash flow can drive shares higher from here."
"We continue to view Alphabet as a category leader & top pick for investors looking for exposure to a number of long-term secular growth themes in the Internet sector," said analyst Eric Sheridan.
"We expect Alphabet to continue to sustain solid rev growth driven by search (particularly mobile), YouTube and push into local while showing promising returns on key investments (cloud, hardware, voice/visual search, etc.) & upside optionality in Other Bets (deep valuation discounts of Waymo & life sciences, in our opinion)."
"We are buyers of HON as 2018 saw the company step up free cash flow conversion, optimize its portfolio, and drive productivity, with more than $25 billion of capital available to deploy in 2019," said analyst Steven Winoker.
"We find HON's overall portfolio positioning relative to the macro landscape relatively positive. End-market dynamics should remain strong in 2019 while management remains prudent in execution. We also expect management to smartly but aggressively deploy capital with a strong balance sheet in 2019. With plenty of capital available, Intelligrated-like M&A opportunities seem likely."
"The lack of investor enthusiasm around LMT, coupled with our above-consensus outlook on 2020E, drives our Buy rating," said analyst Myles Walton.
"Our proprietary analysis along with UBS Evidence Lab created a picture of LMT's revenue composition by funding account, which allowed us to construct a revenue forecasting model predicting LMT to have the fastest pace through 2020E (8%+, though we are including 6% in our estimates)."
"The current stock price is an attractive entry point ahead of accelerating testing frequency, continued strong doctor additions, and increasing penetration of the Integrated Delivery Network opportunity," analyst Dan Brennan wrote.
"We believe recent product initiatives should sustain low-SD revenue/EBITDA growth, allowing mgmt to hit its leverage target exiting '18 and setting the stage for meaningful stock repurchases," said analyst John Hodulik.
"Along with the company's strategic value amid continued industry consolidation and a depressed valuation, we see a compelling risk-reward."
"Looking ahead into 2019, the long-awaited 5G network deployments will start to ramp in earnest in the 2H and incremental revenues from networking and storage wins in data center should provide material upside to growth in 2019."
"Additionally, favorable NAND price environment should spur greater adoption of SSDs in both client and enterprise, providing further momentum for MRVL's fast-growing SSD controller business."
"KORS is an underappreciated global growth stock," analyst Jay Sole said.
"The market thinks KORS' portfolio of brands is weak and unlikely to grow. However, multiple UBS Evidence Lab studies suggest KORS' brands are strong. We forecast an 8% 5-yr. EPS CAGR and our DCF analysis points to an $80 price target. We anticipate KORS' P/E rising to ~16x from ~8x today and see a 5:1 upside/downside skew."
"CNQ is differentiated with its long life, low decline reserve base with minimal reservoir risk, resulting in a ~6.8% FCF yield at strip in 2019," said analyst Lloyd Byrne.
"CNQ's DAPSG profile from its assets should lead to significant FCF and de-leveraging, positioning CNQ to continue to return cash to shareholders and expand traditional multiples."
