3 ‘Strong Buy’ Stocks Wall Street Is Backing Now
As we head into a critical week for the market, which stocks are Wall Street’s top analysts backing now? On Wednesday, the US Federal Reserve will decide whether to cut interest rates, or leave them unchanged at a range of 2.25% to 2.50%. Despite pressure from President Trump and investors, the Fed is expected not to make any moves right now- but to set the groundwork for potential rate changes later in the year.
According to a Reuters poll, most of the more than 100 economists polled June 7-12 say they are not penciling in a rate cut until Q3 of next year. But 40 respondents expected at least one rate cut sometime in 2019, up from just eight who did in the previous poll. That suggests views are changing rapidly as pressure mounts.
“Right now, they’ll just give a very dovish message that leans toward a July rate cut,” Joseph LaVorgna, chief economist for the Americas at Natixis, told CNBC. “The market is worried enough about weakness in China, inflation undershooting and the possibility that tariffs disrupt the global supply chain that it’s hard for me not to think the Fed won’t be moving faster than people thought.”
So with this volatility in the background, it’s best to be prepared. Here we pinpointed three stocks with most support from the Street in the last seven days. As you can see below, not only do these stocks boast multiple recent buy ratings, but they also show a ‘Strong Buy’ Street consensus. This is based on all the ratings the stock has received over the last three months.
So should you invest in these three top stock picks? Let’s take a closer look at what the Street has to say now:
Facebook (FB)
Ahead of FB’s potential unveiling of the Libra blockchain on June 18, analysts are applauding the company’s groundbreaking decision to enter the crypto space. “We believe this may prove to be one of the most important initiatives in the history of the company to unlock new engagement and revenue streams” cheers RBC Capital’s Mark Mahaney.
The open-sourced Libra Blockchain will be backed by Libra Reserve, “a reserve of real assets” that will provide the cryptocurrency with “stability, low inflation, global acceptance, and fungibility.” Facebook, which has developed Libra alongside dozens of partners, hopes that this initiative will bring new opportunities for “1.7 billion adults globally” who are “outside of the financial system with no access to a traditional bank.”
Facebook will use crypto to facilitate a platform that can work on three different levels: 1) Payments; 2) Commerce; and 3) Applications & Gaming. “And we believe this strategy is a multi-step process, starting with a focus on user engagement through messaging and leading to further monetization with each subsequent, deeper step – a similar strategy that has worked well for Facebook’s Core Advertising business” writes the analyst.
For example, Mahaney sees a vast opportunity for p2p (peer to peer) payments in emerging markets subject to hyper-inflation and government instability. He reminds investors that Facebook has 4x as many Monthly Active Users in Asia (~1B) as it does in North America (~250MM) and 3x as many in the rest of the world...
As for commerce Facebook’s massive international scale provides an instant network for consumers and merchants to transact using a stable token. With crypto on the mind, Mahaney reiterated his Buy rating on FB with a Street-high price target of $250. From current levels that suggests significant upside potential of over 37%.
Meanwhile Deutsche Bank’s Lloyd Walmsley called FB his top internet stock pick. Overall we can see that FB boasts a ‘Strong Buy’ analyst consensus with an average analyst price target of $222 (22% upside potential).
Uber Technologies Inc (UBER)
Uber has had a challenging time recently. But a wave of buy ratings from the Street shows that analysts are sticking with the newly public ride-sharing company.
On June 7, the company announced its COO (Barney Horford) and CMO (Rebecca Messina) will both leave Uber. That’s as the CEO Dara Khosrowshahi, takes on more responsibility. “Over the years, I’ve learned that at every critical milestone, it’s important to step back and think about how best to organize for the future. Given that we’re a month past the IPO, now is one of those times” explained Khosrowshahi.
Top Raymond James analyst Justin Patterson stated that if the "CEO is spending less time on financing activities and partnerships, there’s less need for a COO. Likewise, it makes sense to align brand and policy messaging under one leader. Ultimately, we believe concerns will diminish after consecutive quarters of more benign competition and improving financial results."
Top Raymond James analyst Justin Patterson stated that if the "CEO is spending less time on financing activities and partnerships, there’s less need for a COO. Likewise, it makes sense to align brand and policy messaging under one leader. Ultimately, we believe concerns will diminish after consecutive quarters of more benign competition and improving financial results."
A similar message comes from Needham’s Brad Erickson: "While we expect that making significant changes like this so soon after the IPO will create some incremental questions from investors, we remain confident in management's experience running large and complex organizations and believe the structure and strategy are in place for growth and value creation." As if investors had any doubt, he added “we remain buyers of the stock.”
More worryingly perhaps are recent press reports revealing that two new entrants to the London ride-sharing market. Eastern European-based ridesharing company Bolt launched in London this week while Indian player Ola plans to launch there by the end of the year.
However even though London represents high-margin territory for Uber, the "headlines may be worse than the reality of the threat," reported Morgan Stanley analyst Brian Nowak. He reiterated his UBER buy rating on June 13 with a $56 price target (30% upside potential), while wondering how long these new rivals will be want to- or even be able to- fund a market share battle against Uber.
At the same time the analyst conceded that a market share battle would present a risk for Uber. He advises investors to track app user data to monitor the extent and speed of consumer uptake.
Meanwhile five-star Merrill Lynch analyst Justin Post told investors: “Uber may experience decreased profitability in London in the near-term if it chooses to match Bolt, but it remains the dominant player in the market with an advantage in scale, likely leading to lower wait times and a long-term EBITDA per trip advantage as competitors run out of dry powder to invest in discounting rides and increasing driver incentives.”
As RBC Capital’s Mark Mahaney tells investors, the bottom line is that Uber remains the leading global player in a massive ridesharing & meal delivery market, generating robust growth, with leading technologies, products & ops.” And the company boasts significant option value in new business units (e.g. Freight). “We believe the market underappreciates UBER’s profit potential” the analyst concludes. Indeed, UBER shows a ‘Strong Buy’ analyst consensus with a $54 average analyst price target (25% upside potential).
Salesforce.com Inc (CRM)
Salesforce has just made a monumental leap into data analytics. On June 10, the company announced a definitive agreement to snap up Tableau (DATA) in an all-stock transaction valued at roughly $15.7 billion.This is the largest deal in Salesforce’s history and, if all goes to plan, should close by the end of October. The result: CRM will have an opportunity to show off Tableau to its customer base at the all-important Dreamforce conference in November.
Although Salesforce initially traded lower on the deal announcement, Monness’ Brian White believes this bearish movement will prove short lived. “In a volatile market environment driven by growing trade tensions with China, we believe SaaS vendors such as Salesforce remain attractive with a subscription-based model and strong secular cloud trends” explains White. This Top 20 analyst just reiterated his CRM Buy rating with a $200 price target (33% upside potential).
As Salesforce looks for more ways to add value to organizations, White believes new tools to analyze and visualize data will become increasingly important. Indeed, Tableau is recognized as the clear leader in the world of visual analytics with a cult-like customer following, and there are exciting integration opportunities with CRM’s AI-based Einstein platform.
“Given Salesforce’s leading position in the CRM market, last year’s acquisition of MuleSoft and today’s agreement to acquire Tableau, the company will now be able to combine the customer, integration and data under a single platform in what Marc Benioff described as, “Where the magic really starts to happen” concluded White.
Overall, CRM is one of the Street’s most popular stocks right now. We can see that in the last three months 25 analysts have published CRM ‘Buy’ ratings vs just 1 ‘Hold’ rating. Meanwhile the average analyst price target stands at $182 (22% upside potential).
