Stocks rebound after regulators stepped in to protect depositors at troubled Silicon Valley Bank. But that doesn’t mean it’s time to celebrate, according to Mike Wilson, Morgan Stanley’s chief US equities strategist and chief investment officer.
“We propose to sell any rallies due to government intervention to quell the immediate liquidity crisis at SVB and other institutions until at least we reach new bear market lows,” he wrote in a note to investors on Monday.
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Wilson’s team does not view recent bank failures as “accidental or idiosyncratic.” Instead, the events serve as “another supportive factor” for the team’s negative earnings growth outlook.
The US Federal Reserve has raised interest rates aggressively to tame inflation. And that doesn’t bode well for the bottom line.
“In short, Fed policy is starting to bite and unlikely to reverse even if the Fed paused rate hikes or quantitative tightening – ie the die is cast for further earnings disappointment versus consensus and corporate expectations. “
Despite the bleak outlook, Morgan Stanley sees upside potential in some stocks. Here’s a look at three that it finds particularly appealing.
Apple
Apple (AAPL) is a tech giant.
In its most recent earnings conference call, management announced that the company’s active installed base has surpassed two billion devices.
While competitors offer cheaper devices, millions of users don’t want to live outside the Apple ecosystem. The ecosystem acts as an economic moat that allows the company to generate outsized profits.
The market likes it: Over the past five years, Apple shares are up more than 230%.
Morgan Stanley analyst Erik Woodring sees even more upside potential for the stock. The analyst rates Apple as “overweight” and has a price target of $180 — around 19% above current levels.
snowflake
Many think big data is the next big thing. And that’s where Snowflake (SNOW) shines.
Founded in 2012, the cloud-based data warehousing company serves thousands of customers across a variety of industries, including 573 of the Forbes Global 2000 companies.
Snowflake’s business momentum is strong. For the three months ended January 31, revenue increased 53% year over year to $589.0 million. Notably, the net revenue retention rate was a solid 158%.
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The company continued to make large customer wins. It now has 330 customers with more than $1 million in product sales over the last 12 months, compared to 184 such customers a year ago.
Morgan Stanley analyst Keith Weiss has rated Snowflake as “overweight” with a price target of $215, which implies a potential upside of 56%.
Costco
At a time when physical stores are under serious threat from online retailers, Costco remains a brick-and-mortar beast.
Over the past five years, Costco stock is up more than 150%.
The members-only big-box store operator is known for selling a variety of consumer goods at low prices. When people become more price conscious as a result of inflation, the warehouse retailer’s value proposition is hard to ignore.
In Costco’s most recent fiscal quarter, net sales rose 6.5% year over year to $54.24 billion.
Morgan Stanley analyst Simeon Gutman has rated Costco as “overweight” and has a price target of $520 — about 9% higher than where the stock is today.
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This article is informational only and should not be construed as advice. It is provided without any guarantee.
Source : finance.yahoo.com