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JP Morgan says that these two stocks may rise at least 30% from current levels
In a volatile market environment, with stocks being shaken by a variety of conflicting forces, investors turn to expert analysts for guidance. Covering the macro situation of banking giant JPMorgan, quantum strategist Marko Kolanovic believes that we will see continued gains in stocks. Kolanovic does not rule out the recent crashes on the S&P 500 and NASDAQ; instead, he sees them as temporary. Kolanovic points out that we are approaching the end of the first quarter and we will soon see the first earnings reports for 2021. He expects this to create momentum for stocks in the summer, boosting market indices and keeping inflation in a steady state with earnings of securities stabilizing. Kolanovic set an end-of-year price target of 4,400 for the S&P 500, which suggests a ~ 13% growth in the market benchmark. Taking Kolanovic’s perspective seriously, JP Morgan analysts are offering concrete recommendations, pointing to two names that look attractive. As the company’s analysts are forecasting at least 30% upside potential for each, we use the TipRanks database to go a little deeper. BorgWarner, Inc. (BWA) The first JPM choice we are looking at is BorgWarner, a major manufacturer of transmission components, especially transmissions and air management systems, which has long been a robust in the Detroit automotive industry. The company has, in recent years, been a leader in the development of powertrains and engines for electric vehicles and is committed to accelerating this development. The company announced this week that it plans to expand its EV revenues to 45% of the company’s total by 2030. The company’s plan, called Charging Forward, would see a focus on developing components for electric commercial vehicles, optimizing the combustion and sizing portfolio EV business up to deliver the highest projected demand. Management expects to maintain BorgWarner’s high margin performance while generating strong free cash flow. Current performance gives BorgWarner a solid foundation for its ambitious EV plans. The company had a strong impact in 4Q20 on several important indicators. BWA reported revenues of $ 3.93 billion, a 53% gain year on year. Earnings per share were $ 1.52, up from $ 1.06 in the same quarter last year. Moving on to the figures for the entire year, 2020 ended with the BWA showing $ 10.17 billion in the top row, almost equal to last year’s total. 2020 earnings fell to $ 2.34 from $ 3.61 in 2019. Despite the lower gains, BWA’s cash position improved in 2020. Free cash flow was $ 743 million for the year, and the company increased its cash and cash equivalents by $ 818 million in the year-year. Among the optimists is JPMorgan analyst Ryan Brinkman, who wrote: “Demand for BWA products is strong, driven by elements of consumer ‘attraction’ and government ‘pressure’, and we believe it will only increase over time, with the increase in the number of vehicles in emerging markets puts upward pressure on fuel prices. BWA already enjoys the second largest margin in the sector, partly driven by the fact that many of the products it manufactures are of a highly designed nature, leading to major technical barriers to entry and market concentration. Even so, we expect the combination of rapid revenue growth and financial discipline to allow the expansion of the first-line operating margin. ”To this end, Brinkman rates BWA as Overweight (ie Buy), and its $ 58 target price implies a 33% upside potential for next year. (To see Brinkman’s track record, click here) Brinkman is not overkill in his optimistic stance, but there is some division on Wall Street in relation to BWA. The analyst’s consensus view is a moderate purchase, based on 14 recent analyzes, divided into 8 purchases, 5 retentions and 1 sale. The shares are quoted at $ 43.70 and their average price target of $ 49.69 suggests a year-on-year upside of ~ 14%. (See BWA stock analysis at TipRanks) Adobe, Inc. (ADBE) Changing gears, we will move from the automotive to the software sector. Adobe is a name we are all familiar with, and with good reason. The company created the PDF format and, among its product line, are Photoshop, Illustrator and InDesign, among many, many others. In recent years, Adobe has switched to a subscription SaaS model, offering its products as a bundle on Adobe Creative Cloud. Adobe made gains last year as its cloud-based model was well suited for the 2020 shift to remote and teleworking. The company’s tax revenues in 2020 reached $ 12.8 billion, almost 14% more than 2019, and growth continued in its first fiscal quarter of 2021. The company reported $ 3.9 billion in first quarter revenue, a company record with an increase of 26% year on year. EPS, at $ 2.61 per share, grew 33% yoy. This guidance was updated based on the results for the first quarter. Management sees the company generating $ 15.45 billion in total revenue for fiscal year 2021, which would represent an annual increase of 20% over the published number of 2020. Digital media, one of the main drivers of the numbers of 2020, is expected to deliver 22% annual growth and show an annualized recurring revenue of $ 1.8 billion. Covering these actions for JPM is 5-star analyst Sterling Auty, who sees a clear path for Adobe. “When the business cycle changes to the best, companies tend to invest in solutions that help drive revenue growth and that’s exactly what Adobe Experience Cloud, with its digital marketing solutions, can help customers achieve,” observed Auty. The analyst added: “Over the years, it is more common for Adobe to reiterate the entire year guidance after reporting first quarter earnings, so seeing the increase above just the first quarter upward for full year figures is a a sign of incremental strength in our opinion. As a reminder, the stock hasn’t changed much since the beginning of September and that could be the catalyst to get it moving again. “In line with his optimistic comments, Auty estimates that ADBE shares an Overweight (ie Purchase). Its target price of $ 595 indicates its confidence in a 32% increase in one year. (To view Auty’s track record, click here) Overall, Wall Street analysts are quite unified in their views on Adobe – the stock has 16 buy reviews, against a single wait, for an analyst consensus rating of strong buy. The shares are quoted at $ 450.99, with an average price target of $ 559.82, suggesting an increase of ~ 24% at the end of the year. (See the ADBE stock analysis on TipRanks) To find good ideas for trading stocks with attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that gathers all information about TipRanks stock. Disclaimer: The opinions expressed in this article are exclusively those of the analysts presented. The content should be used for informational purposes only. It is very important to do your own analysis before making any investment.