Markets

3 Strong Buy Stocks for A Summer Rally

Hope at last. There are signs that the market may hit recovery in time for a summer rally. "I think the incremental positive is we broke the string of lower highs that's been in place since January. Our take is the correction that began in January is coming to an end," says Oppenheimer analyst Ari Wald. Fears over a full-blown trade war between China and the US are dissipating due to ongoing trade talks between the two nations, and now both tech stocks and small caps are doing better.

So with this optimistic analysis in mind, we used TipRanks’ nifty Top Analyst Stocks tool to pinpoint three key stocks that are poised to soar from current levels. These are stocks with substantial backing from Wall Street’s best-performing analysts. And as you will see below, all three of these stocks have big catalysts in the pipeline to push prices higher. So let’s dive in and take a closer look now:

1. Microsoft (MSFT)

Software giant Microsoft is riding the AI wave. The company has just held its much-hyped 2018 Microsoft Build conference in Washington. And word on the Street is that the flagship event was a success. Indeed, our data shows that post-conference three top-rated analysts have reiterated their MSFT ‘Buy’ ratings.

One of these analysts is KeyBanc’s Brent Bracelin. This five-star analyst calls the stock “one of our highest conviction cloud stocks to own.” He is projecting 13% upside for shares from current levels to $110- but moots $124 as a bullish case scenario price point.

According to Bracelin “it was clear to us that Microsoft has ambitious plans to integrate AI [artificial intelligence] and ML [machine learning] functionality in a pervasive manner across the entire application portfolio.” He reveals that this “AI-everywhere approach was exemplified by the numerous demonstrations of new features coming to Windows, Office, Visual Studio, Azure, Cortana, Bots, and Microsoft Graph, among other areas.”

Although the conference covered hundreds of new developments, a few particularly impressive features include the integration of Cortana and Alexa voice assistants at work and home. Bracelin also noted that natural language understanding has now been added added to a host of MSFT products (think Office365 and Windows). Developers also have an updated Microsoft Graph to get excited about.

In his keynote speech CVP at Windows Joe Belfiore told attendees: "I just want you to come into the keynote with one key idea, which is that the Graph is a cloud-backed data store where both you and us can put organizational data in a way that's private and secure, but in a way that also lets our solutions take advantage of both so that AI can reason against that data… and make those end users lives better."

All this leads Bracelin to conclude: We remain bullish on the prospects for MSFT to transform its growth/margin profile on share gains in AI and cloud. And he isn’t alone. In the last three months, this ‘Strong Buy’ stock has received 15 buy ratings with just 1 hold rating and 1 sell rating. In terms of price targets, it seems Bracelin’s on the money- the average price target from all these analysts also works out at $110.

2. Altice USA Inc (ATUS)

If you haven’t heard of Altice USA before, listen up. ATUS is is one of the largest broadband communications and video services providers in the US. The stock makes an interesting investing proposition right now because it is about to undergo a total separation from parent company Altice NV. Post-split, Altice USA will focus on the US, and Altice NV will operate in France. This is a savvy move as it effectively eliminates concerns that potential continued issues in France will bleed into the US business.

Ahead of the transition, top-rated JP Morgan analyst Philip Cusick believes ATUS makes a compelling investing proposition. And his price target of $32 bears this out. Given that the stock is currently trading at just $19, this price target indicates huge upside potential of 70%. At the same time, Cusick has also added Altice USA to the firm’s Analyst Focus List as a value pick ahead of the spin-off. He believes the event will take place next month and recommends snapping up shares beforehand.

Plus good news for investors- Altice USA has just declared a one-off cash dividend ahead of the move. But you will have to act fast. The company has announced that it will pay $2.035 per share to only those shareholders who own the stock at the close of May 22. However, the payout will come later, two days before the separation occurs (the date of which is still to be finalized).

Overall, ATUS has received 8 consecutive buy ratings in the last three months. These 8 analysts have an average price target on the stock of $27, indicating 43% upside potential. Note too these bullish words from Pivotal Research’s Jeffrey Wlodarczak: We view the mid-year spin of ATUS from parent ATC favorably… [as it] eliminates the overhang of certain investors shorting the U.S. business against the parent, and sets ATUS up to also return capital via aggressive share repurchase activity.”

3. Heron Therapeutics (HRTX)

Our third and final stock is innovative biotech Heron Therapeutics. This ‘Strong Buy’ company boasts an impressive 11 back-to-back buy ratings from the Street. These analysts are modelling for 29% upside potential from current levels ($32.45) to the average price target of $41.90.

Keep a close eye on HRTX’s potentially transformational pain drug HTX-011. The drug is currently in Phase 3 clinical trials- the final stage before an New Drug Application (NDA) can be filed with the FDA for ultimate approval. According to Mizuho Securities analyst Difei Yang “the biggest catalyst for Heron in 2018 is HTX-011's NDA filing.”

She expects Heron to seek a broad approval for both the reduction of post-operative pain and reduced use of opioid analgesics for a full 72 hours after surgery. As the drug has already been granted fast-track designation by the FDA, HTX-011 could be approved as soon as mid-2019.

The Street is enthusiastic about the huge market opportunity for HTX-011. Here Yang explains why: “We believe HTX-011 addresses what we see as an unmet need in the postoperative pain market - failure of local anesthetics when inflammation is present. HTX-011 works as a combination of local anesthetic bupivacaine and anti-inflammatory agent meloxicam. Recent studies suggest a potential synergistic effect from both components which we see as an important differentiator.”

Bear in mind that Yang is one of the best-ranked analysts on TipRanks. Out of over 4,800 tracked analysts she comes in at #128. In part this is based on her strong average return of over 20% per rating.

Our database covers over 5,000 stocks. Find your own “Strong Buy” stocks in the sector that interests you the most. Go to the Nasdaq Smart Portfolio stock screener now.

Author: Harriet Lefton.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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