As we kick off 2017, we should consider what may be coming ahead as opposed to just relying on what happened last year. Some investors believe that the post-election rally has been so strong that the market strength will remain in place. The bull market is currently nearing eight years old, and according to 24/7 Wall St.’s bullish and bearish outlook for the Dow Jones Industrial Average in 2017 is calling for Dow 21,422. More or less, this would represent a gain of 8% after the Dow rose posted a gain of 13.4% in 2016.
Each day 24/7 Wall St. reviews analyst upgrades, downgrades, initiations and reiterations, which ends up being hundreds of calls made each week. After compiling many lists by sector, 24/7 Wall St. has now grouped what some top picks for 2017 from top Wall Street analysts. Essentially these calls come from lists like the Top Picks, Franchise Picks, US 1 picks, Conviction Buy list and so on. They come from major firms such as Morgan Stanley, Merrill Lynch, Goldman Sachs, Jefferies and others.
Keep in mind that investors should never just follow analysts blindly. After all, blindly endorsing or following an analyst call just because someone else says they are great can have consequences if those calls turn out to be wrong.
The traditional upside for Dow and S&P 500 stocks at this time is roughly 8% to 15% to each Buy-rated and Outperform-rated target. Analysts calling for 20%, 30% or 50% upside implies that there is more risk in that particular stock. Analysts sometimes just get their thesis wrong, and sometimes there are outside forces that interrupt or destroy the potential upside.
Here is a list of the top stock picks for 2017 that have been issued by some of the top analysts on Wall Street.
At the beginning of the year, Barron’s listed Delta Air Lines Inc. (NYSE: DAL) as one of the 10 Top Picks for 2017. It is trading at around nine times 2016/2017 earnings, despite cutting its debt in half since 2009. The firm noted that Delta will return about 8% of its $35 billion market value to shareholders this year, a total of nearly $3 billion. While Barron’s gave an upside of $100, it admitted that this target is a stretch, but at the same time Delta could rise 50% even if it only gets halfway there.
Jefferies called Nike Inc. (NYSE: NKE) a top pick for 2017 at the onset of 2017. This seems generous, considering that Nike was the worst Dow stock of 2016 by far, with a double-digit loss for shareholders.
Kraft Heinz (NASDAQ: KHC) was named one of Sanford Bernstein Kiplinger’s top picks for 2017. The firm noted that on a price-to-earnings basis, the stock isn’t cheap and it is unlikely to soar, but it offers a 2.9% dividend yield, which could be supportive to any portfolio.
Another Jefferies top pick was Monster Beverage Corp. (NASDAQ: MNST), which had its Analyst Day on January 12. At that time, shares were trading near $45.62. The firm issued a Buy rating with a $58 price target.
Though Starbucks Corp. (NASDAQ: SBUX) ended 2016 relatively muted in terms of its share performance, analysts are calling for a strong 2017, with earnings growth expected to be 15% or more. Jefferies named it a top pick among restaurant chains, with a price target of $65. The Wall Street consensus target is $64.91. Kiplinger also had Starbucks in its Top Best Stocks for 2017, citing Value Line for a 16% annual earnings growth for the next five years.
Baird named Tesla Motors Inc. (NASDAQ: TSLA) was named by Baird as its top pick for 2017. However, the call was based more on battery sales accelerating with a production ramp coming down the pipe. This would coincide with the launch of the Model 3 sedan. Currently the consensus target from Wall Street analysts is $238.75, just a buck above the most recent close.
Walt Disney Co. (NYSE: DIS) has been winning and regaining popularity from investors as 2017 gets off to a start. The strength from “Rogue One: A Star Wars Story” and the next feature film in the franchise late in 2017 is now dominating and overcoming the woes of ESPN and cord cutters. Merrill Lynch named Disney as a US 1 list member late in December with a $125 price target, versus the consensus target of $109.59.