The higher the market goes, the harder it is to justify many of the multiples being applied to shares. The big moves in the market since the election last November were due in part to big moves by tech stocks with very large market capitalizations. With tail-risk mounting due to the French elections, the geopolitical situation around the world and some sociopolitical issues here at home, it makes sense for investors to buy stocks with lower multiple large cap growth stocks.
In a series of new research reports, Merrill Lynch raised price targets on five quality, large cap growth stocks that make good sense for growth investors looking to reposition their portfolios to account for perhaps more volatility in the rest of 2017. With corporate optimism much stronger than some of the current data, playing it safe makes good sense.
Here are five buy-rated growth stocks on which Merrill Lynch has raised its price targets.
Citizens Financial Group
A top financial pick across Wall Street, Citizens Financial Group Inc. (NYSE: CFG) operates 1,200 branches primarily throughout 11 states across the New England, Mid-Atlantic and Midwest regions. It has consolidated total assets of $137 billion, ranking as the 13th largest bank in the United States by assets. The company offers a broad range of retail and commercial banking products and services to more than 5 million individuals, institutions and companies.
The company posted outstanding first-quarter results and the analysts noted this in the report:
Strong capital markets revenue, card fees, and spread income drove the first quarter earnings-per-share beat. We are raising our 2017 EPS estimate to $2.40 and 2018 EPS estimate to $2.70 to reflect improved revenue prospects. We reiterate our Buy rating as the company has multiple levers to grow revenue and remains committed to deploy its excess capital.
Shareholders are paid a 1.6% dividend. The Merrill Lynch price target was raised to $40 from $38, and the Wall Street consensus target is $37.90. The shares closed last Friday at $34.90.
This is one of the highest volume builders in the United States. D.R. Horton Inc. (NYSE: DHI) is the largest public builder by closings in the country, delivering roughly 40,000 homes in fiscal 2016. The company is positioned in 78 metropolitan markets in six major regions, and it develops single-family homes for first-time and move-up buyers.
Approximately 80% of revenue is derived from the Southeast, South Central and West regions. The company also provides mortgage financing and title agency services to homebuyers. Merrill Lynch likes the liquidity and size of a builder like D.R. Horton, as the company has a market capitalization of over $10 billion.
The company posted solid results but investors sold off the shares, a mistake that Merrill Lynch feels, as it raised the price target and estimates on the company.
Shareholders receive a 1.22% dividend. Merrill Lynch raised its price target to $41 from $40, and the consensus target is $34.97. The shares closed Friday at $32.87.