Merrill Lynch Raises Price Targets on 5 Stocks With Blow-Out Earnings

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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 geopolitical situations around the world and some sociopolitical issues here at home, it makes sense for investors to stock with large cap growth stocks.

In a series of new research reports, Merrill Lynch raised its 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 the rest of 2017. With corporate optimism much stronger than some of the current data, playing it safe makes good sense. All are rated Buy.

Alibaba

Over two years and a half ago, this company was the hottest thing on the planet and getting ready to come public. Alibaba Group Holding Ltd. (NYSE: BABA) runs the largest retail marketplaces (Taobao, TMall) and leading B2B sites (Alibaba.com, 1688.com) in China and Lazada in Southeast Asia. It collects revenues mainly from commissions, marketing services, subscription fees, cloud computing and software, as well as other value-added services. It also owns media and partners with logistics and payment companies to offer delivery, warehousing, payment and financing services for its market participants.

Plain and simple, the dominance in Alibaba’s core business, the very hard barrier to entry for competition and new growth opportunities like cross-border e-commerce make the stock extremely attractive.

The company recently reported huge quarterly numbers, and the driving force for some of the outperformance included social features, customized mobile app for users, cross-platform user tracking and ad targeting for merchants. In fact, growth returned to the levels the company was at when it went public.

The Merrill Lynch price target for the stock was raised to $140 from $125. The Wall Street consensus estimate is lower at $133.17. The shares closed Friday at $123.22.

Applied Materials

Some on Wall Street feel this semiconductor capital equipment leader has the broadest range of exposure to 3D NAND and foundry display. Applied Materials Inc. (NASDAQ: AMAT) is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Applied Material’s technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.

The company reported second-quarter earnings per share that exceeded the Wall Street consensus estimate. Revenues rose 44.7% from last year and were right in line with the analysts’ view. Looking ahead, Applied Materials forecast third-quarter earnings well ahead of the Wall Street consensus forecast. The company also sees third-quarter revenues much higher than the analysts’ view.

Shareholders of Applied Materials are paid a small 0.9% dividend. The $54 Merrill Lynch price target jumped to $58. The consensus target is $43.89, below where shares closed on Friday, at $44.08.