Despite the market hitting all-time highs yet again this week, and with the seasonably difficult time of the year for stocks rolling around, many of the top analysts and strategists that we cover here at 24/7 Wall St. remain very positive for the rest of 2017. The number one reason cited for the continued bullishness, which is almost a constant on Wall Street anyway, is earnings growth, and for the most part, reasonable valuations.
With the market so lofty, we thought it makes good sense to review the highest conviction picks at top firms. We screened the Merrill Lynch US 1 list for the companies that have exhibited strong price momentum and found four that look like solid picks for the fourth quarter.
Broadcom
This company remains a top pick across Wall Street and derives 20% of its business from Apple. Broadcom Ltd. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.
Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.
Top Wall Street analysts like the leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many on Wall Street see a cyclical rebound in industrial and communications demand.
The analysts note that the stock is underowned compared to peers, and the 40% iPhone content growth, combined with the closure of the Brocade purchase, which they feel is accretive, are very positive catalysts. They also feel dividend growth is possible.
Broadcom investors receive a 1.63% dividend. The Merrill Lynch price target for the stock is $300, and the Wall Street consensus target is $284.75. Shares closed Wednesday at $242.91.
Salesforce.com
This top company reported solid second-quarter results as billings drastically improved. Salesforce.com Inc. (NYSE: CRM) provides enterprise cloud computing solutions, with a focus on customer relationship management to various businesses and industries worldwide.
It offers enterprise cloud computing applications and platform services, including Sales Cloud that enables companies to store data, monitor leads and progress, forecast opportunities, gain insights through relationship intelligence and collaborate around sales on desktop and mobile devices.
The company also provides Service Cloud, which enables companies to deliver personalized customer service and support, as well as connect their service agents with customers on various devices; and Marketing Cloud, which enables companies to plan, personalize and optimize customer interactions.
The company has recently been upgraded at several top Wall Street firms and looks to be breaking out of a triple top formation.
Merrill Lynch has a $114 price target, and the consensus target is $107.24. Shares closed Wednesday at $95.21.
The huge social media leader has continued to post gigantic numbers, and it is the top pick in internet media for 2017 at Merrill Lynch. Facebook Inc. (NASDAQ: FB) operates as a mobile application and website that enables people to connect, share, discover and communicate each other on mobile devices and personal computers worldwide.
Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.
Top analysts feel that Facebook’s long-term forecasts are more easily attainable, especially as the company continues to grow and employ new platforms for online advertising. Wall Street estimates are likely moving higher for 2018 as the company ramps monetization in Instagram, including Stories ads, rolls out more Facebook original video content, begins to monetize Messenger and sees slightly lower than forecast operating expense and capital expenditure growth.
The $190 Merrill Lynch price target compares with the consensus target of $172.62. Shares closed on Wednesday at $172.17.
24/7 Wall St.Regeneron Pharmaceuticals
This is a top biotech play for aggressive accounts to consider. Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) is a biopharmaceutical company focused on the development of therapeutic human antibodies for the treatment of eye disorders, hypercholesterolemia, cancer, inflammation and other diseases.
Regeneron’s product sales are driven principally by its VEGF inhibitor Eylea, which is approved for use in wet age-related macular degeneration and diabetic macular edema, and by Praluent for the treatment of hypercholesterolemia.
The company recently posted solid clinical results for a new drug, and the analysts noted:
Phase 3 study of Dupixent in severe asthma met both primary endpoints of reducing exacerbation and improving lung function. Exacerbation declined 46% in overall population, driven by more pronounced benefit in pts with high eosinophil counts. Though not as compelling as in Phase 2, Dupixent is competitive against other therapies in light of lung function improvement.
The Merrill Lynch price target is a whopping $588. The consensus target is $497.30, and shares closed Wednesday a $438.17.
These are four top momentum plays for aggressive accounts looking to add some fourth quarter alpha. It makes sense to keep tight stops on these stocks, as a big reversal in the market could push them lower much faster than others.
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