Top Merrill Lynch Stock Picks for the First Quarter of 2018

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As incredible as it may seem, we are into 2018, and the holidays are finally over. With last year showing little volatility, the S&P 500 finished up a massive 19.4%, and much of those gains were driven by the big Trump rally that started after the businessman was elected U.S. president in early November of 2016, and continued all through 2017. As we start the new year, many of the top firms we cover on Wall Street are out with their top ideas for the first three months of 2018.

In a new research report, Merrill Lynch is among the first out with top ideas for the first quarter of 2018. The firm has eight stocks to buy and two that are expected to underperform. Here we focus on the long ideas, and at first glance, they look like outstanding stock picks for growth accounts.

AMD

After years of frustrating performance, Advanced Micro Devices Inc. (NYSE: AMD) appears to have turned the corner and is a hot commodity on Wall Street. It is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.

AMD is working with Tesla to refine an AI chip for autonomous driving tasks in its cars. Many think the unconfirmed partnership would make sense, and though most would not expect the shipment of AMD chips to Tesla to have a material impact near term, it would constitute a critical win for AMD and support the thesis that the company is a primary beneficiary of the shift to parallel processing graphics processing units.

The Merrill Lynch price target is $18, and the Wall Street consensus target is $14.16. The shares were trading on Tuesday at $10.85.

Disney

This top consumer media company has multiple streams of income to push revenue. Walt Disney Co. (NYSE: DIS) stock continues outperforming on a near-term and long-term basis. With the movie studio business poised to improve, as with accelerating theme park business, the network programming continues to drive viewership with extensive sports programming. Combining that revenue growth with the company’s solid media networks and interactive presence, and the 2018 revenue estimates could be conservative.

Many on Wall Street feel that the company’s distribution leverage and optionality, as well as its concentration of valuable intellectual property, will only improve with the acquisition of 21st Century Fox assets. Another plus is Disney’s continued impressive theatrical momentum.

Shareholders are paid a 1.53% dividend. Merrill Lynch has a $120 price target, and the consensus target is $112.11. Share traded at $110.50 on Tuesday.

Exact Sciences

This one has been on fire and could still have big upside. Exact Sciences Corp. (NASDAQ: EXAS) is a molecular diagnostics company focused on the early detection and prevention of the deadliest forms of cancer. The company has commercialized a next-generation non-invasive colorectal cancer screening test, Cologuard, which received concomitant FDA approval and Medicare coverage in 2014.

Cologuard is included in the colorectal cancer screening guidelines of the American Cancer Society and stool DNA is included in the U.S. Multi-Society Task Force on Colorectal Cancer.

The $67 Merrill Lynch price objective is above the posted consensus target of $59.10. The stock was last seen at $51.35 a share.

Exelon

This top utility stock still makes good sense for conservative accounts. Shares have traded up some this year, but are still offering a great entry point. Exelon Corp. (NYSE: EXC) is the nation’s leading competitive energy provider, with expected 2017 revenues of approximately $31.7 billion. Headquartered in Chicago, Exelon does business in 48 states, the District of Columbia and Canada. Exelon is one of the largest competitive U.S. power generators, with approximately 32,500 megawatts of owned capacity comprising one of the nation’s cleanest and lowest-cost power generation fleets.

Its Constellation business unit provides energy products and services to more than 2.5 million residential, public sector and business customers, including more than two-thirds of the Fortune 100. Exelon’s utilities deliver electricity and natural gas to more than 7.8 million customers in central Maryland, northern Illinois and southeastern Pennsylvania.

Exelon investors are paid a very solid 3.32% dividend. Merrill Lynch has set its price target at $45. The consensus target is $43.10, and the stock was trading at $39.50.