One of the best plans of action in the stock market is staying with sector leaders. Typically those are more mature companies, but many times a newer outsider hits Wall Street, goes public and takes over an entire industry. For example, Facebook Inc. (NASDAQ: FB), which has only been a publicly traded company for just over four years. Regardless of their duration, the sector leaders tend to stay that way, especially in technology.
In separate new research reports, Merrill Lynch is very bullish on mega-cap tech companies. Three top stocks are highlighted here, and all three are rated Buy at Merrill Lynch. While not suitable for all accounts, they all make sense for longer term growth accounts with some risk tolerance.
This time two years ago, this company was the hottest thing on the planet and getting ready to come public. Alibaba Group Holding Ltd. (NYSE: BABA) is the largest online and mobile commerce company as measured by gross merchandise volume, and it had the highest profile initial public offering (IPO) of 2014. The stock has acted horrible since, printing highs at $120 in mid-November of 2014.
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. With most of the damage to the China equity markets seemingly subsided for now, the residual effect to the company may all subside some.
The Merrill Lynch team sees the company as cheap, with outstanding premium growth potential. They also note that the company has gone beyond e-commerce and developed into a sophisticated new type of conglomerate in the cyber-era with e-commerce as the base for the rest of the four businesses: logistics, finance, data-computing and cross-border infrastructure. They expect a whopping 24% compounded annual growth rate between now and 2018 for e-commerce in China.
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 is $110. The Wall Street consensus price target is lower at $105.23. The shares closed Friday up big on the day at $98.25.