4 Merrill Lynch Catalyst-Driven Stock Ideas to Buy Now

With second-quarter earnings right around the corner, many investors are trying to size up what stocks have the potential to trade meaningfully higher the rest of the year. A new research report from Merrill Lynch features the top 10 catalyst-driven stocks ideas for the third quarter. Eight are long ideas and two are shorts.

We screened the Merrill Lynch list for the ideas that had the largest upside to the posted target prices. All these stocks are rated Buy.


This incredible, fast-growing company remains the face of social media, and the top media pick at Merrill Lynch. Facebook Inc. (NASDAQ: FB) has been grinding higher over the past year after a big run up in 2013 to early 2014, when the stock almost doubled. The social media behemoth does not look to be slowing down, as analysts across Wall Street continue to recommend the stock and have moved price targets higher.

Given Instagram, Premium video and Graph Search capabilities, some analysts feel that the company can drive revenue growth even without a huge increase in advertising placement. It has been reported that Instagram is opening its platform for advertisers, particularly direct response advertisers, via new direct response ad units like mobile app install ads. With a talented and experienced sales team, this should only continue to drive revenue higher.

The Merrill Lynch analysts point to the fact that Facebook remains the top beneficiary of the adoption of mobile Internet trends, with total U.S. internet time spent on Facebook and Messenger up 19.6% in May. Other metrics continue to explode, and the key is there is no viable challengers anywhere in sight. They cite positive monthly data use, easier growth comparisons and positive data on ad revenue drivers as the top catalysts.

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Facebook also recently announced a willingness to share ad revenue to acquire premium content, a totally new avenue for the company. The company hopes to draw content away from Google’s YouTube. Facebook will offer contributors 55% of the revenue from ads that appear alongside videos, the same split as YouTube. The spots will be part of a new feature that suggests clips to Facebook users who are already watching videos. This is yet another step forward for the company as it builds a hedge to the social media train that at some point may hit critical mass.

The Merrill Lynch team raises the price target on the stock to $105 from $95. The Thomson/First Call consensus target is $97.33. The shares closed Wednesday at $86.91.

The stock was recently added to the Russell 1000, and could have big upside potential. Comcast Corp. (NYSE: CMCSA) is a leading media stock and is growing earnings substantially with extremely strong content revenue growth. Increased revenue at NBC Universal (NBCU) is also giving the company some earnings tailwinds, and a growing sports lineup is adding to revenues.

After over a year of haggling with regulators, the company abandoned plans in the spring to acquire Time Warner Cable, which was ultimately bought by Charter Communications. Comcast reported better-than-expected profit and revenue growth in its first quarter, as its broadband division logged its strongest revenue growth in more than four years.

The Merrill Lynch analysts see very strong performance at NBCU, and cite “Jurassic World” and the “Minions” spin-off as two movies that are expected to be huge. They also think that the AT&T-DirecTV deal closing could drive incremental demand for Comcast programming.

Comcast investors are paid a 1.62% dividend. The Merrill Lynch price target is $84, and the consensus target is much lower at $67.46. Comcast closed trading Wednesday at $62.25 per share.

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Applied Materials

The stock of this semiconductor capital equipment leader has lagged the overall tech market over the past year. Applied Materials Inc. (NASDAQ: AMAT) is actually now trading below all the moving averages, and for patient investors may be a high-quality pick now. The company is the global leader in precision materials engineering solutions for the semiconductor, flat panel display and solar photovoltaic industries. Its technologies help make innovations like smartphones, flat screen TVs and solar panels more affordable and accessible to consumers and businesses around the world.

The analysts are very positive on the stock, and see Applied Materials benefiting not only the semiconductor side of the business, but also from larger, higher resolution and flexible screens on the display side of the business. Many on Wall Street were disappointed when the merger with Tokyo Electron was called off recently, and the Merrill Lynch team points out the stock has been out of favor ever since.

Despite reporting solid first-quarter earnings that were above consensus, and giving guidance that was in line with expectations, the stock has continued to underperform. It may very well be one of the best technology values available for investors today. Some Wall Street analysts see continued FinFET capacity expansion (10nm/14nm/16nm) and transition to 3D NAND, with DRAM spending remaining strong next year.

The Merrill Lynch analysts point to the analyst day at Semicon West and commentary from peers on the robust chip cycle as upcoming catalysts.

Investors are paid a 2.05% dividend. The Merrill Lynch price target is $26, and the consensus target is $24.50. Shares closed Wednesday at $19.51.

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Eli Lilly

This stock checks in at high on the global pharmaceutical lists at many top Wall Street firms. Eli Lilly & Co. (NYSE: LLY) is somewhat surprisingly out of consensus with portfolio managers at mutual fund and hedge funds, or what is known as the buy side.

The company easily beat analysts’ earnings expectations for the first quarter, reporting earnings of $0.87 per share that topped guidance of $0.76 per share by 11 cents. Revenues for the period declined 1% to $4.65 billion, but were still enough to top analysts’ $4.63 billion expectations.

While generic competition is eating into profits with the company’s Cymbalta and Evista drugs, and currency headwinds took a toll on overseas sales, the drug giant still affirmed forward expectations. The company’s new cancer drug Cyramza won FDA approval for label expansion recently. It treats patients suffering from metastatic colorectal cancer. This was the fourth Cyramza approval in a one-year period; it already has approval to treat advanced or metastatic gastric or gastroesophageal junction adenocarcinoma and metastatic non-small cell lung cancer. Cyramza has so far generated sales of $67.5 million.

The Merrill Lynch team loves the company’s product pipeline, and they think that Eli Lilly’s Solanezumab drug for Alzheimer’s Phase 3 data, and Jardiance, the company’s drug for diabetes, CV data are both huge upcoming catalysts that could drive the stock.

Eli Lilly shareholders are paid a solid 2.37% dividend. The Merrill Lynch price target of $101 is well above the consensus target of $85.61. Shares closed Wednesday at $84.85 apiece.

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Catalysts that drive stocks are always positive. When you have four blue chip stocks like these with upcoming positive catalysts, you really have something that can drive stock prices higher.

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