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.
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.