10 Analyst Calls Too Big to Ignore: AMD, BHP, Micron, Nike, Pandora and More
The week of December 9, 2016, was another record-breaking market one. The post-election rally has continued, with hopes of major structural economic changes coming under a new administration in 2017 and beyond. The Dow had two days of triple gains, and a close of 19,756 means that we could easily be at Dow 20,000 on just one or two more days of rallying. What simply cannot be ignored is that investors have the fear of missing out now more than the fear of buying the top. And investors are looking for new ideas for gains or income.
24/7 Wall St. tracks dozens of analyst upgrades, downgrades and initiations each day, and this becomes hundreds of analyst calls each week. Some analyst calls from the week of December 9 were just too big to ignore, with analysts pointing out potentially uncovered gems, extreme value or massive upside. Some were in easily recognized large cap stocks and others might be lesser followed.
Before blindly following analyst calls as though they are foregone conclusions, investors need to be honest with themselves. The traditional analyst upside projection in Dow and S&P 500 stocks is currently 8% to 15%. So if you see calls for 25%, 35%, 50% or even more upside, then it should be assumed that there are many more risks or many hidden assumptions that may require a lot more good news to occur than is priced in by the market. If investors see big upside calls in small-cap and low-priced stocks, they better assume they are taking much more than just market risk — some companies could be facing existential risk.
Another consideration is that analysts sometimes just get their thesis wrong. It happens, but in the world of modern markets, some of the sophisticated investors and those who are inside of certain industries may know just as much or even more than analysts making projections. Sometimes outside events that were unforeseen wreck an upside thesis. And we have to consider that the market is feeling overbought, not just because of the bull run being almost eight years old, but because the Trump rally has not seen a single correction worth noting in a month.
These are the analyst calls that made a big impact or that were simply too big to ignore. Links have been provided to more expansive coverage on some calls.
Advanced Micro Devices Inc. (NASDAQ: AMD) has seen one monster of a year in 2016, rising exponentially. This company was literally facing implosion in prior years, but now Merrill Lynch has come out with the most aggressive analyst target of $12.00, after raising its rating by two notches to Buy from Underperform, preferring it over Intel and NVIDIA.
The Merrill Lynch team admits that they were very late to the party here, but reworking the upside from servers, personal computers, graphics, machine learning and virtual reality gives them massive upside. Their bull-bear case was even for as much as $15 on this stock.
AMD has hit multiyear highs, and the most recently closing price of $10.34 is now against a 52-week trading range of $1.75 to $10.66.
BHP Billiton Ltd. (NYSE: BHP) could have even more commodity-driven recovery ahead of it, if Argus is right in its dual target upgrade of Rio Tinto and BHP. Argus has a Buy rating but raised its price target to $46 from $40 in this week’s call. The firm pointed out that the American depositary shares are down more than 60% from their all-time highs of 2011, and that target is now almost $10 higher than the prior Thomson Reuters consensus analyst target price.
BHP Billiton closed down 1.1% at $38.48 on Friday, in a 52-week range of $18.46 to $39.80. It is up just 3.3% since the November 8 election date when this call was made. Argus feels its upside in commodities and oil still has much room to run.
Two key analyst calls were seen in Juniper Networks Inc. (NYSE: JNPR) this past week. It was raised to Buy from Neutral at Nomura, and its price target was raised to $33 from $24. It also was raised to Outperform from Neutral by Credit Suisse the prior day, with a target hike to $31 from $27.
Shares traded most recently at $28.46, and despite a 20-cent drop on Friday, they rose 6% this past week. The stock now has a consensus analyst target of $28.29, up about a dollar from the prior week, and its 52-week range is $21.18 to $29.57.
Among companies based in America, Micron Technology Inc. (NASDAQ: MU) is the king of DRAM and the king of Flash. Its turnaround may only be just started, if Citigroup is correct. The firm issued a new Buy rating and assigned a $30 price target. That compared with a prior $19.06 close, so Citi sees more than 50% upside here.
Micron closed down 16 cents on Friday to $20.50, for a 9% gain this week alone. It also has a new 52-week range of $9.31 to $20.99, and its consensus analyst target has risen to $21.41.
Throughout 2016, Nike Inc. (NYSE: NKE) has seen downgrades and price target cuts. Rising competition and currencies have played a role in the sector, but HSBC is saying that enough is enough. The firm raised its rating to Buy from Hold on December 5, and it raised its price target to $60 from $56.
HSBC has been on the sidelines for 18 months, despite so many other analysts raising targets prior to 2016, and it feels this is a key franchise in which long-term investors can get one of the top brands in the world on a deep sale: “Nike shares on sale on aisle six!”
Nike shares closed out the week at $51.72, and its 52-week range is $49.01 to $68.19.