Mondelez International (NASDAQ: MDLZ) is another new addition to the number-one top picks list, and Credit Suisse’s target price of $48 implied an upside 17%. That upside would be over 19% if you count the 2.1% dividend yield.
Mondelez offers a compelling risk-reward scenario in the challenged packaged foods space. Nearly 60% of the company’s sales come from developing markets. With China’s growth accelerating and India’s recent financial reforms behind it, both regions should provide topline tailwinds with spillover effects in the rest of Asia. New management under CEO Dirk Van de Put provides an underappreciated catalyst for change. The current multiple implies negative sentiment around a potential earnings rebase that has been factored in. And its main category, snacks, remains a structural growth story as eating habits shift to smaller meals at higher frequencies.
Shares of Mondelez were last seen at $40.46. The 52-week range is $39.19 to $47.23, and a consensus price target is $48.92.
UnitedHealth Group Inc. (NYSE: UNH) was a new addition to Credit Suisse’s number-one top picks, and the firm’s $233 price target implied upside of about 9.5%. That upside projection would be closer to 11% on a total return basis, given its 1.4% dividend yield.
This is the firm’s play on secular growth in health care, which means it may be a controversial pick, depending on how the political and social fighting turns out over the nation’s health insurance. It is targeting attractive long-term earnings growth of 13% to 16%, but with higher growth in 2017. Credit Suisse said of this pick:
For 2018, despite a headwind associated with the reinstatement of the health insurer fee, UnitedHealth management says consensus EPS estimates, which imply adjusted Y/Y growth of 16% (ex HIF), appear reasonable. UNH’s health benefits franchise (UHC) is positioned to capture share and grow earnings. UHC’s relationship with Optum enables it to manage medical costs effectively, which enhances the competitiveness of its offerings. As a market share leader in every product segment in which it competes, UHC’s scale allows it to leverage G&A costs, which given MLR caps has become the primary way for health insurers to drive margin gains.
Shares of UnitedHealth were trading at $212.72, with a 52-week range of $136.22 to $213.93. The consensus price target is $229.26.
eBay Inc. (NASDAQ: EBAY) was upgraded to the number-one top picks list. Credit Suisse’s $44 price target implies upside of 17.3%. The firm called eBay a rare value story with several paths to value creation. Three areas of value were as follows:
- Potential marketplace gross merchandise volume (GMV) acceleration
- Potential monetization of classified and/or StubHub businesses
- Improved transaction revenue growth driven by uptake of promoted listing ads
- More aggressive share repurchases adding to 2018 earnings per share
eBay shares were last seen at $37.50, with a consensus price target of $39.00 and a 52-week range of $27.28 to $39.28.