With a new year comes a new set of forecasts and targets from Wall Street. Credit Suisse routinely updates its own Top Picks List based on duration and performance. For 2019, the investment banking firm has 110 top picks. Some have much more implied upside than others, but where the list gets interesting with each refresh is in the new additions to the list.
The firm does not tell investors that these are meant to make up a portfolio. Instead, these are considered to be its analysts’ best ideas for a six to 12 month time horizon. Each of the firm’s research analysts identifies and ranks up to three picks per sector.
For the start of 2019, Credit Suisse added these eight companies to the Top Picks List. We have included a snippet of the upside catalysts behind each call, as well as added in how they compare to other analysts within the Thomson Reuters sell-side research universe.
Advance Auto Parts Inc. (NYSE: AAP) has a target price of $195, implying more than 18% upside from the prior $165.05 close. This is a leading auto after-market parts retailer, and Credit Suisse sees a healthy demand backdrop for the space, including growth in the number of vehicles that require aftermarket repair, modest inflation and low-income consumer wage growth. The firm is looking for further progression in accelerating comparable sales and margin expansion in 2019. The consensus target price of $195.65 puts Credit Suisse in the middle of other analyst targets.
Energy Transfer L.P. (NYSE: ET) has a $23 price target at Credit Suisse, which implies a whopping 52% upside from the prior $15.10 close, and that’s before even considering the 9.5% yield equivalent. The analyst points out that it trades at a discount in the midstream space despite strategically strong exposure and robust growth outlook versus peers. It also is noted as offering “irreplaceable exposure to the fast-paced Permian basin” with one of the largest gas gathering and processing footprints and extensive crude gathering, which should enable the company to continue to win projects despite growing competition from private equity and exploration and production sponsored master limited partnerships. Energy Transfer has a consensus price target of $21.76.
Honeywell International Inc. (NYSE: HON) has implied 15% upside to Credit Suisse’s $158 price target, without considering its 2.5% dividend yield, and that is actually under the $169 consensus target price from Thomson Reuters. The company is viewed as uniquely positioned to outperform in both positive and negative macro growth revision scenarios since it can pull earnings levers from organic sales growth, fixed cost reduction and free cash flow deployment. Honeywell also is viewed now as a more streamlined company after the Garrett and Resideo spinoffs and should be able to maintain a mid-single-digit organic growth rate with significant balance sheet optionality.
IHS Markit Ltd. (NASDAQ: INFO) has a $65 price target at Credit Suisse, which is almost 10% higher than the consensus analyst target price and just under the $66 target price that would be the street-high. The company is said to have the best-in-class data assets integrated in client workflows that support pricing and high revenue retention. If the top pick list is accurate, that’s 30% implied upside from the $49.89 prior close. Credit Suisse sees healthy end markets with oil capital spending rebounding and global GDP growth of 3%, along with a deeper penetration in client workflows and new products supporting accelerated organic growth and margin expansion. The firm also sees $500 million per year being available for share repurchases, against close to a $20 billion market cap.
InterXion Holding N.V. (NYSE: INXN) has a $70 price target at Credit Suisse, implying 21% upside from the $57.76 prior close. That is still handily short of the consensus target price of $75.38. The firm sees InterXion as a benefactor of increasing global colocation demand, given its vertical customer mix of 35% cloud, 33% connectivity and 32% enterprise. The firm also anticipates the company inflecting positively in the medium term due to beneficial trends, and it also sees a scenario in which its return on invested capital yield expands due to favorable business dynamics and international opportunities. This is expected to lead to multiple expansion for InterXion’s market valuations.
Microchip Technology Inc. (NASDAQ: MCHP) is down handily, with shares about 30% lower than the 2018 highs. Credit Suisse has a target price of $110 that implies more than 40% upside from the $76.62 closing price. It should be noted that this target compares with a $98 consensus target price and is also above its 52-week high of $104.20. The firm called out Microchip Technology as having consistent execution and a strong track record of M&A to augment organic growth. The firm also sees the first or second quarter of 2019 marking a bottom to its earnings with stability thereafter. It also sees a path to deleveraging, as it intends to use all excess cash to reduce debt.
Spirit Airlines Inc. (NYSE: SAVE) has a price target of $77 at Credit Suisse. That is about $3 higher than consensus and represents about 27% in implied upside. This discount airline is viewed as underappreciated while it continues to execute well. Drivers ahead may come from company-specific ancillary initiatives from its technology investments. Spirit also is considered to have the best growth story among the airlines, and that its revenue improvement is likely still in the early innings of its game.
Stryker Corp. (NYSE: SYK) is a leader in medical devices with a substantial lead in the robotic surgery market with additional U.S. Knee market share gains coming ahead. It is also considered to be diversified across an array of attractive and complementary business platforms. Credit Suisse’s $195 price target is $6.50 higher than the consensus target price, and it implies 21% upside from the prior $161.34 closing price.