Merrill Lynch Has 8 Top US Stock Ideas for Q3

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As incredible is it may seem, 2019 is already half over and we are in the third quarter, with all the major indexes hitting record all-time highs. Very dovish Humphrey-Hawkins testimony from Federal Reserve Chair “Jay” Powell drove stocks to new highs this week, and the market now anticipates at least a 25-basis-point cut at the end of the month. Some are even suggesting the potential for a half a percentage point cut.

In a new research report, Merrill Lynch is among the first out with top ideas for the third quarter of 2019. The firm has eight stocks to buy and two that are expected to underperform. Here we focus on the long ideas, and at first glance, they look like outstanding stock picks for growth accounts.

AMD

This top company has clearly turned the corner, and it had some solid news this week. Advanced Micro Devices Inc. (NYSE: AMD) is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.

Last year the company released its first major offering in five years, the Ryzen chipset, which many feel is uniquely positioned to compete with the big players like Intel and Nvidia in the $50 billion total addressable market for personal computers, gaming, artificial intelligence and servers.

The Merrill price target for the shares is $40, while the Wall Street consensus target is much lower at $30.68. The shares closed Thursday at $33.06.

Burlington Stores

This top retail stock has been on fire and is also on the Merrill Lynch US 1 list. Burlington Stores Inc. (NASDAQ: BURL) is a national off-price retailer of high-quality branded apparel with more than 500 locations in 44 states and Puerto Rico. Burlington also operates an e-commerce business.

The company sources from over 5,000 vendors, with a focus on nationally recognized brands. Similar to other off-price retailers, the company employs an everyday low price model and offers discounts of 60% to 70% off department and specialty stores’ regular prices.

Merrill has a $190 price target, and the consensus estimate is $176.94. Shares closed at $178.75 on Thursday.

Dropbox

This company had a hot initial public offering last year, which has come back to earth and could be offering investors a great entry point. Dropbox Inc. (NYSE: DBX) provides cloud-based file sharing and collaboration platform, and it has over 500 million registered users across 180 countries. The company generates revenue by selling cloud file storage and collaboration tools for subscription fees.

Dropbox had an estimated 12.7 million paid subscribers at the end of 2018. Core markets include public cloud storage and collaboration software, with longer-term opportunities in content management and project and portfolio management.

The $33 Merrill price target compares with a $32.27 consensus target. The stock closed most recently at $25.96.

Fidelity National Information Services

This top stock has been on fire all year. Fidelity National Information Services Inc. (NYSE: FIS) is a global leader in banking and payments technology, as well as consulting and outsourcing solutions, and serves more than 14,000 institutions in over 130 countries. It provides state-of-the-art software, services and outsourcing of the technology that empowers the financial industry.

In 2018, the company generated revenues of $8.1 billion, with adjusted EBITDA of $3.1 billion, adjusted earnings per share of $6.95 and $1.4 billion in free cash flow. Fidelity National serves more than 20,000 clients in over 130 countries. Headquartered in Jacksonville, Florida, the company employs more than 47,000 people worldwide and holds leadership positions in payment processing, financial software and banking solutions.

Shareholders receive a 1.10% dividend. Merrill has set its price objective at $143. The consensus target is $138.65, and shares closed at $127.82.