Investing

6 New Credit Suisse Top Number-One Stock Picks for 2020

IQVIA: Strong Trends in Biotech Funding and Outsourcing!

IQVIA Holdings Inc. (NYSE: IQV) stock is rated as Outperform, but its target price of $175 was only representative of about 10% upside from Credit Suisse’s reference price. That is a tad lower than the consensus target price of $178.58 as well, but it’s also after a 17% gain from trough to peak in the past 75 days or so. IQVIA may be an unknown name to some investors, but it was formerly known as Quintiles IMS. The company offers advanced analytics, technology solution, and contract research services to life-science companies and entities.

Credit Suisse sees the company’s robust bookings and healthy underlying trends in funding and outsourcing in biotech helping to contribute to more meaningful top-line growth above peers and its medium-term guidance of 6% to 9% in organic growth as manageable. The firm also sees IQVIA capturing greater share from a relatively diversified customer base.

Micron Technology: The Best Opportunity Leading in DRAM/Memory!

Micron Technology Inc. (NASDAQ: MU) stock is rated as Outperform with a $90 target. That is substantially above the $65.38 consensus target price, but it’s also still not the street-high target. Micron is expected to be the largest beneficiary of a larger total addressable market with lower costs and higher importance of analytics. Trends such as the cloud, artificial intelligence and machine learning, and even 5G, are expected to bring a much higher peak in its business cycle.

Credit Suisse noted that pricing and long-term memory price/demand metrics remain risks. Micron’s recent share price of $59.50 means Credit Suisse’s more aggressive view is calling for a projected 51% upside ahead.

Tradeweb: Riding Electrification of Bond Trading!

Tradeweb Markets Inc. (NASDAQ: TW) stock is rated as Outperform, and the $54 target represented an implied upside call of about 19% from Credit Suisse’s reference price. The consensus target price is $50.38. The firm has noted strong growth, but it sees the biggest risk or pushback coming from high valuations having a sticker-shock factor against peers. Tradeweb shares have slipped below $45, and the 52-week range is $33.68 to $50.48.

The firm’s base case in 2020 to 2021 assumes about 15% volume growth that will help to generate 150 to 200 basis points of higher margin and about 10% to 15% earnings per share growth. Those numbers are said to be conservative if there becomes a scenario of higher volatility or greater traction from new initiatives. The move to make fixed-income (bond) markets more electronic is a long-term secular theme that will bring higher trading activity to Tradeweb. Credit Suisse also sees the potential for market data revenue expansion and strategic mergers and acquisitions adding to growth over time.

Vistra Energy: Value in Dome Oversold Utilities!

Vistra Energy Corp. (NYSE: VST) stock is a top utilities pick, and the $32 target price implies close to 50% potential upside from its reference price. That sounds high, but the consensus target price for this $11 billion stock is even higher at $33.40. Credit Suisse sees the integrated utilities companies with non-utility exposure as outperforming traditional utilities in 2020. Investment funds are expected to rotate away from defensive sectors into more value, and Vistra’s shares have underperformed in recent weeks over unwarranted or exaggerated concerns over weakening reserve margins in Texas.

Also worth noting is that a December block trade from Brookfield was from the firm prudently trimming its position that had grown significantly after its acquisition of Oaktree. As Credit Suisse sees it, support from Brookfield and the State of Texas’s assessment of reserve margins remains a deeply flawed analysis. That includes over 400 MW of solar without firm financial backing, as well as the inclusion of plants that have already announced retirement, and a higher capacity credit for renewables despite intermittency. Still, Credit Suisse warns that it is too early to project a full impact pending final rules, while some investors remain concerned that Vistra’s fossil-fuel fleet metrics could be harmed by an increasingly aggressive push toward decarbonization and renewable energy.

Vistra traded at $22.75, with close to a 2.2% yield, and its 52-week trading range is $21.33 to $27.96.

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