Even though many people view the bull market rally as long in the tooth, given that the beginnings were almost nine years ago, the fact of the matter is bull markets can run a long time, and they often have big corrections within the run. While there is no doubt that we may be closer to the end than the beginning, the final phase is often the most productive in terms of upside, and 2017 has been a good example of that, as the market will post its best year since 2013.
24/7 Wall St. reviews dozens of daily analyst research reports, and this turns into hundreds of reports each week. In the second half of December there have been many Wall Street strategists making big bold predictions for stocks in the year ahead. That is after the Dow Jones Industrial Average was up about 25% and the S&P 500 was up about 20% so far in 2017.
Top strategists around Wall Street, like Savita Subramanian at Merrill Lynch, feel that the place to be for the final push higher in this bull market is momentum. In a recent and lengthy year-end report, Subramanian and her outstanding team acknowledged the nosebleed levels of the market, with the S&P 500 forward price-to-earnings (P/E) ratio at a rich 18 times, but they also say that missing out on the final run of a bull market can be a losing hand. They maintain that in the late stages of a bull market, momentum is the place to be, and for 2018, momentum equals technology stocks.
A huge silo of the technology sector that could also drive growth in 2018 is memory. It’s been percolating for a while, and some of the top stocks already reflect the growth, but demand for DRAM and 3D NAND flash memory is continuing at a pace that is even astounding some on Wall Street. Flash memory is electronic (solid-state) non-volatile computer medium that can be electrically erased and reprogrammed. Dynamic random-access memory (DRAM) is a type of random-access memory that stores each bit of data in a separate capacitor within an integrated circuit.
A recent research report from Stifel indicates that capital expenditures at the big chip companies like Samsung and Intel are rising. The report from earlier this year noted this:
We believe DRAM pricing has held up better than expected (and bit growth may actually be somewhat higher than previously forecasted) and Samsung is aggressively converting its capacity (both DRAM and older planar NAND capacity) to 18 nanometer. We expect the company to maintain a leadership position at this node for approximately six months before the competition can fully ramp.
Lastly, the proliferation of the cloud continues to be one of the most amazing stories in the ever-expanding world of technology. Since the introduction of the smartphone in 2007, just a short 10 years ago, the demand for data both streaming and downloaded has exploded. Toss in massive new Internet of Things applications, big data use, a huge directional change in media and entertainment and a multitude of additional structural use, and the growth just keeps exponentially going higher.
While cloud growth continues almost unabated, so does spending for maintenance and expansion. A new RBC research report traces cloud expenditures, and they continue at a furious pace. According to the report:
Cloud service provider capital expenditures grew ~23% year over year in the third quarter and increased 24% quarter over quarter in our tracker, while the fourth quarter is expected to be stable seasonally and grow +19% year over year.
We screened our December research coverage here at 24/7 Wall St., looking for the top analyst picks for 2018 and beyond, and found 13 companies rated Buy at top Wall Street firms that look poised to continue their strength in the coming year and beyond.
This red-hot momentum stock is being bought this quarter by Dan Loeb, who runs Third Point, a New York–based hedge fund. Alibaba Group Holding Ltd. (NYSE: BABA) runs the largest retail marketplaces (Taobao, TMall) and leading B2B sites (Alibaba.com, 1688.com) in China and Lazada in Southeast Asia. It collects revenues mainly from commissions, marketing services, subscription fees, cloud computing and software, as well as other value-added services.
The company has gone beyond e-commerce and developed into a sophisticated new type of conglomerate in the cyber-era with e-commerce as the base for the rest of the four businesses: logistics, finance, data-computing and cross-border infrastructure. Top analysts expect a whopping 24% compounded annual growth rate between now and 2018 for e-commerce in China.
The SunTrust price target for the shares is $210, and the Wall Street consensus target is $208.37. The shares closed Friday at $172.34.
The search giant continues to expand and is even working on a driverless car now. Alphabet Inc. (NASDAQ: GOOGL) is a global technology company focused around key areas, such as search, advertising, operating systems and platforms, enterprise and hardware products. It generates revenue primarily by delivering online advertising and by selling apps and contents on Google Play, as well as hardware products. The company provides its products and services in more than 100 languages and in 190 countries, regions and territories.
Alphabet offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
SunTrust has a $1,180 price target, and the consensus price objective is $1,178.57. The shares closed on Friday at $1053.40.