Here are analysts’ top stocks to buy in the second quarter.
After a big year in 2020, the S&P 500 made new all-time highs in the first three months of 2021 and closed out the quarter above 4,000 for the first time. Investors are increasingly optimistic that the combination of aggressive government stimulus, vaccine rollouts and pent-up economic demand will drive stock prices even higher in the second quarter and beyond. Bank of America recently released its quarterly list of the top eight stocks to buy in the second quarter. These eight stocks are high-conviction investment ideas that have bullish catalysts coming sometime in the next three months.
Booking Holdings (ticker: BKNG)
Priceline’s parent company Booking Holdings is a leading online travel company. For investors betting on pent-up demand for leisure travel this summer, analyst Justin Post says Booking is a must-have investment in the second quarter. Post says Booking is one of the biggest beneficiaries of widespread vaccinations in Europe, which is Priceline’s largest market. He says travel stocks could also see upside from earnings multiple expansion in the near term. Finally, Post says Priceline is increasingly adding alternative accommodation listings to complement its traditional hotel and resort offerings. Bank of America has a “buy” rating and a $2,950 price target for BKNG stock.
The Walt Disney Co. (DIS)
The health crisis was bittersweet for Disney. Its theme park, cruise line and TV and movie production businesses took a huge hit in 2020. However, its critical Disney+ streaming service registered impressive subscriber growth during the crisis. Analyst Jessica Reif Ehrlich says Disney’s diversified business offers investors a unique reopening play that is both offensive and defensive. In addition to its mid-May earnings report, Reif Ehrlich says theme park reopenings and capacity ramps will be bullish catalysts in the second quarter. Bank of America has a “buy” rating and a $223 price target for DIS stock.
Newmont Corp. (NEM)
More than $6 trillion in government stimulus since the beginning of 2020 has many investors concerned about inflation, which could be good news for gold prices. Analyst Michael Jalonen says Newmont is one of only a handful of senior gold miners that is currently increasing production while simultaneously managing to reduce costs. Jalonen says investors should get updates on the company’s capital return program and critical growth projects in April. The company will be presenting at the Bank of America Global Mining Conference on May 18. Jalonen has a “buy” rating and a $69 price target for NEM stock.
NXP Semiconductors (NXPI)
Analyst Vivek Arya says NXP Semiconductors has several bullish catalysts ahead in the second quarter. First, the company’s addition to the S&P 500 in late March will likely raise investor awareness just as NXP’s cyclical and secular growth is accelerating. NXP is a global leader in auto semiconductors, and auto technology stocks have been hot investments in recent quarters. Recoveries in industrial Internet-of-Things spending and deployment of 5G base stations will also be demand drivers for NXP in 2021, Arya says. Bank of America has a “buy” rating and a $240 price target for NXPI stock.
O’Reilly Automotive (ORLY)
Analyst Elizabeth Suzuki says auto parts retailers with exposure to professional auto service are underappreciated economic reopening investments. Suzuki says O’Reilly has an attractive mix of professional auto services and do-it-yourself sales and is well positioned to beat consensus earnings expectations in late April. Suzuki says the latest round of stimulus payments likely boosted O’Reilly’s business in the first quarter, and total U.S. miles driven will likely normalize within weeks. Finally, Suzuki says O’Reilly shares are attractively valued at around 19 times her 2022 earnings estimate. Bank of America has a “buy” rating and a $600 price target for ORLY stock.
Parker Hannifin Corp. (PH)
Parker Hannifin supplies hydraulics and motion and fluid control systems to industrial and aerospace end markets. Analyst Andrew Obin says management has reduced the company’s leverage and improved its earnings, making Parker Hannifin a best-in-class industrial investment. Obin projects a first-quarter earnings beat in late April and positive inflection in the company’s North American industrial business starting in the third quarter. Also, a rebound in the travel industry should be a bullish catalyst for the company’s aerospace business, Obin says. Bank of America has a “buy” rating and a $385 price target for PH stock.
Travel and industrial oil demand tanked in 2020, but analyst Chase Mulvehill says pent-up economic reopening demand will be very bullish for oil services company Schlumberger. Mulvehill says the oil services industry is in the early stages of a cyclical upswing that could start to pick up steam this summer. He projects that Schlumberger’s earnings and free cash flow will double from 2020 levels by 2022. Mulvehill says Schlumberger’s international revenue could grow in the double digits in the second half of 2021. Bank of America has a “buy” rating and a $34 price target for SLB stock.
Stryker Corp. (SYK)
Stryker is a medical technology company that specializes in orthopedics and neurotechnology. In the longer term, analyst Bob Hopkins says an industry shift to more outpatient surgeries will be a tailwind for Stryker. He says Stryker will likely outperform its medtech peers when the company reports first-quarter earnings in April. U.S. medtech demand has been picking up since early March, hospital capital spending trends have been encouraging and a recovery in elective orthopedic procedures could be a bullish catalyst for Stryker starting in the second quarter. Bank of America has a “buy” rating and a $265 price target for SYK stock.
Bank of America’s eight best stocks to buy in the second quarter:
— Booking Holdings (BKNG)
— The Walt Disney Co. (DIS)
— Newmont Corp. (NEM)
— NXP Semiconductors (NXPI)
— O’Reilly Automotive (ORLY)
— Parker Hannifin Corp. (PH)
— Schlumberger (SLB)
— Stryker Corp. (SYK)
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