Analysts recommend these upgraded stocks in July.
The S&P 500 finished the first half of 2021 up 14.4% as the economy bounces back from a horrendous 2020. The S&P is now up more than 90% from its pandemic low in March 2020, but that doesn’t necessarily mean that investors who didn’t buy the dip have completely missed out on the rebound. The U.S. economic expansion may still be in the early innings, and analysts still see plenty of fresh buying opportunities even with the S&P at all-time highs. Here are eight stocks to buy that were recently upgraded by Bank of America.
Ultragenyx Pharmaceuticals (ticker: RARE)
Ultragenyx Pharmaceuticals is a biotech company developing treatments for rare diseases. Analyst Tazeen Ahmad upgraded Ultragenyx and says the stock’s current valuation assigns very little value to the company’s late-stage clinical pipeline of drug candidates. In the near term, Ahmad says Ultragenyx is initiating four critical drug trials in the second half of 2021 for DTX401, DTX301, UX701 and Setrusumab. If successful, any four of them could be major revenue contributors. In the meantime, Ahmad says the company’s approved drugs, Crysvita, Mepsevii, and Dojolvi, provide downside protection. Bank of America has a “buy” rating and a $162 price target for RARE stock.
Barings BDC (BBDC)
Barings BDC is a specialized finance company structured as a business development company. Analyst Derek Hewett upgraded Barings and says he likes the company’s proprietary origination platform, experienced management team and late-cycle oriented investment portfolio. Hewett says Barings is well positioned to gain market share and trades at a compelling discount to peers. Profitability and earnings visibility have significantly improved, and acquisitions and other investment opportunities could drive additional earnings upside, according to Hewett. Like many other business development companies, Barings also pays a sizable dividend at 7.5%. Bank of America has a “buy” rating and an $11.25 price target for BBDC stock.
UGI Corp. (UGI)
UGI is a Pennsylvania-based natural gas transmission and energy distribution company. Analyst Julien Dumoulin-Smith upgraded UGI and says the company’s expansion into the renewable energy market will boost long-term earnings growth to the high end of UGI’s target range of 6% to 10% annually. UGI is projecting more than $1 billion in renewable investments over the next five years, and Dumoulin-Smith says the company has several opportunities to invest in high-return renewable projects. In the near term, UGI’s propane business is generating impressive cash flow. Bank of America has a “buy” rating and a $51 price target for UGI stock.
Cimarex Energy Co. (XEC)
Cimarex Energy is a U.S. oil and gas exploration and production company focused on the Mid-Continent region and Permian Basin. Analyst Doug Leggate upgraded Cimarex after raising his oil price outlook through 2023. Leggate says Cimarex’s projected 20% free-cash-flow yield in 2022 would be one of the highest in the oil and gas space. Cimarex shares have lagged since the company announced a $17 billion merger with Cabot Oil & Gas Corp. (COG) in May, but Leggate said there’s a chance the deal will not close. Bank of America has a “buy” rating and a $90 price target for XEC stock.
OGE Energy Corp. (OGE)
OGE Energy is an electric utility and natural gas midstream holding company operating in Oklahoma and Arkansas. Dumoulin-Smith upgraded OGE and says capital expenditures could increase rate-base growth above 6% and even potentially drive earnings-per-share growth as high as 7%. A shift in focus to more environmental, social and governance initiatives could also support earnings multiple upside. Dumoulin-Smith projects that free cash flow will ramp up from $11 million in 2021 to $34 million in 2022 and $44 million in 2023. Bank of America has a “buy” rating and a $38 price target for OGE stock.
Sherwin-Williams Co. (SHW)
Sherwin-Williams is a leading producer of paints and coatings. Analyst Steve Byrne upgraded the stock and says his recent survey of paint contractors suggests do-it-yourself demand in 2020 has not cannibalized contractor demand in 2021. In fact, the current backlog of painting projects is well above 2019 levels, thanks to booming housing and home improvement markets, suggesting elevated paint demand for years to come. Even as raw materials and paint prices rise, contractors said they expect to buy 8% more paint in 2021 than in 2019. Bank of America has a “buy” rating and a $325 price target for SHW stock.
Wells Fargo & Co. (WFC)
Analyst Erika Najarian has upgraded Wells Fargo and says the big bank stock is finally positioned to turn the corner on a multiyear transformation story following its 2016 accounting fraud scandal. Najarian says the company has an opportunity to lower its cost of equity closer to its banking peer group, which should lead to earnings multiple expansion. Wells Fargo recently passed its annual stress test and announced it is doubling its dividend and launching an $18 billion buyback program starting in the third quarter. Bank of America has a “buy” rating and a $60 price target for WFC stock.
Affirm Holdings (AFRM)
Affirm Holdings is a buy now, pay later fintech specialist. Analyst Jason Kupferberg upgraded the stock and says fiscal 2021 and 2022 revenue estimates are too low for Affirm given the potential for a ramp in the company’s Shopify (SHOP) relationship and momentum in its non-Peloton Interactive (PTON) business. Affirm’s key unit economics metrics are trending in the right direction and exceeding targets. The stock has high short interest and could even be a potential short squeeze candidate. Bank of America has a “buy” rating and a $71 price target for AFRM stock.
Eight upgraded stocks to buy in July:
— Ultragenyx Pharmaceuticals (RARE)
— Barings BDC (BBDC)
— UGI Corp. (UGI)
— Cimarex Energy Co. (XEC)
— OGE Energy Corp. (OGE)
— Sherwin-Williams Co. (SHW)
— Wells Fargo & Co. (WFC)
— Affirm Holdings (AFRM)
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Update 07/07/21: This story was published at an earlier date and has been updated with new information.