Analysts recommend these upgraded stocks in August.
After grinding higher once again in July, the S&P 500 is now up almost 20% year to date and more than 90% from its March 2020 lows. But just because the market has already come so far doesn’t mean investors have completely missed the boat on the rebound. Many economists believe the U.S. is in the early innings of a multiyear expansion phase. Analysts still see plenty of fresh buying opportunities in the market, even with the S&P 500 at all-time highs. Here are nine stocks to buy that were recently upgraded by Bank of America.
F5 Networks Inc. (ticker: FFIV)
F5 Networks specializes in application delivery networking products that manage internet traffic to both servers and network devices. Analyst Tal Liani upgraded F5 and says the company’s fiscal third-quarter earnings beat coupled with upcoming contract renewals suggest growth upside in 2022. Liani says the rise of software as a service and 5G wireless networks are potential growth catalysts. F5 Networks shares trade at a similar earnings multiples to competitor Juniper Networks Inc. (JNPR), but Liani says F5 deserves a premium valuation relative to Juniper because of F5’s superior growth profile. Bank of America has a “buy” rating and a $285 price target.
Prelude Therapeutics Inc. (PRLD)
Prelude Therapeutics is a clinical-stage oncology biotechnology company developing the PRT543 and PRT811 treatments, which are currently in phase 1 clinical trials. Analyst Tazeen Ahmad upgraded the stock and says Prelude’s risk-reward balance skews to the upside. Ahmad says the company’s studies targeting inhibition of the PRMT5 protein present multiple potential opportunities in different cancer types, and its key updates expected in the second half of 2021 could be bullish catalysts for the stock. In the long term, Ahmad projects PRT543 risk-adjusted peak sales of $2 billion in 2035. Bank of America has a “buy” rating and a $60 price target for PRLD stock.
Weyerhaeuser Co. (WY)
Weyerhaeuser grows timber and sells forest and wood products. Analyst George Staphos upgraded the stock and says Weyerhaeuser’s valuation is extremely attractive based on normalized lumber prices, especially given the stock’s year-to-date underperformance. After soaring as high as $1,514 per thousand board feet in late May, lumber prices have pulled back significantly. However, Staphos says there could be a late summer rally in lumber prices given the potential for summer restocking demand, a worse-than-average fire season and even hurricane-related sales. Bank of America has a “buy” rating and $41 price target for WY stock.
American Electric Power Co. Inc. (AEP)
American Electric Power is an electric utility that has more than 5.4 million customers in 11 different states. Analyst Julien Dumoulin-Smith upgraded the stock and says American Electric’s current valuation doesn’t fully reflect the company’s mix shift from coal to renewables. In April, the company announced a strategic review of its Kentucky assets, and Dumoulin-Smith says that review is likely to lead to a major asset sale. Also, he says investors should anticipate additional asset sales down the road. Bank of America has a “buy” rating and a $97 price target for AEP stock.
The RealReal Inc. (REAL)
The RealReal is an online marketplace for consigned luxury goods. Analyst Michael McGovern upgraded The RealReal and says e-commerce trends are shifting from value to luxury goods. McGovern says luxury consumers are relatively well positioned heading into the second half of 2021, and The RealReal has extremely easy year-over-year comparisons thanks to supply constraints in late 2020. In addition, he says The RealReal’s neighborhood store strategy will help the company capture pent-up supply. The stock also trades at a significant valuation discount to peers based on McGovern’s 2023 sales projections. Bank of America has a “buy” rating and a $26 price target for REAL stock.
Western Midstream Partners LP (WES)
Western Midstream Partners owns and operates U.S. midstream assets used for gathering, processing and transporting natural gas. The stock is down around 12% in the past month, but analyst Derek Walker says Western Midstream is undervalued based on earnings before interest, taxes, depreciation and amortization growth projections of 5% in 2022 and 3% in 2023. The stock’s 7.1 enterprise multiple values it at a discount to both its current peer group and its own pre-pandemic valuation. Western Midstream also pays an attractive 6.7% dividend. Bank of America has a “buy” rating and a $25 price target for WES stock.
NOV Inc. (NOV)
NOV designs and produces oil and gas drilling equipment. Analyst Chase Mulvehill upgraded NOV and says the company is on the verge of demonstrating that its offshore oil and gas competencies can translate largely to the nascent offshore wind market. NOV management has even mentioned the potential for roughly a dozen wind installations in coming years. The U.K. offshore Cerulean Winds floating wind project alone could be a $4 billion opportunity, Mulvehill says. In the meantime, Mulvehill says NOV’s legacy oil and gas business has significant upside. Bank of America has a “buy” rating and a $20 price target for NOV stock.
Olin Corp. (OLN)
Olin manufactures chloralkali products and epoxy materials and is a leading U.S. ammunition producer. Analyst Steve Byrne upgraded Olin and says investors shouldn’t be hesitant to chase the stock even after it has rallied more than 90% year to date. Byrne says investors should continue to monitor competition in the epoxy space, but Olin’s cash flow profile is simply too good to ignore. Byrne estimates the company could generate more than 50% of its market cap in free cash flow over the next three years alone. Bank of America has a “buy” rating and a $58 price target for OLN stock.
Greenbrier Cos. Inc. (GBX)
Greenbrier manufactures railroad freight cars and marine barges. Analyst Ken Hoexter upgraded the stock and says Greenbrier is well positioned for a multiyear growth cycle in rail car demand. Hoexter says Greenbrier earnings easily topped $4 per share during peaks of past cycles, and the company is even leaner and more efficient today than in the past. Hoexter is anticipating margin expansion and earnings growth acceleration in the medium term, and the current environment of elevated transport earnings multiples suggests the stock has valuation upside. Bank of America has a “buy” rating and a $52 price target for GBX stock.
Upgraded stocks to buy in August:
— F5 Networks Inc. (FFIV)
— Prelude Therapeutics Inc. (PRLD)
— Weyerhaeuser Co. (WY)
— American Electric Power Co. Inc. (AEP)
— The RealReal Inc. (REAL)
— Western Midstream Partners LP (WES)
— NOV Inc. (NOV)
— Olin Corp. (OLN)
— Greenbrier Cos. Inc. (GBX)
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Update 08/04/21: This story was published at an earlier date and has been updated with new information.