Analysts recommend these upgraded stocks for December.
The S&P 500’s steady march to new all-time highs continued in November, and the index will likely close out its third consecutive calendar year of double-digit percentage gains. The Federal Reserve finally began tapering its monthly asset purchases in November, and investors are now focusing on persistently high inflation, supply chain disruptions, labor market shortages and the new omicron variant of COVID-19 heading into 2022. Despite the uncertainties, analysts are generally optimistic about the economic outlook, and the CFRA Research team sees some fresh investment opportunities in December. Here are nine recently upgraded stocks to buy, according to CFRA.
Bank of America Corp. (ticker: BAC)
Bank of America has had a big year, as the stock has about doubled the return of the S&P 500 in 2021. CFRA analyst Kenneth Leon upgraded the stock in November and says Bank of America is in an even better position heading into a 2022 environment of loan volume growth and rising interest rates. Leon anticipates Federal Reserve rate hikes starting in the third quarter of 2022 and says Bank of America already generates a sizable amount of net interest income compared to other large U.S. banks. CFRA has a “buy” rating and a $51 price target for BAC stock, which closed at $44.47 on Nov. 30.
Cboe Global Markets Inc. (CBOE)
Cboe Global Markets owns the Chicago Board Options Exchange and the Better Alternative Trading System, or BATS, Global Markets stock exchange operator. Analyst Alexander Yokum upgraded CBOE and says the stock has several bullish catalysts, including its global expansion, its new nano options and its growing recurring revenue. Yokum says investors don’t fully appreciate CBOE’s opportunity to gain international market share and believes recurring revenue growth will continue to outpace transaction revenue growth in 2022 and beyond. Yokum says CBOE’s margins should also expand after it integrates BIDS Trading LP and other recent acquisitions. CFRA has a “buy” rating and a $145 price target for CBOE stock, which closed at $128.94 on Nov. 30.
Oatly Group AB (OTLY)
Oatly is the world’s largest oat milk producer. Analyst Arun Sundaram upgraded Oatly and says the stock’s valuation is “too attractive to ignore.” By comparison, Oatly trades at a lower enterprise value-to-sales ratio than peer Beyond Meat Inc. (BYND). Sundaram projects 33% compound annual revenue growth for Oatly and just 26% annual growth for Beyond over the next decade. Sundaram says Oatly’s near-term headwinds related to production and capacity are temporary and sales growth and margins should improve next year. Sundaram projects 69% sales growth in 2022. CFRA has a “buy” rating and a $15 price target for OTLY stock, which closed at $8.95 on Nov. 30.
Fair Isaac Corp. (FICO)
Fair Isaac provides predictive software solutions and its ubiquitous FICO credit score data. Analyst John Freeman upgraded Fair Isaac and says the stock is attractively valued and trading well below its long-term average earnings multiple. In addition, Freeman likes the company’s high-margin credit check business, which he predicts will grow revenue by between 9% and 13% through 2024 and generate substantial operating leverage. Freeman is concerned about the long-term health of the company’s software business but considers any recovery in software as “pure upside” for Fair Isaac. CFRA has a “strong-buy” rating and a $495 price target for FICO stock, which closed at $353.13 on Nov. 30.
NICE Ltd. (NICE)
NICE provides applications for handling call center operations and customer interactions. Freeman upgraded NICE and says the company has impressive fundamentals, a strong management team and multiple growth drivers. NICE’s CXone is the best-in-class, contact-center-as-a-service platform, according to analyst firms Gartner and Forrester. NICE has also made progress in using deep learning and natural language processing to predict customer behavior and make recommendations based on word choice, tone of voice and other variables. Finally, Freeman says NICE has become an early market leader in robotic process automation applications. CFRA has a “strong-buy” rating and a $406 price target for NICE stock, which closed at $291.98 on Nov. 30.
Tapestry Inc. (TPR)
Tapestry markets luxury accessories and owns lifestyle brands Coach, Kate Spade and Stuart Weitzman. Analyst Zachary Warring upgraded Tapestry and says the company is returning to steady growth thanks in large part to its expansion into China. Tapestry is also boosting its online sales business, reducing its reliance on wholesale, investing its cash flow in digital marketing and returning capital to shareholders via buybacks and a 2.4% dividend. Warring says the return of international travel in the next 12 months will also be a tail wind for Tapestry. CFRA has a “buy” rating and a $55 price target for TPR stock, which closed at $40.13 on Nov. 30.
MKS Instruments Inc. (MKSI)
MKS Instruments produces power supplies, control and analysis components, and vacuum products used in semiconductor manufacturing and the industrial and life sciences markets. Analyst Zachary Warring upgraded MKS and says the company has tremendous momentum following recent design wins and market share gains. Warring says MKS is positioned to capitalize on a ramp up in semiconductor equipment and device manufacturer capital expenditures in 2022. He says MKS Instruments’ announced acquisition of Atotech will provide a stable revenue source, 40% of which is recurring revenue. CFRA has a “strong-buy” rating and a $210 price target for MKSI stock, which closed at $152.16 on Nov. 30.
Teradata Corp. (TDC)
Teradata provides business data, analytics and consulting services. Analyst David Holt upgraded Teradata and says its recent deal slippage has been fully priced into the stock, which is down more than 20% in the past month. The company has also reset expectations, creating potential for upward revisions in coming quarters. Teradata’s forward price-earnings multiple of 24 represents a steep discount to other direct cloud-based data peers. Holt says the company’s legacy business is weighing on its valuation, but he sees room for significant earnings multiple expansion. CFRA has a “buy” rating and a $60 price target for TDC stock, which closed at $43.42 on Nov. 30.
Fortinet Inc. (FTNT
Fortinet is a global cybersecurity and network solutions company. Analyst Janice Quek upgraded the stock and says Fortinet has clear bullish momentum after three consecutive stellar quarters. Quek says the rise of remote work has created more complex technology and security challenges, pressuring businesses to upgrade security infrastructure. Fortinet’s sales growth has been impressive, and industry supply chain issues have allowed the company to raise prices and boost margins. Fortinet shares have been red hot, but Quek says technology upgrade cycles are typically multiyear events. CFRA has a “buy” rating and a $443 price target for FTNT stock, which closed at $332.11 on Nov. 30
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