Analysts recommend these upgraded stocks for November.
The S&P 500 bounced back from a rough September to finish October near all-time highs. The October rally was driven by a strong start to earnings season, with most bank stocks and Big Tech companies exceeding analyst expectations. Investor focus heading into the end of the year will now shift to inflation, Federal Reserve tapering, supply chain disruptions and even potential tax policy changes in Washington. Analysts are generally optimistic heading into 2022 and the CFRA Research analyst team sees some fresh investment opportunities in November. Here are nine recently upgraded stocks to buy, according to CFRA.
AutoNation Inc. (ticker: AN)
AutoNation is the largest U.S. auto retailer. Analyst Garrett Nelson upgraded the stock and says it has a very attractive valuation. Nelson says the company has worked past its operational issues, and its aggressive buybacks are boosting its earnings per share and providing support for the stock. Given AutoNation’s scale and industry-leading margins, Nelson says the stock deserves to trade at a valuation premium to other auto retailers. Low inventory levels and chip shortages are near-term headwinds, but Nelson expects a steady recovery in coming quarters. CFRA has a “strong-buy” rating and a $165 price target for AN stock, which closed at $123.38 on Nov. 1.
Tractor Supply Co. (TSCO)
Tractor Supply is a specialty retailer that sells farm and ranch supplies. Analyst Zachary Warring upgraded Tractor Supply and says high pet ownership is bullish for the stock given nearly half its sales are livestock and pet products. Warring says the U.S. population shift from cities to rural areas is driving pet adoption. The company has invested in updating its business by modernizing its website and mobile app and adding one-day delivery. Tractor Supply is also aggressively expanding its footprint, opening an estimated 90 stores in 2021. CFRA has a “buy” rating and a $230 price target for TSCO stock, which closed at $213.83 on Nov. 1.
ASML Holding NV (ASML)
ASML is one of the world’s largest semiconductor manufacturing equipment suppliers. Analyst Jun Zhang Tan upgraded ASML and says the company has both cyclical and secular growth tail winds. In response to the global semiconductor shortage, chipmakers are expanding manufacturing capacity to meet demand. Tan says this expansion should boost ASML sales through at least 2022. In the longer term, 5G wireless networks and higher-powered connected devices will also support demand. Tan says ASML shares aren’t particularly cheap, but the company’s growth prospects make it a compelling investment. CFRA has a “strong-buy” rating and a $967 price target for ASML stock, which closed at $805.36 on Nov. 1.
Lithia Motors Inc. (LAD)
Lithia Motors operates primarily used auto dealerships in the western U.S. Nelson upgraded Lithia and says the company’s recent quarterly earnings alleviated investor concerns about record-low U.S. dealership inventories. Lithia has a long-term goal of $50 billion in revenue and $50 in earnings per share by 2025, a target Nelson says will likely require additional acquisitions. Nelson is bullish on Lithia’s management team and projects 72% revenue growth in 2021 and 16% growth in 2022. In addition, Nelson says an increasing percentage of that growth will come from higher-margin segments such as services and parts. CFRA has a “buy” rating and a $400 price target for LAD stock, which closed at $329.85 on Nov. 1.
Winnebago Industries Inc. (WGO)
Winnebago manufactures recreational vehicles used for leisure travel. Nelson upgraded Winnebago as well, saying the stock’s 20% sell-off in the past six months on concerns about rising fuel prices and the durability of RV sales is overdone and could be an excellent buying opportunity. Winnebago sales got a boost during the pandemic and Nelson expects that strength to continue in 2022 rather than sales retreating back to pre-pandemic levels. Nelson is particularly bullish on low-cost, high-margin towable RVs, which are a Winnebago specialty. CFRA has a “buy” rating and an $85 price target for WGO stock, which closed at $70.64 on Nov. 1.
Idexx Laboratories Inc. (IDXX)
Idexx Laboratories specializes in products and services for the companion animal, veterinary, livestock and other markets. Analyst Sel Hardy upgraded IDXX and says the stock still has significant upside driven by bullish trends in the companion animal health market. The stock may seem pricey at first glance given it is trading at a significant premium to its long-term average forward earnings multiple, but Hardy says Idexx’s five-year compound annual EPS growth of 26% is a reminder of just how strong the company’s execution has been. CFRA has a “buy” rating and a $680 price target for IDXX stock, which closed at $666.48 on Nov. 1.
Kohl’s Corp. (KSS)
Kohl’s operates a chain of more than 1,100 specialty department stores. Warring upgraded Kohl’s and says the company is the gold standard in the department store industry. Warring says Kohl’s has made strategic investments to grow sales and stay relevant in a very difficult time for legacy brick-and-mortar retailers. When cash flow boomed over the past eight months, Warring says Kohl’s wisely used excess cash to pay down debt and improve its balance sheet. The company now has more cash than long-term debt. CFRA has a “buy” rating and a $92 price target for KSS stock, which closed at $51.61 on Nov. 1.
Applied Materials Inc. (AMAT)
Applied Materials manufactures water fabrication equipment for the semiconductor industry. Analyst Keven Young upgraded the stock and says it deserves to trade at a valuation premium to peers. Bullish catalysts include foundry and logic technology updates and memory capacity growth. Young says the company’s services segment gives it a valuable source of recurring revenue growth. China is also investing heavily in supporting its local chip manufacturers, which Young says is good news for Applied Materials. He projects $6.4 billion in free cash flow in fiscal 2022. CFRA has a “buy” rating and a $150 price target for AMAT stock, which closed at $139.51 on Nov. 1.
Moderna Inc. (MRNA)
Shares of COVID-19 vaccine maker Moderna dropped significantly in early October. Hardy recently upgraded the stock and says investors should be buying the dip in Moderna. He says COVID-19 booster shots are a potential near-term catalyst for the stock. In addition, the fact that the Centers for Disease Control and Prevention has said it’s OK to mix and match vaccines and boosters bodes well for Moderna given the high efficacy of its vaccine. Hardy says the company’s mRNA therapeutics also have “significant potential” in the long term. CFRA has a “buy” rating and a $385 price target for MRNA stock, which closed at $337.17 on Nov. 1.
Upgraded stocks to buy in November:
— AutoNation Inc. (AN)
— Tractor Supply Co. (TSCO)
— ASML Holding NV (ASML)
— Lithia Motors Inc. (LAD)
— Winnebago Industries Inc. (WGO)
— Idexx Laboratories Inc. (IDXX)
— Kohl’s Corp. (KSS)
— Applied Materials Inc. (AMAT)
— Moderna Inc. (MRNA)
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