Analysts recommend these upgraded stocks for October.
The S&P 500 dropped to new 2022 lows in September and was down more than 24% heading into October. The Federal Reserve raised interest rates by another 0.75 percentage point in September as it continues to battle inflation. The higher interest rates rise, the more difficult it becomes for S&P 500 companies to grow earnings. In fact, many economists now fear a recession is just around the corner. Fortunately, analysts say the chaotic macroeconomic environment has created a handful of fresh investment opportunities in the market. Here are nine recently upgraded stocks to buy, according to CFRA Research.
Generac Holdings Inc. (ticker: GNRC)
Generac produces power energy technology, specializing in power generators and equipment. Analyst Jonathan Sakraida upgraded Generac and says he is bullish on the company’s efforts to become the market leader in cleaner-burning generators and other green energy products. In the near term, Sakraida says, a stressed U.S. power grid will boost Generac’s demand. In the longer term, he sees additional need for Generac’s high-margin distributed energy optimization and control software. Finally, Hurricane Ian likely boosted generator sales in the third quarter. CFRA has a “strong buy” rating and $300 price target for GNRC stock, which closed at $177.38 on Oct. 3.
Moderna Inc. (MRNA)
Moderna is a leading biotechnology company that specializes in mRNA therapeutics. Investors likely know of Moderna because of its popular COVID-19 vaccine. Analyst Stewart Glickman upgraded the stock. He says COVID-19 vaccine demand has likely already peaked, but Moderna will have long-term opportunities in COVID treatment as the virus enters the endemic stage. A recent report by Reuters suggests that China may purchase vaccines from Moderna, and Glickman says the company has several other potential applications for its mRNA-based technology already in various stages of development. CFRA has a “buy” rating and $165 price target for MRNA stock, which closed at $120.99 on Oct. 3.
Wolfspeed Inc. (WOLF)
Wolfspeed develops and produces semiconductor devices and materials made from silicon carbide and other special materials. Analyst Keven Young upgraded the stock and says Wolfspeed’s focus on higher-growth businesses will help the company expand its margins by 12% by 2025. Young says Wolfspeed will boost its silicon carbide and gallium nitride capacity to meet demand from 5G networks and the electric vehicle market. He is bullish on the company’s large contracts and says Wolfspeed will maintain its dominant share of the high-growth silicon carbide market. CFRA has a “buy” rating and $140 price target for WOLF stock, which closed at $108.08 on Oct. 3.
GitLab Inc. (GTLB)
GitLab operates an “open core” platform for development, security and operations, or DevSecOps, an integrated approach to software that has gained popularity among enterprise customers. Analyst John Freeman upgraded GitLab and says the company is a beneficiary of his “rise of meta-software” investing theme. Freeman says GitLab’s open core model is a hybrid of the open-source and freemium commercial models. He says only a handful of winners will take over the majority of the DevSecOps platform market in coming years, and GitLab is well positioned to be among the top players. CFRA has a “strong buy” rating and $80 price target for GTLB stock, which closed at $51.22 on Oct. 3.
American Eagle Outfitters Inc. (AEO)
American Eagle Outfitters is a specialty casual apparel and accessories retailer focused on consumers in the 15- to 25-year-old age range. The retail sector has been a challenging space for investors in recent years, but analyst Zachary Warring has upgraded American Eagle and says the company has finally gotten its inventory down to a manageable level. With the stock down more than 60% year to date, Warring says, American Eagle is now trading well below 10 times his fiscal 2024 earnings-per-share estimate, providing an attractive entry point for investors. CFRA has a “buy” rating and $15 price target for AEO stock, which closed at $10.13 on Oct. 3.
Ulta Beauty Inc. (ULTA)
Ulta Beauty is one of the largest U.S. beauty retailers, offering cosmetics, fragrance, skin care and other products and services. Analyst Siye Desta upgraded Ulta and says the company continues to dominate the beauty and cosmetics market. In addition, Ulta is executing its long-term strategy of investing in omnichannel initiatives to integrate its digital and in-store ecosystems. Ulta offers two-hour in-store pickup in all its stores and same-day shipping in certain markets. Desta says its Target Corp. (TGT) partnership will also help Ulta grow its customer base. CFRA has a “strong buy” rating and $535 price target for ULTA stock, which closed at $404.75 on Oct. 3.
Starbucks Corp. (SBUX)
Starbucks is the world’s leading coffee retailer and operates more than 34,900 stores worldwide. Desta also upgraded Starbucks and says the stock is currently undervalued relative to both its peer group and its own historical levels. Desta says the company’s 8% revenue growth and 3% same-store-sales growth in the June quarter were encouraging as the company navigates headwinds from both wage and input cost inflation, ongoing COVID-19 lockdowns in China, and disruptions from the war in Ukraine. Desta projects 11% revenue growth in fiscal 2022. CFRA has a “buy” rating and $103 price target for SBUX stock, which closed at $85.62 on Oct. 3.
Lululemon Athletica Inc. (LULU)
Lululemon Athletica is a specialty retailer of athletic apparel and a popular healthy lifestyle brand. Warring upgraded Lululemon and says the company is a top performer in the retail sector, consistently generating impressive earnings and revenue growth. In addition, Warring says Lululemon’s margins are holding up relatively well compared to peers thanks to the company’s impressive pricing power, and he says the company still has a long runway of growth ahead in international markets. Warring projects 26.3% revenue growth in fiscal 2023 and 15% growth in 2024. CFRA has a “strong buy” rating and $400 price target for LULU stock, which closed at $292.10 on Oct. 3.
Bank of Montreal (BMO)
Bank of Montreal is one of the largest commercial banks in Canada and has a large presence in the U.S. market. Analyst Alexander Yokum upgraded the stock and says Bank of Montreal is insulated from the recent downturn in the Canadian housing market because of its relatively low exposure to residential mortgages. Yokum says the Bank of the West acquisition will help Bank of Montreal improve its geographical diversification and gain market share in California, but the deal’s $16.3 billion price tag was steep. CFRA has a “buy” rating and $113 price target for BMO stock, which closed at $90.41 on Oct. 3.
9 upgraded stocks to buy in October:
— Generac Holdings Inc. (GNRC)
— Moderna Inc. (MRNA)
— Wolfspeed Inc. (WOLF)
— GitLab Inc. (GTLB)
— American Eagle Outfitters Inc. (AEO)
— Ulta Beauty Inc. (ULTA)
— Starbucks Corp. (SBUX)
— Lululemon Athletica Inc. (LULU)
— Bank of Montreal (BMO)
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9 Upgraded Stocks to Buy in October originally appeared on usnews.com
Update 10/04/22: This story was published at an earlier date and has been updated with new information.
