The S&P 500 gained 6.2% in January, kicking off 2023 on a strong note after a brutal 2022. But the Federal Reserve is still raising interest rates in its ongoing battle against inflation. The higher interest rates rise, the more difficult it becomes for S&P 500 companies to grow earnings. In fact, many economists still fear a U.S. recession is just around the corner. Fortunately, a handful of fresh investment opportunities remain despite the chaotic macroeconomic environment.
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Here are nine recently upgraded stocks to buy, according to CFRA Research:
— Interactive Brokers Group Inc. (ticker: IBKR)
— JPMorgan Chase & Co. (JPM)
— Wells Fargo & Co. (WFC)
— Moody’s Corp. (MCO)
— Netflix Inc. (NFLX)
— FactSet Research Systems Inc. (FDS)
— Advance Auto Parts Inc. (AAP)
— New Oriental Education & Technology Group Inc. (EDU)
— Berry Global Group Inc. (BERY)
Interactive Brokers Group Inc. (IBKR)
Interactive Brokers is an online, low-cost broker offering stock, bond, futures, forex and cryptocurrency trading. Analyst Michael Elliott upgraded the stock and says Interactive Brokers should benefit from elevated net interest income, or NII, and higher commissions per trade in 2023, even as client account growth slows. Elliott projects at least 35% NII growth in 2023 and says Interactive Brokers has a relatively sophisticated user base that trades plenty of high-commission options and futures contracts. Elliott says the stock is undervalued, priced at around 16 times his 2023 earnings estimate. CFRA has a “buy” rating and $89 price target for IBKR stock.
JPMorgan Chase & Co. (JPM)
JPMorgan Chase is one of the world’s largest banks and financial services companies with roughly $3.7 trillion in assets. Analyst Kenneth Leon upgraded the stock and says JPMorgan is well positioned to weather a mild 2023 U.S. recession. Leon says the bank’s asset management and investment banking businesses will likely recover in late 2023, and the bank has guided for 11.1% NII growth this year. Leon projects 7.6% year-over-year revenue growth in 2023, and the stock pays a 2.9% dividend. CFRA has a “buy” rating and $156 price target for JPM stock.
Wells Fargo & Co. (WFC)
Wells Fargo is another one of the largest U.S. banks and has mostly a domestic loan portfolio. Leon also upgraded Wells Fargo and says the company is on track for profitable growth in coming years. The bank has trimmed down its size and scope in recent years, improving its efficiency and boosting its NII opportunities. Wells Fargo has been operating under a Federal Reserve asset cap since 2018, but the eventual lifting of that cap could be a bullish catalyst for the bank. CFRA has a “buy” rating and $50 price target for WFC stock.
Moody’s Corp. (MCO)
Moody’s provides credit ratings, analytics, financial data and other research services for the financial industry. Analyst Alexander Yokum upgraded the stock and says consensus Wall Street expectations are overly pessimistic heading into 2023. Yokum says Moody’s dealt with several debt issuance headwinds in 2022, including inflation, monetary policy tightening and a sharp decline in mergers and acquisitions. However, he says debt issuance should rebound in 2023 and continue its cyclical rise through 2025 as companies replace maturing corporate debt. Yokum projects 8.5% revenue growth in 2023. CFRA has a “buy” rating and $310 price target for MCO stock.
Netflix Inc. (NFLX)
Netflix is a leading subscription-based streaming video platform. Leon upgraded Netflix and says the company has several key advantages over its streaming competitors, including its unrivaled content library. In addition, Leon says advertising and ad-pay plans could be key growth drivers in 2023 and beyond. Netflix also has a first-mover advantage over many recently launched subscription services, and it doesn’t have to deal with a struggling traditional TV business like legacy media conglomerates do. Account sharing crackdowns could also boost near-term growth. CFRA has a “buy” rating and $390 price target for NFLX stock.
FactSet Research Systems Inc. (FDS)
FactSet Research Systems provides software solutions and financial and economic data to the global financial sector. Analyst Alexander Yokum upgraded the stock and says FactSet has historically been an excellent defensive investment during economic downturns. In fact, the company has generated 42 consecutive years of revenue growth and 26 consecutive years of net income growth, a testament to the resiliency of its business under a wide range of macroeconomic conditions. In addition, 98% of the company’s revenue is recurring, and customers face high switching costs, which helps financial stability. CFRA has a “buy” rating and $470 price target for FDS stock.
Advance Auto Parts Inc. (AAP)
Advance Auto Parts is one of the largest U.S. auto parts retailers. Analyst Garrett Nelson upgraded Advance and says easing inflation and a pickup in gross domestic product growth suggest Advance may be back on the right path after three consecutive quarterly earnings misses. An aging fleet of vehicles on U.S. highways is a tailwind for auto parts retailers, and Nelson says Advance’s stock is attractively valued given its favorable underlying business fundamentals. Advance’s capital return program should also help support its share price. CFRA has a “buy” rating and $185 price target for AAP stock.
New Oriental Education & Technology Group Inc. (EDU)
New Oriental Education & Technology is one of China’s leading for-profit education companies, offering K-12 after-school tutoring services. The stock is down more than 65% over the past three years after Chinese regulators specifically banned for-profit private tutoring in July 2021. New Oriental endured several major headwinds in recent years, but analyst Nazira Abdullah has upgraded the stock and says the company’s strong balance sheet will allow it to adjust its business to remain both profitable and compliant with new regulations. While after-school tutoring supply has dropped sharply in China, Abdullah says demand remains strong. CFRA has a “buy” rating and $50 price target for EDU stock.
Berry Global Group Inc. (BERY)
Berry Global manufactures rigid, flexible and non-woven packaging used in a variety of consumer and industrial end markets. Analyst Matthew Miller upgraded Berry and says the stock has an attractive valuation, generates robust cash flow and has a strong balance sheet. In addition, Berry has a diversified customer base, and demand from consumer-packaging and food-service customers has recovered faster than Miller anticipated. Miller says Berry’s revenue growth will rebound into positive territory in fiscal 2024 driven by low-single-digit organic volume growth in all of its segments. CFRA has a “buy” rating and $68 price target for BERY stock.
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9 Upgraded Stocks to Buy in February originally appeared on usnews.com
Update 02/02/23: This story was published at an earlier date and has been updated with new information.
