Every quarter, most of the firms we cover on Wall Street come out with top trading and investment ideas, and the big-selloff in early February took what was some very good ideas and tossed them out the window along with the baby and the bathwater. While the markets have recovered much of the losses from early in the month, some of these top picks are still trying to recover, and a few look like outstanding buys at current levels.
We screened the Merrill Lynch top ideas for the first quarter and found four that look like excellent buys right now. They have all been knocked down from highs posted earlier in the quarter and could be some likely investment addition candidates as portfolio managers do some first-quarter window dressing shopping in the next month.
AMD
After years of frustrating performance, Advanced Micro Devices Inc. (NYSE: AMD) appears to have turned the corner and is a hot commodity on Wall Street. AMD is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.
Last year the company released its first major offering in five years, the Ryzen chipset, which many feel is uniquely positioned to compete with the big players like Intel and NVIDIA in the $50 billion total addressable market for personal computers, gaming, artificial intelligence and servers.
The company posted solid results, and the analysts said this at the time:
Beat and solid raise, we see 20%+ growth trajectory with accretive products even without crypto benefit. Server inflection is here with chance to ramp share from nothing to 5% in $20b billion total addressable market. Raise estimates, reiterate Buy and a top Small/Midcap pick for 2018.
Merrill Lynch has an $18 price target, and the Wall Street consensus price objective is $14.86. The shares closed Friday at $12.07.
Disney
This top consumer media company has multiple streams of income to push revenue. Walt Disney Co. (NYSE: DIS) is one of the largest U.S. diversified media companies and the global leader in producing branded family entertainment. Key assets include its theme parks (six locations globally), the ABC TV network, ESPN and other cable networks, film studios (Disney, LucasFilms, Marvel, Pixar) and consumer products.
Many on Wall Street feel that the company’s distribution leverage and optionality, as well as its concentration of valuable intellectual property, will only improve with the acquisition of 21st Century Fox assets. Another plus is Disney’s continued impressive theatrical momentum.
Shareholders receive a 1.53% dividend. The $144 Merrill Lynch price target compares to the $120.16 consensus target. Shares closed Friday at $107.25.
Exact Sciences
This stock has been on fire and could still have big upside. Exact Sciences Corp. (NASDAQ: EXAS) is a molecular diagnostics company focused on the early detection and prevention of the deadliest forms of cancer. The company has commercialized a next-generation non-invasive colorectal cancer screening test, Cologuard, which received concomitant FDA approval and Medicare coverage in 2014.
Cologuard is included in the colorectal cancer screening guidelines of the American Cancer Society and stool DNA is included in the U.S. Multi-Society Task Force on Colorectal Cancer. The stock is down almost 15% from highs posted in January and looks like a great buy at current levels.
The stock was hit Friday but the analysts remain bullish:
The company reported fourth quarter sales inline with the flash results and raised fiscal year 2018 sales guidance slightly with the Cologuard volume guide inline. The first Cologuard guide is softer-than-expected given flu severity, but we think there is plenty of room for upside through the year.
The Merrill Lynch price objective remains at a strong $67. The consensus target is $58.82, and shares closed Friday at $42.37.
PayPal
This stock has long been a Merrill Lynch and Wall Street favorite. PayPal Holdings Inc. (NASDAQ: PYPL) is a global, technology-driven payment platform with greater than 210 million direct customer relationships in more than 200 countries. PayPal empowers a streamlined digital and mobile payment experience in-browser, on mobile devices and in-app. It is accepted at more than 75% of the largest 100 internet retailers.
PayPal enables businesses of various sizes to accept payments from merchant websites, mobile devices and applications, as well as at offline retail locations through a range of payment solutions across company’s payments platform, including PayPal, PayPal Credit, Venmo and Braintree products. The company’s platform allows customers to pay and get paid, withdraw funds to bank accounts and hold balances in PayPal accounts in various currencies.
The stock was hit when the company announced restructuring of the company’s agreement with eBay, which will become merchant of record after the current deal expires in 2020. However, eBay will continue to accept PayPal-branded transactions through 2023.
The Merrill Lynch price objective is $88. The consensus target price is $85.17, and shares closed Friday at $79.69.
Four top picks from Merrill Lynch that all have been scorched in the first quarter and look like great buys in what again is looking like a pricey and volatile market. While better suited for growth accounts with more risk tolerance, they are great additions to portfolios looking for new ideas.
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