Investing

Sell-Off or Not, 7 Blue Chips and Industry Leaders Analysts Want You to Buy Now

Jon C. Ogg

Published: March 23, 2019 7:01 am

Last Updated: January 30, 2020 10:59 pm

The week of March 22, 2019, ended on a very sour note with the Dow Jones industrials selling off on Friday alone by a sharp 460 points and the S&P 500 down 54 points. Despite Fed Chair Jerome Powell surrendering in his war of hiking interest rates, the economic weakness seen in reports and the newly inverted yield curve weighed heavily on a market that was already in serious need of a breather. That said, there are always some stocks that manage to rise in hard times.

Blue chips and industry leaders are often those leaders, at the expense of industry laggards and companies with business plans that are afterthoughts of their larger companies.

24/7 Wall St. reviews dozens of analyst upgrades, downgrades and initiations each day of the week. This ends up being hundreds of analyst calls each week that get reviewed. Some of these calls are on blue chip stocks, industry leaders and Dow stocks, and some prove to be rather defensive stocks by nature. To prove the point, some of them even saw their shares rally despite the selling pressure late in the week.

During the week of March 22, we tracked seven standout analyst calls in these blue chips and industry leaders in which analysts were telling their clients to buy the shares regardless of the current stock market woes and regardless of the Fed backing away from the rate-hike machine, causing an inverted yield curve in U.S. Treasury interest rates.

Most analyst upgrades and reiterations come with implied upside of 8% to 10% in a total return projection at this stage of the 10-year old bull market.

Here are seven of the blue chip and industry leaders calls that stood out, above and beyond the rest of the pack, this last week.

Apple Inc. (NASDAQ: AAPL) was reiterated as Outperform and the price target was raised to $215 from $200 at Wedbush Securities, with the firm seeing its streaming service adding over $60 billion dollars in shareholder value at current prices. Needham was even offering a stronger upside, raising its Buy rating to Strong Buy and raising its target to $225 from $180.

Apple closed up 0.87% at $188.16 a share ahead of the call, but it closed out the week at $191.05, after giving back 2% during Friday’s sell-off. Its 52-week trading range is $142.00 to $233.47, and its consensus target price was $180.85 on last look.

Best Buy Co. Inc. (NYSE: BBY) was raised to Outperform from Perform with an $86 price target at Oppenheimer, and its shares had closed up 2.1% at $70.56 ahead of the call. This is the independent leader of consumer electronics and home goods, and it has managed to withstand the pressure from Amazon and other online retailers over the years. This represents almost 25% total return opportunity if you include the dividend, assuming Oppenheimer is correct.

After being indicated up another 1.5% at $71.60 early on Friday, Best Buy shares closed down 0.6% at $70.11 on Friday. The consensus target price is $76.64, and the 52-week trading range is $47.72 to $84.37.

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Eli Lilly & Co. (NYSE: LLY) was started with a Buy rating and assigned a $140 price target (versus a $126.59 prior close) at UBS. The 52-week range is $74.51 to $130.75, and the consensus analyst target is $122.00. UBS sees Eli Lilly as stronger after the Elanco Animal Health exit is complete and with a few other positive catalysts coming down the pipe.

UBS’s Navin Jacob believes Wall Street is not fully appreciating (nor fully valuing) the strength and growth of the company’s Human Health unit, with diabetes treatments Jardiance and Trulicity bringing growth and a positive view on Tanezumab as a non-opioid pain treatment. More importantly, UBS sees Eli Lilly having perhaps the least amount of patent cliff woes compared with other large drug companies.

Shares of Eli Lilly shares closed up 1.2% at $128.16 on the heels of the analyst call, but the stock still closed marginally higher at the end of Friday at $128.30, despite a one-cent drop.

International Flavors & Fragrances Inc. (NYSE: IFF) may not be as widely known as true blue chip stocks to the public, with its $13 billion market cap, but if you taste corporate food or smell things you have without a doubt run across the company’s work. Goldman Sachs raised IFF stock to Buy from Neutral with a $151 price target (versus a $122.54 prior close).

IFF has a 52-week trading range of $121.85 to $150.57, and the Goldman Sachs target is higher than the consensus target price of $145.27. IFF shares were still up at $124.69 at Friday’s close, despite falling 0.8% during the day’s sell-off.

McDonald’s Corp. (NYSE: MCD) is a true blue chip and a defensive stock. It even closed up 0.24% at $186.81 during a big sell-off, a true test that it is one of the top defensive stocks to own. Cowen reiterated McDonald’s as Outperform with a $205 price target (versus a consensus estimate of $197.68) as the firm’s team is cautiously optimistic about the future prospects after store remodels, using automated assistance and technology, online ordering and even using third-party delivery services.

McDonald’s has a 52-week range of $153.13 to $190.88. No one even cares that one share of McDonald’s stock costs close to a month’s worth of a single ordering for one meal a day for a whole month.

Nike Inc. (NYSE: NKE) traded down by 6.6% to $82.19 after its earnings did not keep shareholders enthralled, but if you just consider the prior $88.01 close then it is important to realize Nike shares were outperforming both the Dow and S&P 500 with a 19% total return year to date. These are some of the Nike calls seen on Friday after the earnings report had been digested:

• Credit Suisse maintained Nike as Outperform but lowered its estimates and its target price, down to $97 from $100.
• Wedbush maintained its Outperform rating with a $96 price target, noting that the drop seemed overly dramatic.
• Nomura/Instinet reiterated its Buy rating and raised its target price to $91 from $85.

Visa Inc. (NYSE: V) was already rated as Buy at Deutsche Bank, but the firm feels the fairly new Dow component has little no interest rate risk, along with the bank stocks, as it just collects fees every time a credit card or debit card with the Visa label on it is used. Deutsche Bank raised its $160 price target to $177, which compares with a $161.00 prior consensus analyst target.

Visa hit a new high of $156.82 recently, and it sold off 1.75% to $153.07 on Friday’s close with the sell-off.

Remember that analyst calls are not always right, and in many instances the analysts making the underlying calls have little to no more valuable information than the investing public.