With the second quarter of 2021 well underway, and almost 70% of the S&P 500 earnings for the first quarter having been posted, many of the top companies we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. With the market hitting all-time highs recently on all the major indexes, it makes sense to examine the lists as the rest of the year could have some additional volatility as the political and geopolitical cycle could still prove to be very explosive components.

The analysts at BofA Securities have made some big changes to the firm’s US 1 list of top stock recommendations. Three new companies were added, and two that have performed admirably were removed. While covering the newest additions, which of course are all rated Buy, as are the two that were removed, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Comcast Corp. (NASDAQ: CMCSA) and Netflix Inc. (NASDAQ: NFLX) were both removed from the US 1 list, but the BofA Securities analysts kept Buy ratings on both of these top-performing stocks.

Here are the three new additions to the US 1 list.

Avalara

While probably not a household name, this top company has huge potential. Avalara Inc. (NYSE: AVLR) is a cloud-based provider of sales/indirect tax compliance software, including sales tax calculations, returns filing and remittance.

The solutions on the Avalara Tax Compliance Cloud (AvaTax, Returns and CertCapture) handle automated sales tax calculations, monthly remittance and payment to jurisdictions, and filings on exemptions on behalf of customers. The company has shown some very positive recent strength, and the analysts said this last week:

Partner commentary on steady customer adds is likely to drive upside to organic revenue growth of 30%, versus 22% in base case. Reaccelerate to mid 30s organic growth is likely as we move through the year from gradual move upmarket, and cross selling activity. We think shares are likely to re-rate higher as we move through the year; maintain Buy rating and top pick.

The BofA Securities price target for the shares is $215, while the Wall Street consensus target is $203.43 and Monday’s last trade was recorded at $138.64 a share.

Disney

This is a top consumer media company with multiple streams of income to push revenue, and it is a huge reopening winner. Walt Disney Co. (NYSE: DIS) is the largest publicly traded media and entertainment company and a global leader in producing high-quality, branded, family entertainment.
Key Disney assets include its theme parks (six locations globally, which are slowly reopening), the ABC TV Network, ESPN, FX, National Geographic and other cable networks, iconic film studios Disney, LucasFilm, Marvel, Pixar, 20th Century Fox), Star India, direct-to-consumer streaming platforms (Disney+, 66% Hulu stake and ESPN+) and consumer products.

This is a giant reopening play for the theme parks, and the company’s Disney+ streaming product has been a massive success. On April 30, after just over 13 months of closure, Disneyland celebrated its second proper grand opening since July of 1955, having closed only rarely and sporadically, and never having been closed for any extended period since the first opening.

BofA Securities has a $223 price target, and the consensus target is $209.23. Walt Disney stock closed on Monday at $185.51.

Spotify

This music streaming giant could be poised to trade much higher. Spotify Technology S.A. (NYSE: SPOT) provides audio streaming services worldwide. It operates in two segments.

The Premium segment offers unlimited online and offline streaming access to its catalog of music and podcasts without commercial breaks to its subscribers. The Ad-Supported segment provides on-demand online access to its catalog of music and unlimited online access to the catalog of podcasts to its subscribers with no subscription fees.

The company also offers sales, marketing, contract research and development, and customer support services. As of December 31, 2020, its platform included 345 million monthly active users and 155 million premium subscribers in 93 countries and territories.

BofA Securities feels that the company has almost unlimited potential and said this after the stock pulled back after earnings:

Spotify shares declined 12% following first quarter results on 4/28, which we believe is largely attributed to lower monthly active users (MAU) versus expectations. The MAU growth curve appears to more closely mirror 2018 and 2019 versus the elevated 2020 levels. We believe the magnitude of the selloff is overblown and our longer term thesis remains intact.

The $428 BofA Securities price objective is well above the $316.32 consensus figure. Monday’s last Spotify Technology stock trade was at $247.69.

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Three outstanding stocks were added to the BofA Securities US 1 list, and while two were retired, both remain solid ideas for more aggressive growth stock investors. With shares of all the new additions backing up some recently, the current entry points are offering buy-in good levels now.

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