Whenever JP Morgan (NYSE:JPM) adds new stocks to its focus list, investors seeking value or growth at a reasonable price (GARP) stocks should be all ears. Depending on where you look, stock valuations may still be a tad lofty, even after the late-summer rough patch the markets have driven through. However, despite the less-than-ideal terrain, the stock market is a market of stocks. And some of the more neglected names out there (think outside of the Magnificent Seven cohort) seem like far better deals today.
In this piece, we’ll go over two of the latest additions to JP Morgan’s exclusive focus list and determine whether it’s a good time to buy now amid a turbulent market that could be at risk of giving back more of the year’s gains, even as the Fed follows through with its promised interest rate reductions.
Key Points About This Article
- JP Morgan’s focus list is worth checking out if you seek opportunities in today’s “toppy” market.
- Adobe and Caesars Entertainment are two standout additions that may be ready to rise.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
Adobe
Tech doesn’t seem like the place to be right now, with the tech-heavy Nasdaq 100 trailing the S&P 500 since the first half of 2024 began. Undoubtedly, the creative software company has received negative headlines about consumer-unfriendly practices surrounding its software subscription services. Indeed, the FTC suit has acted as an overhang on Adobe (NADSAQ:ADBE) shares for quite a while now.
Either way, there are few suitable alternatives for the many professional graphic designers on the market right now. Indeed, the price to use Adobe’s creative suite may be high, but until there’s a credible challenger to Adobe’s throne, people will have no choice other than to pay up with their cash and maybe their data, something that many users fear.
For now, the company has publicly stated that it will not train its generative AI models with user data. Given certain clauses in the terms and conditions seem vague, some users may not buy it.
However, Adobe users will have few alternatives until another firm can chip away at its moat with a better offering. Even then, navigating a completely different platform can prove tricky, especially for those trained in Adobe software since entering the industry.
Some big names on Wall Street think Adobe is on the right side of the AI boom.
JP Morgan analyst Mark Murphy is upbeat about the firm following its solid quarter released in June. Notably, Murphy believes that AI tools and applications, including the image generator Firefly, can help lift the stock into year’s end.
Murphy isn’t the only big bull on Adobe’s Firefly AI. Hedgeye analyst Felix Wang is “confident” in Adobe’s AI strategy and thinks Firefly’s integration is “underappreciated” by the market. At 27.7 times trailing price-to-earnings (P/E), ADBE stock looks relatively cheap relative to most other AI-leveraging tech firms.
Caesars Entertainment
Caesars Entertainment (NYSE:CZR) is a gaming company that also made JP Morgan’s focus list. The company has been stuck in a bear market for quite some time, and despite subtle recession worries (downturns are not awful for casino firms), the depressed valuation alone may be enough reason to ride out the tides.
Notably, JP Morgan analyst Joseph Greff sees Caesar’s estimates as “achievable.” Whenever there’s a low bar and an even lower valuation, you could have a deep-value play most others are sleeping on. At the time of writing, CZR stock is down close to 70% from its all-time high just shy of $120 per share. Greff isn’t the only bull on the name at this level.
Billionaire investor Carl Icahn added to his stake in the ailing casino stock, scooping up 2.44 million more shares. Indeed, investors are in some pretty good company with Caesars as the firm looks to ride out a rough economic patch. At 1.8 times price-to-book (P/B) and 0.7 times price-to-sales (P/S), Caesars shares are historically depressed.
Though only time will tell how much recession risk is baked in, the longer-term chart suggests economic weakness has been on the radar for a few years now. If you firmly believe that the economy is en route for a soft landing (former Fed chair and current U.S. Treasury Secretary Janet Yellen sees this), CZR stock could prove a massive steal.
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