With the first quarter well underway and fourth-quarter earnings results pouring in, many of the top firms we follow on Wall Street are making some changes to the lists of their high-conviction stock picks for clients. The market seems to hit all-time highs daily on all the major indexes, so it makes sense to examine the lists, as the rest of the year, and especially the first quarter of 2021, could have additional volatility as the political and geopolitical cycle could still prove to be very explosive.
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In a somewhat surprising move, the team at BofA Securities has added Alphabet Inc. (NASDAQ: GOOGL) to the firm’s US 1 list of top stock picks. They also add two other top companies, and all of them are rated Buy. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Alphabet
Alphabet, parent of Google, is a global technology company focused on key areas such as search, advertising, operating systems and platforms, and enterprise and hardware products. The company generates revenue primarily by delivering online advertising and by selling apps and content on Google Play, as well as hardware products. Alphabet provides its products and services in more than 100 languages and in 190 countries, regions and territories.
The company offers performance and brand advertising services. It operates through Google and Other Bets segments. The Google segment includes principal internet products, such as search, ads, commerce, Maps, YouTube, Apps, Cloud, Android, Chrome and Google Play, as well as technical infrastructure and newer efforts, such as virtual reality.
Analysts point to Google Cloud, which is the largest cloud infrastructure play and engages in more technology, infrastructure research and development in headcount and dollars than any other company. That gives it the strength and wherewithal to compete with and differentiate itself from Amazon’s AWS and Microsoft’s Azure.
Alphabet reported stellar third-quarter earnings, but some on Wall Street feel that blowout advertising revenues sure will not help the company in its fight against antitrust allegations.
With that caveat noted, the BofA Securities price target for the stock is $2,150, while the Wall Street consensus target is $1,943.32. Alphabet stock closed Thursday’s trading at $1,884.15 a share.
East West Bancorp
Shares of this off-the-radar bank have been on fire, and the stock also debuts on the US 1 list. East West Bancorp Inc. (NASDAQ: EWBC) is a $50 billion asset bank. Its wholly owned subsidiary, East West Bank, is focused exclusively on the United States and Greater China markets and operates over 120 locations worldwide, which include California, New York, Georgia, Massachusetts, Texas and Washington. In Greater China, East West’s presence includes full-service branches in Hong Kong and Shanghai and representative offices in Beijing, Shenzhen and Taipei.
The analysts are very positive on the stock and noted this when adding the shares to the US 1 list:
Superior revenue growth and ROA/ROE should drive above average earnings per share growth and stock outperformance. East West Bancorp offers compelling optionality to rising interest rates; we see potential for the stock to re-rate to 2.5-3x total book value. A more predictable China policy under the Biden administration should remove an overhang that weighed on the stock in 2018 and 2019.
Shareholders receive a 1.77% dividend. BofA Securities has a $70 price target, well above the $58.90 consensus target. The last East West Bancorp stock trade on Thursday was reported at $61.17.
24/7 Wall St.General Motors
This expanding car company could benefit from an improving economy and the return to work, and it is also a new member of the US 1 List. General Motors Co. (NYSE: GM) is the world’s largest automaker, with annual volume of almost 9 million units. It now relies on only four core brands in its key North American segment (Chevrolet, GMC, Buick and Cadillac).
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GM also sells cars, trucks and crossovers to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies and governments. In addition, it offers connected safety, security and mobility solutions, as well as information technology services. The company, through its General Motors Financial Company subsidiary, provides automotive financing services.
The analysts are very positive on the forward strategy at the auto giant and noted this:
GM announced that Cruise has entered into a strategic agreement with Microsoft to advance commercialization of its autonomous vehicle fleet. Microsoft’s value-add to Cruise/GM partnership and AV development/deployment will be its cloud/edge computing platform Azure. Microsoft will contribute to a $2 billion equity investment in Cruise, bringing post-money valuation to $30 billion
The $72 BofA Securities price target on the venerable auto manufacturer is well above the $54.59 consensus figure. General Motors stock closed at $55.08 on Thursday.
24/7 Wall St.The US 1 team has removed Twitter Inc. (NYSE: TWTR) and SVB Financial Group (NASDAQ: SVIB) from the portfolio. However, both stocks remain Buy rated.
It comes as somewhat of a surprise that the BofA Securities team is adding Alphabet now after such a massive run, yet they are not the only ones on Wall Street reiterating Buy ratings and raising price targets in front of the upcoming earnings. It may make sense just to nibble at the shares, buying partial positions now and waiting to see how the earnings reports come in.
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