UBS: These 11 stocks are set to rocket higher in 2019

Spencer Platt/Getty ImagesTraders work on the floor of the New York Stock Exchange earlier this week.
  • UBS has published a list of stocks they believe are set to rocket higher next year.
  • To be included in the list, a stock must have a “buy” rating at the firm and have a catalyst that most investors are ignoring.
  • Markets Insider picked out the 11 stocks in the US that UBS says will have the most upside potential.

In a recent note to clients, UBS equity analysts highlighted the stocks they believe that are best set to surge in the year ahead.

To be included on the list, a stock must have a “buy” rating and a catalyst most investors are ignoring.

“As well as screening for upside to price target, upside/downside skew, market cap, sector weightings and liquidity, we focused on stocks where we believe our analysts have a truly differentiated view versus consensus,” the firm said.

After going through the list, Markets Insider picked out the 11 US stocks that UBS says will have soar at least 35% in 2019.

Below are the 11 stocks, in ascending order of their upside potentials:


Wells Fargo

MI

Ticker: WFC

Closing Price on 12/18: $US46.52

UBS Price Target: $US63 (+35%)

“Wells Fargo’s substantial underperformance since 2016 has created a long-term buying opportunity,” said analyst Saul Martinez.

“Even with limited revenue growth, efficiency improvements and capital optimization should drive mid to high teen EPS growth and considerable ROTCE expansion in 2019 and 2020. We forecast that Wells buys back 17 % of its shares by year-end 2020, providing considerable support to the EPS and ROTCE trajectory.”

Source: UBS


Advance Auto Parts

MI

Ticker: AAP

Closing Price on 12/18: $US158.24

UBS Price Target: $US215 (+36%)

“Its initiatives like cross-banner visibility and its marketing campaign are driving the top-line,” said analyst Michael Lasser.

“The industry is in a good spot with a healthier car park and the potential benefit from parts inflation. A strong top-line should drive expense leverage across the business. Some of the investment margin drags will roll off and it will see savings from closing duplicative DCs. Plus, inventory optimization and managing its AP/Inventory ratio should lead to improved free cash flow, which should lead to greater share repurchases.”

Source: UBS


Salesforce.com

MI
Ticker: CRM

Closing Price on 12/18: $US132.32

UBS Price Target: $US180 (+36%)

“We think Salesforce is establishing a leading position as an enabler of digital transformations, and this trend will remain a key area for IT budget growth in CY19,” analyst Jennifer Lowe noted.

“Our analysis suggests improved efficiency in CY17 and CY18, and continued progress here should lead to better margins in the future. We think strong top line growth plus better-than-expected margins and cash flow can drive shares higher from here.”

Source: UBS


Alphabet Google

MI

Ticker: GOOG

Closing Price on 12/18: $US1028.71

UBS Price Target: $US1400 (+36%)

“We continue to view Alphabet as a category leader & top pick for investors looking for exposure to a number of long-term secular growth themes in the Internet sector,” said analyst Eric Sheridan.

“We expect Alphabet to continue to sustain solid rev growth driven by search (particularly mobile), YouTube and push into local while showing promising returns on key investments (cloud, hardware, voice/visual search, etc.) & upside optionality in Other Bets (deep valuation discounts of Waymo & life sciences, in our opinion).”

Source: UBS


Honeywell International

MI

Ticker: HON

Closing Price on 12/18: $US135.18

UBS Price Target: $US190 (+41%)

“We are buyers of HON as 2018 saw the company step up free cash flow conversion, optimise its portfolio, and drive productivity, with more than $US25 billion of capital available to deploy in 2019,” said analyst Steven Winoker.

“We find HON’s overall portfolio positioning relative to the macro landscape relatively positive. End-market dynamics should remain strong in 2019 while management remains prudent in execution. We also expect management to smartly but aggressively deploy capital with a strong balance sheet in 2019. With plenty of capital available, Intelligrated-like M&A opportunities seem likely.”

Source: UBS


Lockheed Martin

MI

Ticker: LMT

Closing Price on 12/18: $US279.47

UBS Price Target: $US400 (+43%)

“The lack of investor enthusiasm around LMT, coupled with our above-consensus outlook on 2020E, drives our Buy rating,” said analyst Myles Walton.

“Our proprietary analysis along with UBS Evidence Lab created a picture of LMT’s revenue composition by funding account, which allowed us to construct a revenue forecasting model predicting LMT to have the fastest pace through 2020E (8%+, though we are including 6% in our estimates).”

Source: UBS


Exact Sciences

MI

Ticker: EXAS

Closing Price on 12/18: $US67.80

UBS Price Target: $US100 (+47%)

“The current stock price is an attractive entry point ahead of accelerating testing frequency, continued strong doctor additions, and increasing penetration of the Integrated Delivery Network opportunity,” analyst Dan Brennan wrote.

Source: UBS


Altice USA

MI

Ticker: ATUS

Closing Price on 12/18: $US17.40

UBS Price Target: $US26 (+49%)

“We believe recent product initiatives should sustain low-SD revenue/EBITDA growth, allowing mgmt to hit its leverage target exiting ’18 and setting the stage for meaningful stock repurchases,” said analyst John Hodulik.

“Along with the company’s strategic value amid continued industry consolidation and a depressed valuation, we see a compelling risk-reward.”

Source: UBS


Marvell Technology

MI

Ticker: MRVL

Closing Price on 12/18: $US15.44

UBS Price Target: $US25 (+62%)

UBS View:

“Looking ahead into 2019, the long-awaited 5G network deployments will start to ramp in earnest in the 2H and incremental revenues from networking and storage wins in data center should provide material upside to growth in 2019.”

“Additionally, favourable NAND price environment should spur greater adoption of SSDs in both client and enterprise, providing further momentum for MRVL’s fast-growing SSD controller business.”

Source: UBS


Michael Kors

MI

Ticker: KORS

Closing Price on 12/18: $US39.78

UBS Price Target: $US80 (+101%)

“KORS is an underappreciated global growth stock,” analyst Jay Sole said.

“The market thinks KORS’ portfolio of brands is weak and unlikely to grow. However, multiple UBS Evidence Lab studies suggest KORS’ brands are strong. We forecast an 8% 5-yr. EPS CAGR and our DCF analysis points to an $US80 price target. We anticipate KORS’ P/E rising to ~16x from ~8x today and see a 5:1 upside/downside skew.”

Source: UBS


Canadian Natural Resources

MI

Ticker: CNQ

Closing Price on 12/18: $US24.49

UBS Price Target: $US57 (+133%)

“CNQ is differentiated with its long life, low decline reserve base with minimal reservoir risk, resulting in a ~6.8% FCF yield at strip in 2019,” said analyst Lloyd Byrne.

“CNQ’s DAPSG profile from its assets should lead to significant FCF and de-leveraging, positioning CNQ to continue to return cash to shareholders and expand traditional multiples.”

Source: UBS


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