NFLX - Netflix FedEx among in BofA's top 10 stocks for the second quarter

2023-04-04 09:39:20 ET

Investors moved a record $508B into cash in the first quarter and BofA is out with a list of best names to deploy cash for Q2.

BofA's Alpha Generation Research team chose eight Buys and two Underperforms for the next three months.

"This list of stock recommendations represents some of our fundamental equity analysts' highest conviction ideas for the 2nd quarter," strategist Anthony Cassamassino wrote in a note.

The Buy stocks are:

1. CubeSmart ( CUBE ), price target $64, "CUBE screens the best out of its sector peers on our 2023 earnings growth and trades at an attractive valuation relative to peers with the lowest 2023 PEG and PEGY ratio."
2. FedEx ( NYSE: FDX ), $305, "We expect accelerating cost cut efforts by FedEx to drive its margins higher from trough levels, as its effort to improve efficiency and reduce excess capacity will lead to structural gains in profitability."
3. Flowserve ( FLS ), $40, "We think liquified natural gas ( LNG ) capex and the return of deep offshore (together representing ~5-10% of revenues and a material portion of FLS’s petrochemicals business) could help move the needle this year."
4. Lamb Weston ( LW ), $115, "LW continues to showcase best in class pricing power across CPG with minimal elasticities and plans for an additional price increase to begin flowing through this spring/summer."
5. Lowe's ( LOW ), $278, "The BofA RENO Barometer, which is our proprietary indicator of home improvement retail demand utilizing 14 unique inputs, suggests that same-store sales growth at home improvement retailers is currently troughing and should climb in subsequent months."
6. Netflix ( NASDAQ: NFLX ), $410, "In our view, the password sharing crackdown will result in a greater number of subs as well as revenue because the primary account holder will either pay an additional fee for members who have moved out of the household or those sharing accounts become full subscribers."
7. Progressive ( PGR ), $177, "With the pricing gap between Progressive and its competitors the widest in over 20 years and with Progressive in the 'sweet spot' Feb. May seasonal growth peak, we expect that Progressive may be poised to enjoy the most significant three months of growth in at least 20 years."
8. UnitedHealth Group ( UNH ), $650, "MCOs generate investment income from the premiums they receive at the beginning of the month for claim payments that occur up to a year after the date or service. A 100bps increase in interest rates would add 2.4% to UNH’s EPS through increased investment income."

The Underperform stocks are:

1. CarMax ( KMX ), $40, "Competition in used auto retailing has become fiercer as traditional franchised new auto dealers are aggressively focusing on the business. Specifically, the public dealers have been growing their used business by facilitating customer trade-ins, utilizing digital tools, making acquisitions, and organic footprint expansion."
2. United Airlines ( UAL ), $40, "While air travel is not as exposed to the lower-income cohort, we believe consumers are still likely to pull back on leisure trips, outside of the holiday peaks, as costs for discretionary items remain elevated. In terms of leisure travel, pricing in leisure channels has decelerated about 200bps over the last several weeks since the start of the year."

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