May was a choppy month to say the least, as new economic data from April rattled markets. Going into the summer investors find themselves in an odd position.
Fed Chairman Jerome Powell has said that the central bank is committed to an “all-in” approach as it tries to nurse the economy back to health. But the taper timeline has been brought into focus and many investors have concerns on whether the Fed is eyeing the exit ramp.
However, some economists have pointed out that last week’s lower than expected jobs number supports the Fed’s current approach, which supports a bullish outlook for now. But watch for further signs of inflationary pressure, as it could lead to the Fed increasing interest rates sooner than expected.
With all of that said, our team has three recommendations to buy that could be set to launch higher. Continue reading to find out which stocks we’re watching this week.
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The financial sector is a clear beneficiary of the recent rise in inflation. As inflation rises interest rates rise, and that’s good for banks, which make more money along with the expansion of the spread between rates they pay on deposits and rates they charge on loans. But Goldman Sachs (GS) has a couple things going for it aside from being in the right sector.
Goldman Sachs has been benefiting from a boom in retail investing. In the most recent quarter, Goldman Sachs’ investment banking revenue surged 73% to a record high $3.77 billion. Fixed-income trading revenue jumped 31% to $3.89 billion, and equities trading revenue surged 68% to $3.69 billion.
What makes (GS) stock even more appealing is that it trades for just nine times earnings despite analysts expecting almost 17% EPS growth annually over the next five years. That makes for a price-earnings growth ratio of just 0.55, reflecting extreme value.
Plus, while many large banks pay high dividends, Goldman pays a modest 1.4% and uses just 12% of earnings to do so, meaning it has ample room to grow its payout in the years to come.
Of 25 analysts offering recommendations for GS stock, 16 rate the stock a Buy and 7 call it a Hold. Only 2 of the Wall Street pros covering the stock give it a Sell rating.
Next up on the list we have Health Catalyst (HCAT), a software-as-a-service company that provides a cloud-based data platform, analytics software and professional services for hospitals and other healthcare organizations.
The pandemic induced shutdown of March 2020 sent HCAT plunging to an all time low of $23.39. But it actually created an excellent buying opportunity as the stock has more than doubled since – and the Wall Street pros covering the stock say this strength will likely continue.
HCAT is gaining favor within the analyst community. The stock sports a consensus Buy recommendation. Of the 15 analysts covering it, all rate the stock a buy. Last month, J.P. Morgan initiated coverage with a Buy rating on the stock and a $63 price target which represents a nearly 13% increase.
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At Raymond James, five-star analyst John Ransom reiterated his Strong Buy recommendation, citing that he expects business to accelerate in the coming months as the COVID-19 crisis gradually abates.
“Post-pandemic we expect to see increased demand for Health Catalyst suite of solutions and note that the discounts provided to customers in the depths of the pandemic should buy a significant amount of goodwill and is evidence of the company’s dedication to helping providers improve,” writes Ransom, who specializes in the Healthcare sector.
Stifel analyst David Grossman sums up the reason for their Buy rating, “Our thesis reflects HCAT’s market leadership in the Healthcare Analytics market. We expect HCAT to maintain 20%-plus organic growth through a combination of new clients and contractual price escalators.”
Health Catalyst shares have added about 25% since the beginning of the year versus the S&P 500’s gain of 14.3% and there may be plenty of runway ahead.
Apple (AAPL) stock has been spinning its wheels since shares topped out on Sept. 2 and haven’t been able to find traction since, dipping over 6% in May.
But one factor that could boost the stock price is developments unveiled during Monday’s Worldwide Developers Conference (WWDC).
Rumor has it that Apple will announce five new software updates, including iOS 15 and macOS 12. For investors, possible updates on the products and services front would be most meaningful. Updates on AR and VR technology and even hints about the Apple Car would certainly be highlights.
Historically, AAPL share price has risen following the WWDC in recent years. Following the 2020 event, which was the first developers conference to be held virtually, and took place just a few months after the pandemic bottom, the stock gained 3%. The year prior, pre-pandemic in 2019, AAPL stock spiked 17% following the WWDC.
Next week’s WWDC event may be the next catalyst for AAPL. Or it could be the company’s late-July earnings report. Who knows, it could even come in the fourth. But the majority of Wall Street pros anticipate a rise back into the leadership role for Apple, eventually. Of 43 analysts polled 32 rate the stock a Buy, 9 say Hold and only 2 say Sell AAPL stock. A median price target of $160 reflects a 27% increase from its current price.
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