narvikk
The Wells Fargo equity team identified 14 high-conviction, catalyst-driven stock opportunities for the second quarter, including two Magnificent 7 names.
The list includes 10 long (or Overweight) trades and 4 short (or Underweight) trades.
The list, updated each quarter, indicates where analysts "see significant Q2 ’24 catalysts that could drive meaningful upside or downside."
The Overweight ideas:
- Amazon (AMZN) - "We believe the recently announced FBA fee restructuring is the next leg of retail margin expansion for AMZN, driving an estimated $5.2B of annualized NA retail OI accretion."
- Annexon (ANNX) - "Shares only trade at a $400MM enterprise value, we think the risk/reward (+130%/-50%) is skewed to the upside on the upcoming Phase 3 GBS data."
- Aerovate Therapeutics (AVTE) - "Based on our deep dive of the trial's key risks and merits, we are confident in positive data from IMPAHCT. In our scenario analysis, we see shares up 60% in our base case, with 100%+ upside in our bull case."
- Citigroup (C) - "Citigroup ... is at the start of a multi-year inflection that should reflect better efficiency and returns, as its historical underperformance (incl. worst-in-class 4Q23) becomes best-in-class 2024 positive operating leverage (+4-5%)."
- Devon Energy (DVN) - "Based on the timing, locations, and DSU well density of recent drilling and completion activity in the Delaware Basin, along with likely conservative assumptions baked into the FY24 production guide, we believe DVN is likely to provide a better-than-expected Q2’24 production guidance along with Q1’24 earnings release and begin to beat & raise throughout the year."
- Global-E Online (GLBE) - "Based on the timing of new client signings and product launches in 2H24, along with likely conservative assumptions embedded into the FY24 guide, we think GLBE is likely to report a string of beat and raises throughout the year."
- Insmed (INSM) - "Brensocatib’s readout in bronchiectasis in Q2 is the most meaningful near-term upside driver for the stock (70% upside for base case and 100%+ upside for bull case), though we think Arikayce and TPIP offer a fundamental floor for the stock in the high teens/low twenties."
- RTX (RTX) - "RTX's stock has been unfairly punished for the one-time GTF recall impact (>$20B market cap vs ~$3B cost), and sentiment should improve as the grounded aircraft backlog peaks and starts to move lower."
- Starbucks (SBUX) - "Shares are out of favor due to lagging comps and elevated ’24 outlook; but compares are easing, P/E is trough & margin/throughput levers remain tailwinds."
- SITE Centers (SITE) - "We believe SITC has the potential to outperform its peers in the near term as a result of incremental asset sales at favorable pricing, along with the potential for positive CURB spin updates."
Underweight ideas:
- Bill.com (BILL) - "A growing level of competition across the B2B space along with (1) greater investments required to maintain growth than many investors appreciate, (2) growing skepticism around BILL’s terminal take rate and an unclear transaction monetization path near term, and (3) an unfavorable macro upside/downside skew, leads us to believe BILL’s multiple is more likely to contract than expand."
- Graphic Packaging Holding (GPK) - "We rate GPK UW given our view of oversupplied global boxboard conditions and still sluggish packaged food demand driving margin compression in H1/2024."
- Sirius XM (SIRI) - "While SIRI has traded to below our initial Underweight target, we think tactically it has continued downside risk into earnings from pressure on fundamentals including weaker than expected self-pay net adds, valuation moving to comps and the pending combination of SIRI with LSXM."
- Tesla (TSLA) - "We see moderating delivery growth driven by lower demand & diminished return on price cuts. Our FY24 delivery estimate of ~1.8M units represents flat y/y growth & remains ~10% below consensus."
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