These momentum stocks have left peers in the dust.
The stock market has been on quite a run since it hit its pandemic lows in March 2020. Investors who missed out on buying the dip in some of the market’s top performers of the past year and a half might be kicking themselves. Fortunately, there are plenty of stocks that have outperformed their industry peers and still have major bullish momentum heading into the fall. The Bank of America analyst team says it’s not too late to buy these nine momentum stocks, each of which has outperformed its peers by at least 50% in the past 12 months.
Alphabet Inc. (ticker: GOOG, GOOGL)
Alphabet is the parent company of Google and YouTube and is the market leader in digital advertising. Alphabet shares are up 90% in the past year and 240% in the past five years, but analyst Justin Post says there’s still plenty to like about the stock. Post prefers Alphabet over Big Tech peers Facebook Inc. (FB), Amazon.com Inc. (AMZN) and Netflix Inc. (NFLX) and says Alphabet has room for earnings multiple expansion. Post says Alphabet also has large opportunities in artificial intelligence and machine learning. Bank of America has a “buy” rating and a $3,150 price target for GOOGL stock.
Nvidia Corp. (NVDA)
Nvidia designs and produces high-end graphics cards and processing chips for personal computers, servers and supercomputers. Nvidia shares have rallied 70% in the past year, but analyst Vivek Arya says Nvidia’s improving profitability and accelerating data center growth remain bullish long-term catalysts for the stock. In Nvidia’s fiscal third quarter, data center revenue grew 40%, up from 35% growth in the fiscal second quarter. Also, Arya says only 20% of Nvidia’s gaming customers have graphics cards that support a processing technology called ray tracing, creating a near-term upgrade opportunity. Bank of America has a “buy” rating and a $260 price target for NVDA stock.
JPMorgan Chase & Co. (JPM)
JPMorgan Chase is one of the largest global financial services companies, with roughly $3.7 trillion in assets. JPMorgan shares are up 66% in the past 12 months, but Analyst Ebrahim Poonawala says investors should still be snatching up shares of the big bank stock given its positioning as a prime U.S. economic recovery play. In the longer term, JPMorgan will also benefit from a steepening yield curve and rising interest rates. Finally, the stock trades at just 13 times forward earnings. Bank of America has a “buy” rating and a $182 price target for JPM stock.
Eli Lilly and Co. (LLY)
While COVID-19 vaccine manufacturer stocks have gotten most of the health care headlines in the past year, brand-name prescription drug maker Eli Lilly has been an under-the-radar health care sector winner. Eli Lilly shares are up 53% in the past 12 months. Analyst Geoff Meacham says he remains bullish on the company’s key growth drivers, including diabetes medications Trulicity and Jardiance. Meacham says psoriasis drug Taltz, arthritis drug Olumiant, migraine drug Emgality and breast cancer treatment Verzenio are also near-term revenue growth contributors. Bank of America has a “buy” rating and a $285 price target for LLY stock.
Wells Fargo & Co. (WFC)
Wells Fargo is one of the largest U.S. banks, but it has been operating under a punitive Federal Reserve asset cap following a series of scandals. Still, the stock is up 98% in the past year, and Poonawala says Wells Fargo has additional valuation upside given it is positioned to generate at least a 10% return on average tangible common shareholder equity starting in 2022. Regulatory headwinds are a concern, but the eventual removal of the asset cap could be a major bullish catalyst. Bank of America has a “buy” rating and a $60 price target for WFC stock.
Morgan Stanley (MS)
Morgan Stanley is one of the largest U.S. investment banks. The stock is up 111% in the past year, but Poonawala says investors shouldn’t be concerned about Morgan Stanley’s premium valuation relative to peers. The core of his bullish thesis isn’t the stock’s valuation. Instead, he says Morgan Stanley’s superior execution and its recent acquisitions will generate superior returns and surprisingly high revenue growth in the coming years. Also, Morgan Stanley’s earnings are positively correlated to rising interest rates. Bank of America has a “buy” rating and a $105 price target for MS stock.
Intuit Inc. (INTU)
Intuit provides small business accounting, management, tax preparation and personal finance software, including TurboTax and QuickBooks. The stock is up 77% in the past year, but analyst Brad Sills says it is showing no signs of slowing down. He says Intuit has top-tier management in the software space, and the company has the potential to expand operating margins over time. He is also bullish on Intuit’s recent $12 billion buyout of Mailchimp. Sills says Intuit is an “underappreciated growth story,” even after its recent outperformance. Bank of America has a “buy” rating and a $640 price target for INTU stock.
Goldman Sachs Group Inc. (GS)
Goldman Sachs is a global investment banking leader. Poonawala says Goldman’s stock trades at a valuation discount to most of its mega-cap financial stock peers, even after its 100% one-year gain. He says Goldman is a top valuation re-rating story among U.S. mega-cap financial stocks and projects that Goldman could buy back 7% of its market cap in shares in the next year. Also, Goldman’s relatively lower dependence on spread revenue and its momentum in its capital market and asset management business are earnings growth drivers. Bank of America has a “buy” rating and a $440 price target for GS stock.
Applied Materials Inc. (AMAT)
Applied Materials is a semiconductor fabrication equipment company that provides nanomanufacturing technology solutions for the semiconductor industry. Applied Materials shares are up 137% in the past year, making it one of the eight best-performing stocks in the entire S&P 500. Applied Materials has outpaced its peer group in the past year, but Arya says the stock is just getting started. He says the company’s gross margins were at their highest level in 14 years in the most recent quarter, an extremely bullish sign. Bank of America has a “buy” rating and a $170 price target for AMAT stock.
Momentum stocks with additional upside:
— Nvidia Corp. (NVDA)
— JPMorgan Chase & Co. (JPM)
— Eli Lilly and Co. (LLY)
— Wells Fargo & Co. (WFC)
— Morgan Stanley (MS)
— Intuit Inc. (INTU)
— Goldman Sachs Group Inc. (GS)
— Applied Materials Inc. (AMAT)
