Don’t be duped by doomsayers, JPMorgan says — the S&P will rebound to 4,900. Here are 3 stocks it’s using to bet on a bounce
Looking at the S&P 500 right now, you might be convinced the stock market is destined for doom in 2022.
The benchmark index rose nearly 27% last year. This year, it’s already down 22%. Plenty of stocks are deep into correction territory.
Yet JPMorgan’s global head of equity macro research, Dubravko Lakos, sees a major rebound on the horizon.
“People are basically positioned for a recession. Our base case is that this is not going to be a recession in the next 12 months,” Lakos told CNBC earlier this month. “And we think from that angle the portfolios are wrong footed.”
Lakos reiterated a year-end price target of 4,900 for the S&P 500. Since the index sits at 3,736 today, his target implies a potential upside of around 31%.
If you’re aligned with Lakos and are looking ahead to a potential reversal, here’s three stocks JPMorgan finds particularly attractive right now.
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Eager to escape the dismal stock market? Unfortunately, “cash is not a safe investment,” says Ray Dalio, founder of the world’s largest hedge fund. “It’s not a safe place because it will be taxed by inflation.” With the consumer price index hitting a 40-year high of 8.6% in May, you’ll need to get creative to find strong returns.
Smartsheet (SMAR)
This work-management platform helps companies implement, organize and automate their processes. Smartsheet says its application is used by more than 80% of Fortune 500 companies.
And business is growing. In the fiscal quarter ended April 30, revenue surged 44% year over year to $168.3 million, driven by a 44% increase in subscription revenue.
Notably, Smartsheet’s dollar-based net retention rate was a solid 133%.
But the stock is far from being a hot commodity. Year to date, shares are down a painful 61%. That could give contrarian investors something to think about.
Last week, JPMorgan analyst Pinjalim Bora reiterated an “overweight” rating on Smartsheet. While Bora also lowered his price target from $80 to $58, the new target is still 96% above where the stock sits today.
Microsoft (MSFT)
Tech stocks are getting dumped in this market downturn. Even mega-cap behemoths like Microsoft aren’t immune to the bearish sentiment.
The stock has tumbled 26% in 2022.
But business remains on the right track. In the March quarter, Microsoft’s revenue grew 18% year over year to $49.4 billion. Adjusted earnings came in at $2.22 per share, up 9% from the year-ago period.
The tech gorilla is also returning a massive amount of cash to investors. For the quarter, Microsoft’s dividends and share buybacks totaled $12.4 billion, representing a 25% increase year over year.
JPMorgan analyst Mark Murphy recently raised his price target on Microsoft to $320 while maintaining a “buy” rating. That implies a potential upside of 30%.
Eli Lilly (LLY)
This American pharmaceutical giant commands more than $270 billion in market cap, with products marketed in 120 countries around the world.
Unlike the other two names on this list, Eli Lilly is not a beaten-down stock.
In Q1, Eli Lilly delivered 15% revenue growth, driven by a 20% growth in volume. The company paid nearly $900 million in dividends and spent $1.5 billion on buybacks during the quarter.
Shares are actually up 7% so far in 2022, and JPMorgan expects the trend to continue.
On June 1, analyst Chris Schott reiterated an “overweight” rating on Eli Lilly while raising his price target from $340 to $355.
Considering that shares trade at around $291 apiece right now, the new price target implies a potential upside of 22%.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
