Bank of America has highlighted several stocks with strong upside potential heading into September, including Madison Square Garden Entertainment, Church & Dwight, and ASML. Analysts are bullish on these companies due to robust growth, effective management turnarounds, or unjustified market undervaluation, projecting continued positive performance despite varying market conditions.
Bank of America has identified a selection of stocks poised for significant upside as investors look towards September. The investment banking giant highlights several names, including Madison Square Garden Entertainment, Church & Dwight, and ASML, noting that many are "firing on all cylinders" or are currently undervalued.
Madison Square Garden Entertainment (MSGE)
Analysts, including Peter Henderson, are particularly optimistic about Madison Square Garden Entertainment. The powerhouse behind the New York Knicks and Rangers is experiencing robust growth, primarily fueled by a surge in concert activity at the Garden. This includes a higher volume of shows and improved per-concert economics. Additionally, the Knicks' strong championship run significantly boosted fourth-quarter results, alongside increased sponsorship and suite revenues. Henderson anticipates continued robust bookings and healthy operating leverage, which should translate into substantial margin expansion and strong adjusted operating income growth. MSGE shares have already climbed an impressive 45% year-to-date.
Church & Dwight (CHD)
Anna Lizzul, a Bank of America analyst, praises Church & Dwight's management for effectively steering a turnaround. The company, known for household staples like Arm & Hammer baking soda, toothpaste, and shampoo, has successfully achieved an optimal balance between its value and premium product offerings. Lizzul projects strong tailwinds from innovation within its "power brands" and strategic portfolio reshaping. This is expected to propel CHD to unprecedented gross margin levels. Furthermore, Church & Dwight has a proven track record of outperforming during challenging macroeconomic periods, solidifying its status as a top stock pick. The stock has seen a 21% increase this year.
ASML
For semiconductor manufacturing equipment giant ASML, analyst Didier Scemama advises clients to "buy the dip," arguing that the stock's recent underperformance and "de-rating" are unjustified. Scemama notes that ASML's significant underperformance over the past year can be attributed to its simultaneous de-rating while peers were re-rated. Despite concerns around capacity constraints and escalating competition, Bank of America maintains that ASML continues to deliver "best-in-class EPS growth supported by margin expansion" and remains a top choice. ASML shares are up 58% this year.
Tapestry
While Tapestry, the parent company of Coach and Kate Spade, is recognized for consistent strong EPS growth driven by the Coach brand's performance and stabilization at Kate Spade, Bank of America observes limited upside potential from its current levels. This is due to its multiple nearing peak valuations. However, the bank expects Tapestry to continue returning capital to shareholders at an accelerated pace, thanks to its robust free cash flow generation.
