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Morgan Stanley has identified several stocks as compelling buys ahead of their upcoming earnings reports, including Alibaba, Grab, Natera, Cadence Design Systems, and Apple. Analysts are bullish on these companies, citing strong fundamentals, strategic positioning in key growth areas like AI, and potential for share buybacks or increased demand. While some price targets have been adjusted or stocks have seen recent dips, Morgan Stanley largely maintains ‘overweight’ ratings, urging investors to consider these opportunities.
Morgan Stanley, a leading investment bank, has highlighted a select group of stocks with significant upside potential as companies prepare to release their next quarterly earnings reports. The firm suggests that investors consider these opportunities before it's too late to capitalize on pre-earnings momentum. Among the companies rated 'overweight' by Morgan Stanley, and also screened by CNBC Pro, are Alibaba, Grab, Natera, Cadence Design Systems, and Apple.
Alibaba: A Top Pick in China's AI Evolution
Morgan Stanley finds shares of the Chinese global online marketplace, Alibaba, particularly compelling. Analyst Gary Yu reiterates Alibaba as a top pick, anticipating its late August earnings. Yu believes Alibaba, with its extensive cloud infrastructure in China, is well-positioned to gain market share in the evolving AI landscape. Beyond AI, Morgan Stanley points to other positive catalysts, including the company's robust cash flow generation, potential dividends, and ongoing share buybacks. Despite a recent slight adjustment to his price target from $190 to $180 per share, Yu maintains a 'buy' rating, noting Alibaba's impressive 17% surge this month.
Grab: Riding High on Southeast Asia's Demand
Southeast Asia's dominant ride-hailing and delivery service, Grab, is performing exceptionally, according to Morgan Stanley. Analyst Divya Gangahar foresees a strong quarter when Grab reports in early August, citing improving demand and accelerating growth across its diversified platform. Morgan Stanley projects a 22% increase in second-quarter revenue and an adjusted EBITDA of US$166 million. The bank also raised its price target for Grab to $6.25 from $5.90, emphasizing potential for further share buybacks and an attractive risk-reward profile, even though the stock has seen a 12% dip this month.
Cadence Design Systems: Undervalued and AI-Driven
Morgan Stanley's team, led by analyst Lee Simpson, believes electronic automation systems software company Cadence Design Systems is currently undervalued. While a guidance raise is anticipated and largely priced in, Simpson highlights 'Agentic AI' as a crucial competitive advantage for the company. Morgan Stanley advises investors to remain confident and consider buying the dip. The bank reaffirms an 'overweight' rating and a $370 price target, projecting solid margin and earnings recovery next year, bolstered by deal integration and early momentum in physical AI initiatives. Cadence Design Systems has fallen 13% so far in July.
Natera: Soaring Price Target on Growth Profile
For Natera, Morgan Stanley has significantly increased its price target to $310 from $250. This adjustment reflects a valuation based on approximately 15 times its 2026 sales multiple. The premium valuation is justified by Natera's robust growth profile and its leadership position in the precision oncology market, marking a shift in methodology emphasis towards sales multiple valuation supported by DCF.
Apple: Strong Fundamentals Amidst Highs
Apple's underlying fundamentals remain exceptionally strong, according to Morgan Stanley. However, with shares trading near all-time highs, the tactical setup heading into earnings is deemed more neutral to challenging, requiring flawless performance. Despite this, the firm continues to believe in Apple's strong fundamentals, anticipating that numerous price hikes will likely contribute to revenue and EPS upside over the next 6-18 months.
