As first-quarter earnings season winds down, Morgan Stanley is highlighting specific stocks with strong potential for post-report gains. The bank has identified a basket of companies rated ‘overweight’ that are expected to report soon and score highly on their ‘Earnings Surprise Composite’.
Key picks include Ulta Beauty, Target, and Applied Materials, with analysts pointing to strategic investments, positive sentiment, and a history of strong performance as drivers for future growth.
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As the first-quarter earnings season approaches its conclusion, Morgan Stanley identifies promising stocks poised for a post-earnings surge. With a significant majority of the S&P 500 companies having already reported, showcasing strong upside surprises in both earnings and revenue, the investment bank points to a select group of companies yet to release their results.
Morgan Stanley's strategy focuses on stocks within the MSCI U.S. index scheduled to report between May 7 and June 2. These selections are backed by the bank's 'overweight' ratings and a high 'Earnings Surprise Composite' score, indicating strong potential for positive performance.
Key Picks and Analyst Insights:
Ulta Beauty (ULTA)
Expected to report on Monday, June 1, Ulta Beauty has garnered a 'buy' rating from Bank of America. Analyst Lorraine Hutchinson views the beauty retailer as an attractive investment following a recent price pullback, especially given its strategic investments in store renovations, IT systems, and international expansion. Hutchinson believes these investments are creating a sustainable growth engine, turning a recent dip into a buying opportunity for a high-quality company. The analyst's price target suggests a 29% upside from its recent closing price.
Target (TGT)
The retail giant is set to announce its earnings on Tuesday, May 19. While Citigroup maintains a 'neutral' rating, it has raised its price target to $133, reflecting recent positive sentiment and a significant stock rebound year-to-date. However, Citi warns that the high expectations surrounding Target's upcoming report could lead to disappointment if not met or exceeded.
Applied Materials (AMAT)
Morgan Stanley's analyst Shane Brett reiterates an 'overweight' rating for the chip equipment manufacturer, due to report on Wednesday, May 13. Brett anticipates another strong performance with a 'beat and raise' report, building on the company's January quarter results. A revised price target of $454 indicates an almost 11% potential upside, despite the stock already surging 66% this year.
Other Notable Mentions
Morgan Stanley also highlights Nvidia and Deere & Co. as significant names on their list of potential post-earnings plays.
