Bank of America has identified a select group of stocks poised for significant upside heading into September, with the investment bank highlighting companies demonstrating strong performance and favorable outlooks. Among the top recommendations are Tapestry, Madison Square Garden Entertainment, ASML, and Church & Dwight.
Tapestry: Consistent Growth Expected
Bank of America anticipates consistent strong earnings per share (EPS) growth for Tapestry, driven by robust performance at its Coach brand and stabilization at Kate Spade. While the stock's valuation is approaching peak levels due to solid fundamentals, the bank expects continued capital returns to shareholders, fueled by strong free cash flow generation.
Madison Square Garden Entertainment: Firing on All Cylinders
Analysts at Bank of America, led by Peter Henderson, believe Madison Square Garden Entertainment, the owner of the New York Knicks and Rangers, is performing exceptionally well. The bank's report cited strong concert activity, benefiting from an increased number of shows and higher per-concert economics. Furthermore, the recent quarter was boosted by the Knicks' championship run, along with higher sponsorship, signage, and suite revenue. Henderson is optimistic about the upcoming schedule of bookings and expects healthy operating leverage to drive margin expansion and strong adjusted operating income growth. The stock has already seen a 45% increase year-to-date.
Church & Dwight: A "New and Improved" Company Poised for Margin Expansion
Analyst Anna Lizzul notes that Church & Dwight's management is successfully executing a turnaround strategy. Bank of America highlights the company's effective mix of value and premium products, a key factor in its improved performance. Tailwinds from growing power brands through innovation and portfolio reshaping are expected to fuel gross margins to unprecedented levels. The company has a history of outperforming in challenging macroeconomic environments, making it a top idea for the bank, which applauds the "new and improved Church & Dwight." The stock is up 21% this year.
For semiconductor manufacturing equipment maker ASML, analyst Didier Scemama advises clients to "buy the dip," characterizing the stock's recent de-rating as unjustified. Scemama points out that ASML's significant underperformance over the past 12 months is largely due to a simultaneous de-rating of ASML and a re-rating of its peers. Despite capacity constraints and rising competition, Bank of America maintains that ASML offers best-in-class EPS growth supported by margin expansion, making it a top pick. The stock has surged 58% this year.
These insights from Bank of America provide investors with potential opportunities to consider as they navigate the market landscape heading into September.
