According to investment banking giant Morgan Stanley, a selection of stocks still offer considerable upside potential heading into their upcoming earnings reports. The firm highlights companies such as Alibaba, Grab, Natera, Cadence Design Systems, and Apple as particularly compelling opportunities.
Alibaba: China's AI Growth Catalyst
Morgan Stanley finds shares of the Chinese global online marketplace 'too compelling to ignore.' Analyst Gary Yu maintains Alibaba as a top pick, citing its position as China's largest cloud infrastructure provider, poised to gain significant share in the evolving AI cycle. Yu also points to positive catalysts like robust cash flow generation, consistent dividends, and ongoing share buybacks. While the analyst recently adjusted the price target down to $180 from $190, the recommendation to buy remains strong. Alibaba has seen a 17% increase in its stock value this month, with earnings anticipated in late August.
Grab: Riding High on Southeast Asia's Demand
The Southeast Asian ride-hailing and food/grocery delivery powerhouse, Grab, is operating 'on all cylinders,' per Morgan Stanley. Analyst Divya Gangahar anticipates a strong quarter in early August, driven by improving demand and accelerating growth. Gangahar projects a 22% increase in second-quarter revenue and an adjusted EBITDA of US$166 million. Morgan Stanley also raised its price target for Grab to $6.25 from $5.90, noting potential for further share buybacks and deeming the risk-reward profile 'very attractive.' Despite the positive outlook, Grab's shares are down 12% this month.
Cadence Design Systems: Undervalued AI Moat
Morgan Stanley's team, led by analyst Lee Simpson, considers the electronic automation systems software company, Cadence Design Systems, undervalued. Simpson acknowledges that the market likely expects a guidance raise this quarter but emphasizes 'Agentic AI' as 'key to their moat.' Morgan Stanley reiterates an 'Overweight' rating and a price target of $370, forecasting solid margin and earnings recovery next year, bolstered by deal integration and early momentum in physical AI. The stock has experienced a 13% decline in July, with earnings scheduled for Monday.
Natera: Leading in Precision Oncology
Morgan Stanley has significantly increased its price target for Natera to $310 from $250. This adjustment reflects a shift in methodology, valuing the stock primarily on a sales multiple of approximately 15x EV / '26 Sales. This premium valuation is justified by Natera's robust growth profile and its market leadership within the precision oncology sector.
Apple: Solid Fundamentals Amid Tactical Challenges
While Apple's fundamental business remains 'very solid,' Morgan Stanley notes that the tactical setup heading into earnings is 'neutral/tougher.' This is largely attributed to shares trading near all-time highs, necessitating a flawless performance. The firm continues to believe in Apple's strong fundamentals, anticipating that various price hikes will contribute to revenue and EPS upside over the next 6-18 months.
