Stocks are rallying after regulators stepped in to protect depositors at the troubled Silicon Valley Bank. But that doesn’t mean it’s time to party, according to Morgan Stanley’s chief equity and investment strategist Mike Wilson.
“We suggest selling any bounce on government intervention to quell the immediate liquidity crunch at SVB and other institutions until we hit new bear market lows at the earliest,” he wrote in a note to investors on Monday.
Wilson’s team does not consider recent bank failures to be “random or idiosyncratic”. Rather, the events serve as “further supporting factor” to the team’s negative earnings growth prospects.
The US Federal Reserve has aggressively raised interest rates to tame inflation. And that doesn’t bode well for the end result.
“In short, Fed policy is starting to bite and is unlikely to reverse even if the Fed takes a break from its rate hikes or quantitative tightening – i.e., the die is set for more earnings disappointments relative to consensus. and the company’s expectations.
Still, despite the gloomy outlook, Morgan Stanley sees upside in some stocks. Here’s a look at three that you find particularly appealing.
Apple (AAPL) is a technology giant.
In the latest earnings conference call, management revealed that the company’s active installed base exceeded two billion devices.
While competitors offer cheaper devices, millions of users don’t want to live outside Apple’s ecosystem. The ecosystem acts as an economic moat, allowing the company to earn supersized profits.
The market likes it: Over the past five years, Apple stock has risen by more than 230%.
Erik Woodring, an analyst at Morgan Stanley, sees more upside for the stock. The analyst has an ‘overweight’ rating on Apple and a price target of $180 – about 19% above current levels.
Many consider big data to be the next big thing. And that’s where Snowflake (SNOW) shines.
The cloud-based data storage company, founded in 2012, serves thousands of customers across a wide range of industries, including 573 companies on the Forbes Global 2000.
Momentum is strong in Snowflake’s business. In the three months ended January 31, revenue increased 53% year-over-year to $589.0 million. Notably, the net revenue retention rate reached a solid 158%.
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The company continued to win large customers. It now has 330 customers with 12-month product revenue of more than $1 million, compared with 184 such customers a year ago.
Keith Weiss, an analyst at Morgan Stanley, has an ‘overweight’ rating on Snowflake with a price target of $215, implying a potential upside of 56%.
In an age where brick-and-mortar stores are under serious threat from online merchants, Costco remains a brick-and-mortar beast.
Over the past five years, Costco’s stock has risen by more than 150%.
The members-only big-box store operator is known for selling various consumer staples at low prices. When people become more budget minded as a result of inflation, it’s hard to ignore the warehouse retailer’s value proposition.
In Costco’s most recent fiscal quarter, net sales increased 6.5% year-over-year to $54.24 billion.
Morgan Stanley analyst Simeon Gutman has an “overweight” rating on Costco and a price target of $520 — about 9% above where the stock is today.
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