The 5 Top Buys for May: Strong Signals at Critical Support Levels

Globe and Mail

03-05-2025

The five top buys for May have two things in common: leadership positions in technology and strong signals at critical support levels. These stocks corrected in late Q1 and early Q2 but have regained traction at critical levels and are firing solid entry signals for investors. These signals include increased volume, stochastic crossovers, MACD swings, and bullish activity aligning with long-term trends.
The takeaway is that Magnificent Seven stocks like NVIDIA (NASDAQ: NVDA), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT), which have been leading the market for years, are in position for robust rebounds, and other significant AI-centric companies, including Oracle (NYSE: ORCL) and Palantir (NASDAQ: PLTR), are following suit.
The catalyst for the bigger move will likely come with the Q1 earnings reports due in May.
NVIDIA: Outlook Is Reset, Market Can Regain Traction
[content-module:CompanyOverview|NASDAQ:NVDA]
Like the rest of the S&P 500 (NYSEARCA: SPY), NVIDIA's stock price reset is due to several factors affecting the earnings outlook. However, the correction appears to be over, with the worst tariff fears behind us and an improving outlook for onshoring Blackwell and subsequent Rubin production. The loss of China as a customer is a concern, but it is offset by Western demand, which is sufficient to make up the difference.
The analysts have mixed views on Q1. About half have lowered revenue and earnings estimates since the Q1 report, while the other half have increased them, resulting in a consensus forecast for 62% year-over-year growth and a strong margin.
Analyst sentiment trends are bullish despite the recent price target reduction. Analyst coverage is increasing, sentiment is firming with a bullish bias to the Moderate Buy rating, and the consensus target forecasts a 50% upside from late April trading levels.
Amazon Has Low Bar to Hurdle and Dual Tailwinds to Drive It
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Amazon has dual tailwinds arising from its leadership position in the cloud and consumer strength. Consumers have shifted their habits, but spending remains strong, and Amazon is well-positioned to benefit from this. At the same time, its AWS data center business and AI applications are in demand, aiding its clients and core, consumer-oriented business.
This means that outperformance is likely in Q1. The beat could be substantial due to the low bar set by analysts and about three-quarters of the 28 tracked by MarketBeat lowered their forecast for the quarter, expecting growth to slow into the high single-digit range compared to the previous quarter and year.
They rate the stock as a Moderate Buy and see it advancing by 30% at the consensus.
Microsoft Is Gaining Ground in the Cloud
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Microsoft's business model is exceptionally diversified, spanning enterprise software, cloud computing, AI services, cybersecurity, gaming, and professional networking through LinkedIn. Its customer base includes companies across virtually every industry vertical, from healthcare and finance to manufacturing and education, providing a robust and resilient revenue foundation.
The strategic integration of artificial intelligence and cloud solutions, particularly through Azure and partnerships like OpenAI, has significantly reinforced Microsoft's leadership position in cloud infrastructure and next-generation AI-enabled enterprise services.
Analysts anticipate solid revenue growth for Microsoft's fiscal Q3/calendar Q1 earnings report.
However, in line with broader industry trends observed in peers such as Amazon, growth rates are expected to moderate into the high single-digit percentage range as macroeconomic headwinds and a maturing cloud market exert some pressure.
Key catalysts for the stock include the potential for earnings outperformance relative to conservative expectations, continued strength in Azure and AI-related services, and the prospect of management issuing strong forward guidance, particularly if AI monetization initiatives begin translating more visibly into top-line results.
Oracle: On Track for a Trillion-Dollar Valuation?
[content-module:CompanyOverview|NYSE:ORCL]
Oracle is still small compared to the Magnificent Seven but is on track to achieve a trillion-dollar valuation within a few years. The company's transition to the cloud and leaning into AI and AI services has set it up as a budding hyperscaler fundamental to AI infrastructure. Its database services are ubiquitous across the cloud and facilitate AI training globally.
The stock is set up to rally strongly after the Q4 release because 100% of analysts lowered their forecasts despite the strengths shown in Q3. While reported results were mixed, the internals, including RPO and backlog, are accelerating robustly and suggest the same for revenue and earnings as backlog demand is met.
Palantir: Companies and Governments Need It
[content-module:CompanyOverview|NASDAQ:PLTR]
Palantir's business is accelerating due to several factors, including data-driven insights, threat detection, and its impact on efficiency. Recent developments include a partnership with Google.
This partnership makes Palantir a gateway that provides many businesses with access to government contracts. Valuation is a concern for PLTR investors in 2025, but it is offset by the robust growth outlook and the high likelihood that forecasts are too low. Other catalysts in 2025 include expectations for increased government defense spending and expanding partnerships with private businesses.
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