Here are five 'high quality' stocks with major upside, according to Bank of America
There's a slew of stocks that are firing on all cylinders, according to Bank of America. The firm said buy-rated stocks like Disney, Palantir Technologies , Cadence Design Systems, KLA Corp and Planet Fitness have plenty more room to run. CNBC Pro combed through Bank of America research to find names with upside. Disney Shares of the entertainment giant have room for upside following the company's recent earnings report, according to analyst Jessica Reif Ehrlich. "Resilient in the face of choppy macro trends," she wrote in a note to clients. The firm sees no shortage of positive catalysts in the months ahead including a robust slate of upcoming films, growth in direct-to-consumer and more investment in the parks business. The entertainment giant is also well positioned overseas as Disney announced a new park in the Middle East earlier this month. "International attendance remains strong, although per cap spending is weaker due to a challenged Chinese consumer," the analyst noted The stock is up almost 25% this month, and Reif Ehrlich said clients should buy shares now. Palantir The defense tech company is also going full throttle, according to Bank of America. Analyst Mariana Perez Mora and team raised their price target on the stock earlier this week to $150 per share from $125. The firm said Palantir continues to have a differentiated offering for investors. "We see PLTR as the market definer for organizations leveraging [artificial intelligence] to drive accelerated tangible results," she wrote. However, it's the company's growth potential that has the firm staying bullish. "The speed and scale at which PLTR can deploy products and convert customers is growing," Mora added. Meanwhile, shares are up 71% this year with plenty more room to run. "A blue-ribbon recipe for growth," she said. Planet Fitness Analyst Alexander Perry is standing by shares of the fitness giant following the company's recent earnings report. Planet Fitness is well positioned to benefit from a "generational shift," the firm said. That's because the Gen Z and millennial cohorts are prioritizing fitness and leisure activities, Perry wrote. "PLNT's strategy has aligned with the fastest growing fitness trends, as it was quick to identify the prioritization of strength by younger demographics and began tailoring its marketing and equipment approach accordingly," he said. Perry also said the company has a unique business model to go along with fast improving unit growth. The company also has relatively little tariff exposure, he added. Shares of the company are up 51% over the last 12 months. Cadence Design Systems "High quality compounder, resilient complexity leverage, low tariff risk. … We rate CDNS Buy. We like CDNS leading position in an EDA [electronic design automation] industry that is levered to the same secular trends as semis but with much more muted cyclicality. We think CDNS has defensiveness/scarcity value, and is a unique beneficiary of rising chip complexity." KLA Corporation "Best-in-class margins, high-quality compounder. … We believe KLAC's importance as a key enabler of new manufacturing technologies is underappreciated as it provides the equipment needed to inspect/monitor chips for defects. The necessity for its systems has made KLAC's business less cyclical and more profitable that its peers, resulting in more stable FCF and shareholder returns." Disney "Resilient in the face of choppy macro trends. … Strong trends in Experiences and continuing to invest. … Intl attendance remains strong, although per cap spending is weaker due to a challenged Chinese consumer. … Near term catalysts include: 1) profitability inflection in DTC, 2) reacceleration in the Parks business and 3) strong film slate which drives other businesses..." Palantir Technologies "We see PLTR as the market definer for organizations leveraging AI to drive accelerated tangible results. … The speed and scale at which PLTR can deploy products and convert customers is growing. … A blue-ribbon recipe for growth. … We see Palantir as a beneficiary of rapidly growing demand for Artificial Intelligence (AI)-platforms in both commercial and government end-markets." Planet Fitness "PLNT to benefit from generational shift to healthy habits. … PLNT's strategy has aligned with the fastest growing fitness trends, as it was quick to identify the prioritization of strength by younger demographics and began tailoring its marketing and equipment approach accordingly. … Better franchisee economics should accelerate unit growth."
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Also, as the May inflation figures showed, tariffs have yet to be felt on prices. Investors - and Fed policymakers, who meet next week - are in a state of limbo. How will corporate profits and consumer spending be affected? What proportion of the tariffs will companies "swallow", and how much will they pass on to their customers? Zooming out, inflation appears to be cooling around the world, although this trend is expected to reverse once tariffs start to fuel higher goods price inflation. Figures on Wednesday showed that U.S. consumer inflation and Japanese wholesale inflation were lower than expected in May. These reports follow similar numbers from Europe recently, and China remains stuck in its battle against deflation. Next up is India, which releases consumer inflation figures on Thursday, which are expected to show annual inflation slowed to 3.0% in May, the lowest in more than six years. Another focus for investors on Thursday will be the auction of 30-year U.S. Treasury bonds. US stocks-bonds warnings flash amber again Calm has descended on U.S. markets following the 'Liberation Day' tariff turmoil of early April. But Wall Street's rally has revived questions about U.S. equity valuations, as stocks once again look super pricey compared to bonds. Since the chaotic days of early April, U.S. equities have rebounded fiercely, with the S&P 500 up 25%, putting the Shiller cyclically adjusted price-earnings (CAPE) ratio for the index in the 94th percentile going back to the 1950s, according to bond giant PIMCO. Stocks are looking expensive in absolute terms, and in relation to bonds. The equity risk premium (ERP), the difference between equity yields and bond yields, is near historically low levels. According to analysts at PIMCO, the ERP is now zero. The previous two times it fell to zero or below were in 1987 and 1996–2001. 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The term premium - the risk premium investors demand for holding long-term debt rather than rolling over short-dated loans - is the highest in over a decade, reflecting concerns about Uncle Sam's long-term fiscal health. And the diagnosis here shows no signs of improving. Trump's 'Big Beautiful Bill' is expected to add $2.4 trillion to the U.S. debt over the next decade, according to the nonpartisan Congressional Budget Office, likely putting more upward pressure on yields. Of course, equity investors do seem to be pricing in a very rosy scenario, and the past few months have shown how quickly the market landscape can change. The U.S. economy could weaken more than expected, the trade war could escalate, or there could be a geopolitical surprise that causes bond yields and equity prices to fall. Investors should therefore be mindful of the warnings being sent by ERPs and other absolute and relative valuation metrics. However, they should also remember that stretched valuations can get even more stretched. As the famous saying goes, markets can stay irrational longer than investors can remain solvent. What could move markets tomorrow? * India CPI inflation (May) * UK trade (April) * UK industrial production (April) * ECB's Jose Luis Escriva and Frank Elderson speak atseparate events * Brazil retail sales (May) * $22 billion U.S. 30-year Treasury note auction * U.S. weekly jobless claims * U.S. PPI inflation (May) Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. (By Jamie McGeever; Editing by Deepa Babington) Sign in to access your portfolio
Yahoo
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Trump Treasury Secretary Suddenly Backtracks on Major Tariff Deadline
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