Shares rebound after regulators stepped in to protect depositors at struggling Silicon Valley Bank. But that doesn’t mean it’s time to party, according to Mike Wilson, chief US equity strategist and chief investment officer of Morgan Stanley.
“We suggest selling any rebound on government intervention to ease the immediate liquidity crisis at SVB and other institutions until we reach new lows in the bear market at a minimum,” he wrote in a note on Monday. to investors.
Wilson’s team does not view recent bank failures as “random or idiosyncratic.” Instead, the events serve as “an additional supporting factor” for the team’s negative earnings growth outlook.
The US Federal Reserve has raised interest rates aggressively to control inflation. And that doesn’t bode well for the bottom line.
“In short, Fed policy is starting to bite, and it’s unlikely to reverse even if the Fed were to suspend rate hikes or quantitative tightening – that is, the dice are thrown away for further earnings disappointments relative to consensus and corporate expectations.”
Yet despite the bleak outlook, Morgan Stanley sees a fair number of stocks rising. Here are three that he finds particularly appealing.
Apple (AAPL) is a technology giant.
During the most recent earnings conference call, management revealed that the company’s active installed base has surpassed two billion devices.
While competitors offer cheaper devices, millions of users don’t want to live outside the Apple ecosystem. The ecosystem acts as an economic moat, allowing the company to make outsized profits.
The market likes it: Over the past five years, Apple shares have jumped more than 230%.
Morgan Stanley analyst Erik Woodring sees more potential going forward for the stock. The analyst has an “overweight” rating on Apple and a price target of $180, about 19% above current levels.
Many see big data as the next big thing. And that’s where Snowflake (SNOW) shines.
The cloud-based data warehousing company, founded in 2012, serves thousands of customers across a wide range of industries, including 573 of the Forbes Global 2000 companies.
The momentum is strong in Snowflake activities. In the three months ended Jan. 31, revenue jumped 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 major customer contracts. It now has 330 customers with 12-month product revenue of more than $1 million, up from 184 such customers a year ago.
Morgan Stanley analyst Keith Weiss has an “overweight” rating on Snowflake with a price target of $215, implying a potential upside of 56%.
At a time when physical stores are under serious threat from online merchants, Costco remains a brick-and-mortar beast.
Over the past five years, Costco shares have jumped more than 150%.
The member-only big box store operator is known for selling many consumer staples at low prices. When people become more budget-conscious due to inflation, the warehouse retailer’s value proposition is hard to ignore.
In Costco’s most recent fiscal quarter, net sales rose 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 the stock’s current position.
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