Markets are rising so far in September, after a rough August. The S&P 500 is up 2.7% this month, bringing the index’s year-to-date gains to almost 20%. And looking forward, two stocks are poised for particular outperformance. These are stocks that are buzzing following two notable analyst ratings. Analysts usually reiterate ratings – so upgrades speak volumes about a stock's potential. We found these stocks by filtering for the latest upgrades on the Daily Analyst Ratings, an up-to-date listing of the most recent stock reviews by analysts. Let’s look more closely, and see what the analysts had to say about these two recent upgrades.
Micron Technology, Inc. (MU)
The world’s fifth largest semiconductor company, with $31.8 billion in revenues last year, Micron (MU – Get Report) has proven more resilient than its peers, with less price volatility this past summer in the face of increased US-China trade tensions. MU shares have gained 12.6% so far this month, with 59% gains year-to-date.
The strong stock performance drew notice from Longbow analyst Nikolay Todorov, who upgraded his stance on the stock from neutral to buy. In his comments, he wrote, “We are turning more positive on memory fundamentals as we now believe excess inventory will be depleted faster than expected, triggering an improvement in pricing and margin ahead of current expectations.”
Going into greater detail, Todorov added, “Our checks highlight upside in shipments and improving DRAM and NAND pricing fundamentals associated with upside at select hyperscales and risk of tightening supply. As a result, upstream inventory drawdown is occurring faster than previously forecast, which should drive a bottoming in DRAM fundamentals by year-end to pair with an in-process recovery in NAND fundamentals.” Todorov’s price target of $66 suggests an impressive 30% upside for MU.
Todorov is not the only bull on Micron. Weston Twigg, from KeyBanc, set raised his price target from $45 to $58, saying, “Barring a recession, we expect memory trends to improve through 2020.” Twigg’s new target implies a potential upside of 15%.
The upbeat analyst reviews of MU shares, along with the general optimism about the company’s near- to mid-term prospects, pushed the stock price up in recent days, well above its average price target. As well as the upward trending share price, MU has a Moderate Buy rating from the analyst consensus, based on 14 buys, 5 holds, and 2 sells set in the last 90 days.
Cisco Systems, Inc. (CSCO)
We may live in the digital age, but our information networks live on hardware. And Cisco (CSCO – Get Report) is the leading provider of the networking hardware that makes up the physical connections of the internet.
Cisco has done well as the hardware man for the tech world. Shares are up 14.5% year-to-date. While that is below the S&P average of 19%, the most recently quarterly report showed an EPS beat of 1.32%. Steady growth and earnings have made Cisco a favorite with investors, as has the company’s 2.96% dividend. The quarterly payment is a modest 35 cents per share, but Cisco has a policy making regular increases and the dividend has grown 13% in the last 5 years.
The strong market position attracted attention from 5-star Evercore analyst Amit Daryanani. He initiated his coverage of this stock with a buy rating and a price target of $60, suggesting a robust upside potential of 20%. Daryanani believes that future hardware investment in the tech sector will focus on the upcoming 5G networks. He writes of Cisco: “Investors are underappreciating Cisco's shift towards a more predictable and free-cash-flow-focused model. The transition CSCO is undergoing merits investors focusing more on an FCF-based valuation vs. traditional price-to-earnings approach.
“Cisco is well-positioned as an end-to-end solutions provider across the enterprise networking product spectrum; CSCO’s unique portfolio of assets allows the company to address emerging growth adjacencies (security, services, cloud-based solutions) while maintaining market leading positions in several core networking product categories.”
Also bullish on Cisco is James Fish, of Piper Jaffray. Writing in mid-August, Fish said, “We believe that the stock warrants a higher valuation than the market is offering. We see good risk-reward on Cisco at current levels as long as the company's growth segments… continue to execute.” Fish’s $57 price target implies an upside of 12% for CSCO.
Cisco is up 4% since Daryanani opened his coverage, and up 8% for September so far. The stock’s Moderate Buy consensus rating is based on 22 reviews, including 16 buys and 6 holds. The average price target of $56.47 suggests an upside of 11% from the current share price of $50.60.
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