It has been a crazy few days for investors. Sparking the recent selloff was China’s decision to devalue the yuan to below its key 7-to-1 ratio with the U.S. dollar for the first time in a decade. President Donald Trump described Monday’s devaluation as a “major violation.” China also announced its companies have paused purchases of U.S. agricultural goods.
In response, the Dow Jones Industrial Average posted its worst day of the year on Monday, closing down 767 points. Meanwhile the tech-heavy Nasdaq Composite index faced its longest losing streak since November 2016. And the S&P 500 has not fared much better — it’s currently down 6% following President Trump’s tariff threat last week.
Even though China has now revalued its currency higher, it still feels like a roller coaster out there. Nonetheless, there are still stocks that are worth snapping up now. Let’s not forget most stocks are still showing strong year-to-date gains. The Dow, for instance, is up over 12% year-to-date.
Here we looked for five of the Street’s highest-rated Dow Jones stocks right now. As you will see, all five of these stocks show a firm ‘Strong Buy’ Street consensus.
Highest-Rated Dow Stocks: Visa (V)
Despite the recent selloff, Visa (NYSE:V) is still surging 30% year-to-date. And according to the Street, plenty of further growth lies ahead. After all, the stock boasts 18 recent buy ratings, with only one analyst deciding to stay on the sidelines (for now).
“Visa remains one of our best ideas in the space given our belief that investors should look to long-term secular-driven stocks that should provide solid organic growth with opportunities for margin expansion” explains RBC Capital’s Daniel Perlin. He has a $207 price target on Visa (20% upside potential).
Although Visa faces some cyclical but abating regulatory pressure, Perlin believes that longer-term capital structure optimization will drive further growth. Plus four recent acquisitions show how Visa is strategically expanding its global network.
“In addition to being one of the best ideas in our space, we believe that Visa’s fundamentals (high-single- to low-double- digit organic revenue growth, 60%+ GAAP operating margins, potential for close to mid-teens+ EPS growth, and significant free cash flow) rank it among a select group of companies with strong fundamentals” commented the analyst.
And don’t forget that Visa returned $2.7 billion in capital to shareholders last quarter. The credit card giant snapped up 12.9 million shares, while cashing out $565 million in dividends. Interested in Visa stock? Get a free V Stock Research Report.
One of the largest pharma stocks in the world, Merck & Co., (NYSE:MRK) is also a hit with the Street right now. And unlike many other stocks, Merck has managed to stay steady in recent days. During Monday’s big selloff, Merck lost just 0.01%.
Driving the bullish sentiment is Merck’s blockbuster cancer immunotherapy Keytruda. On July 30, MRK revealed that sales of Keytruda soared 58% to $2.63 billion in the quarter, easily beating the estimated $2.5 billion. What’s more, Keytruda continues to pull a string of U.S. regulatory wins (now at 24 approvals) in additional tumor types, notes Mizuho Securities’ Mara Goldstein. She has just reiterated her MRK buy rating with a $97 price target.
“Between now and 2024, we anticipate that KEYTRUDA will grow to greater than ~39% of total sales, up from 17% today” the analyst revealed. “We believe that KEYTRUDA will continue to be a mega blockbuster franchise in and of itself with >1,000 clinical trials underway,” she added.
Even though product dependency is an overhang on valuation — it does not necessarily impact share price performance over a period of time. “What matters, in our view, is the strategic initiatives to offset this (it works until it doesn’t, but that’s not until later in the next decade)” Goldstein concludes. Six out of seven analysts covering Merck are bullish on the stock right now. Their average price target is $93 (12% upside potential). Get the MRK Stock Research Report.
Microsoft Corporation (NASDAQ:MSFT) is on cloud nine right now. Its cloud strategy is reshaping the company’s growth and more than offsetting consumer gaming decline. Out of 24 analysts polled on Microsoft, 22 of them rate the stock a buy. That makes this one of the Street’s favorite Dow stocks to buy.
For instance, KeyBanc analyst Brent Bracelin is one of the top five analysts tracked by TipRanks (out of over 5,200). “We maintain a bullish stance on MSFT as one of our top cloud ideas to own in 2019 based on a multiyear transformation of the model driven by commercial cloud revenue that could reach $100B in CY23 from a $44B run-rate today,” cheers the analyst.
He has a buy rating on MSFT with a $155 price target. Adding weight to the call is his average return per Microsoft rating of 30%. “We would continue to Overweight MSFT on a multiyear model transformation driven by fast-growing cloud and digital segments that are sustaining double digit growth at $125B+ scale,” he wrote following the company’s killer earnings report.
“Strong cloud momentum contributed to another solid revenue beat on commercial cloud growth of 39% y/y vs. our 37% estimate, with revenue climbing to a $44B run-rate” he wrote on July 18. Excluding the tax benefit, net profits rose 21% year-over-year (YoY), outpacing total revenue growth of 12% YoY due to cloud economies of scale. Get the MSFT Stock Research Report.
United Technologies (UTX)
Defense giant United Technologies (NYSE:UTX) is buzzing right now following a stellar earnings report. Aero strength drove a 2Q19 beat and raise with the stock now trading up 21% year-to-date.
And of course, the key topic of the earnings call was the upcoming Raytheon Company (NYSE:RTN) merger. In June, Raytheon and United Technologies announced an all-stock deal, with the resulting company likely to emerge as the second largest defense contractor in the world.
At the same time, UTX is also planning to separate into three different companies through the spin-offs of Otis (elevators) and Carrier (HVAC, Fire & Security, and Refrigeration).
That means the merger should complete after the spin-offs close in the first half of next year, with UTX shareholders taking 57% of the new company (UTX Aerospace + Raytheon) leaving 43% for Raytheon shareholders.
Following the UTX earnings, five-star Cowen & Co analyst Cai Rumohr commented: “Q2’s EPS/cash flow beat suggests cash consuming build in new aerospace programs is starting to reverse with a likely multi-year ramp in standalone CFPS. And the proposed RTN merger would accelerate cash deployment potential. We reiterate our Outperform rating.”
He noted that commentary was consistent with prior United Technologies views. The company is still targeting a 1H20 merger completion with a 1Q20 goal — with +$1 billion of gross cost synergies by Year-4, said Rumohr.
Five out of six analysts covering UTX rate the stock a buy right now. As a result, United Technologies shows a Strong Buy Street consensus. What’s more the $153 average analyst price target indicates 17% upside potential lies ahead. Get the UTX Stock Research Report.
Don’t be downhearted by the recent UnitedHealth Group (NYSE:UNH) pullback. Since peaking at $268 on July 17, UNH has lost just over $20. That’s despite a solid beat and raise quarter. According to the Street, this is just investors looking to take some money off the table, and there’s nothing more sinister going on …
“If one really wanted to sell, one could rationalize the quarter as only a modest beat, under the most conservative scenario – but in reality, the quarter was fine and the outlook remains attractive,” writes RBC Capital analyst Ben Hendrix. He has a buy rating on UNH with a $311 price target.
Meanwhile Cantor Fitzgerald’s Steven Halper chimed in: “With Medicare for All noise subsiding, we believe Managed Care sentiment is improving. We continue to believe UNH is attractively positioned given its integrated model and consistent execution. Our price of $310 represents almost 20% upside from current levels.”
Overall, UNH’s Street consensus remains a bullish Strong Buy thanks to 9 recent buy ratings. That’s vs just 1 hold rating in the same period. Plus the $303 average analyst price target translates into upside potential of over 20%. Get the UNH Stock Research Report.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of over 5,000 Wall Street analysts. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.
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