Buying Opportunities in the Bear Market: JPMorgan analysts see doubling down opportunities for these two stocks

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Analyst Kolanovic expects the stock market to recover in the second half of the year

Mexican airline stock Volaris likely to rise on travel boom

Chip stock Marvell Technologie looks cheap

At first glance, the currently highly volatile market environment in the midst of the monthly interest rate hikes by the US Federal Reserve does not necessarily invite courageous follow-up purchases. Since January, every brief bounce has turned out to be a treacherous Brenmarkt rally. Nevertheless, some analysts now see attractive risk/opportunity profiles again for selected stocks. Traditional US bank JPMorgan has singled out two stocks that could offer long-term investors big gains in the future.

JPMorgan analyst Kolanovic sees a big stock market rally in the second half of the year

In the last few days, investors and analysts have outdone each other with their negative forecasts. Long-time JPMorgan CEO Jamie Dimon spoke of a “hurricane” approaching the US economy. British investment legend Jeremy Grantham expected another 20 percent crash in the US S&P 500 index. But there are also more positive voices. One of the most influential bulls at the moment is Marko Kolanovic. The JPMorgan analyst enjoys a good reputation within the analyst guild as it has had a good hit rate on its price targets over the past few years.

Kolanovic expects a sustained stock market rally in the second half of the year, which will lift the S&P 500 back to the level of 4,800 points – i.e. about as high as at the strong start of 2022. His argument: The US economy will be able to avoid a recession. The associated positive economic reports will brighten up the currently extremely pessimistic investor sentiment in the coming weeks of trading. After the first price gains, the company’s share buyback programs will “arrive in full force”. This process will continue for several months: “We believe that this will be a pattern for the whole year, in the sense that the market sold off in the first half of the year and a gradual recovery will follow in the second half,” predicts Kolanovic.

This Mexican airline should benefit from the post-corona travel boom

Meanwhile, Kolanovic’s colleagues at JPMorgan have been scrutinizing numerous stocks to find particularly attractive buy opportunities. According to the “TipRanks” analyst database, the two stocks presented each have enormous upside potential.

The first is the Mexican airline Volaris. Volaris offers low cost flights to Mexico, USA and other countries in Central and South America. Before the outbreak of the COVID-19 pandemic, Volaris had a 28 percent market share in Mexican air traffic, making it one of the big players. After the pandemic-related sales slump, the Mexican airline showed a strong comeback in the third quarter of 2021. This strong performance continued, with gross profit increasing to $582 million in the first quarter of 2022, an increase of 80 percent compared to the same quarter last year. Earnings per available seat, a key indicator for the airline industry, rose 18 percent to 7 cents. This resulted in a cash increase of nine million US dollars; total cash reserves now total $750 million.

Although high energy prices have recently caused significantly higher costs, JPMorgan analyst Fernando Abdalla remains bullish: “Within the Latin American aviation industry, Volaris is our top pick based on: 1) its attractive low-cost model; 2) a good positioning in the Mexican market and an adequate fleet to support future growth 3) sound financial discipline and 4) strong potential for air travel expansion in Mexico We see interesting upside potential for the stock as we believe it will compete with is trading at an undeserved discount to its Latin American competitors,” says Abdalla. His $23 price target implies a 147 percent upside potential for Volaris shares from the current price of $9.29 (closing price on June 16, 2022). According to “TipRanks”, the average analyst price target is even 26.50 US dollars. Incidentally, the price-earnings ratio of the airline is around 15.

Which chip stock offers particularly good long-term opportunities

Chip stocks were among the most sought-after stock investments in the world in 2020 and 2021. The high demand combined with a lack of chips for cars, gaming, electronic devices, etc. caused groups such as ASML, Taiwan Semiconductors, Infineon, NVIDIA and AMD to experience an enormous boom. Still, chip stocks couldn’t escape the general tech sell-off this year.

But now it’s about time to take a closer look at long-term opportunities and to use the favorable prices to make additional purchases, says JPMorgan analyst Harlan Sur. One company he finds particularly interesting is NASDAQ-listed Marvell Technology. Marvell is extremely diversified: the company’s products are used in automotive systems, data processors, Ethernet network switches, security processors, storage accelerators and SSD controllers. In fiscal 2022, sales were $4.46 billion. In the past quarter, Marvell was able to increase profits by a whopping 79 percent compared to the same quarter last year. In addition, Marvell is a reliable dividend payer: Since 2012, the company has been paying a constant 6 dollar cents per share quarterly. Marvell also operates a large share buyback program.

Sur comes to a positive conclusion: “We believe that the market continues to underestimate the strong growth prospects in Marvell’s network, compute and storage silicon franchises, and the eSSD controller/CXL opportunity is in the cloud/enterprise storage space a great example of the company’s strong market leadership and opportunities,” says the analyst. His target price is $100, a full 122 percent higher than the current share price, which was $45.04 at the close on June 16. Analysts’ average price target is $85.44, according to TipRanks.

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