• Stormy times on the stock exchanges are also expected for autumn
• Analysts see high upside potential for chip shares in particular
• An insider tip from the coffee sector should ensure stability
The interim summer recovery rally ended at the latest since Fed Chair Jerome Powell’s hawkish speech at the Jackson Hole central bank meeting on August 26th. Powell announced further interest rate hikes, putting faint hopes of rate cuts next year in the background. International investors sent the indices on a day-long slide as long-term high interest rates could weaken the economy and trigger a recession. However, the US Federal Reserve sees further interest rate hikes as an indispensable tool for curbing inflationary pressures. The stock exchanges are likely to remain volatile in the fall – the next five stock recommendations from recognized Wall Street experts could meanwhile bring a little calm in the portfolio, as “CNBC” reports.
Intel stock: Troubled chip giant with upside potential?
Intel stock is one of the worst performing stocks in recent years. One of these currently only costs $31.22 (closing price on September 2, 2022), while the chipmaker’s papers had already risen above the $70 mark during the 2000 dot-com bubble. In April 2021, the share again scratched this mark. Since then, however, it has steadily gone downhill. The reason: Intel has not been able to keep up with the innovations of the up-and-coming semiconductor competition around NVIDIA and AMD in recent years, and Intel’s sales development has stagnated.
However, a lot of negative things should now be contained in the price of Intel shares. Needham analyst Quinn Bolton agrees, setting a price target of $40 for the stock. The cooperation between Intel and the global infrastructure company Brookfield makes him particularly optimistic. Brookfield’s $30 billion order for two wafer fabs in Arizona will help Intel protect its cash/debt position for future investments and dividend maintenance, he said. Bolton estimates that this will save Intel $15 billion in capital expenditures than it would otherwise. This, in turn, will significantly increase the company’s free cash flow. Intel is also planning to build a chip giga factory in Magdeburg – so the chip giant is not short of major orders despite the current crisis situation.
Applied Materials Stock: Wafer maker with strong market positioning
Like Intel, Applied Materials is also part of the semiconductor sector. The Californian group manufactures production systems for the semiconductor industry, and wafer transport and handling systems are also part of the product range. As a result, Applied Materials is burdened by many crisis phenomena in the semiconductor industry, such as supply chain disruptions, high energy costs and the trend towards declining demand. It is therefore not surprising that Applied Materials shares are currently trading at $91.24, down more than 45 percent from their previous record high of $167.06 (January 14, 2022).
However, Bolton emphasizes what he believes to be an overall promising outlook for the wafer manufacturing industry, where Applied Materials should solidify its position as a big player. Bolton points to the well-coordinated pricing, which should offset the higher costs. In addition, solid orders from the foundry/logics market remain strong, helping Applied Materials offset weaker demand in the memory and ICAPS (IoT, Communications, Automotive, Power and Sensors) markets. His target price of 135 US dollars is therefore well above the current price level.
Analog Devices stock: Steady cash flow ensures stability
With Analog Devices (ADI), another company from the chip industry is at the top of the list of well-known analysts, namely Harlan Sur from the US bank JPMorgan. Sur is convinced of the semiconductor manufacturer’s long-term positive prospects: “ADI is in prosumer applications with long lifecycles (30 percent of sales) and the fast-growing segment of the wearable market (e.g. wearables, hearables and premium smartphones) with a small share of China consumers (low single-digit percentage of total sales).” The lower exposure to China means fewer risks, as was recently shown by the sell-off of NVIDIA shares after the chips were banned from being sold in China. In addition, “even in the face of a potential slowdown, ADI has several cost levers to protect its profitability and free cash flow generation,” Sur says. Thanks to the diversified consumer business, the analyst predicts that ADI will continue to outperform the overall consumer end market, even in an environment characterized by uncertainty.
The ADI share has actually been quite stable over the past few months. With a current purchase price of $148.63, the shares are not too far off their record high of November 22, 2021 ($191.95) at 21 percent – at least compared to other tech stocks.
Synopsys share: High demand even in times of crisis
Synopsys has something in common with the three stock recommendations mentioned above: Like Intel, Applied Materials and Analog Devices, Synopsys is also listed in the US tech index NASDAQ 100. Like most companies in this index, Synopsys is a growth-oriented company that focuses on creating of semiconductor design software (EDA). Thanks to the stable earnings situation of this business, however, the Synopsys papers came through the stock market turbulence surprisingly well and are currently trading (330.56 US dollars) only around 15 percent below their highest level to date, which they marked just a few days ago on August 15, 2022 ($391.17). This makes Synopsys one of the strongest stocks in the overall weak NASDAQ 100 index this year.
In fact, Synopsys enjoys constant demand for its offerings as customers increasingly leverage advanced computing to verify their designs as quickly as possible. In addition, the complexity of chip design increases with the emergence of new advanced technological applications. Despite the difficult environment, Synopsys should therefore have a good chance of further growth, believes Sur. “Given the high order backlog and continued strong chip and system design activity, we believe the company will deliver revenue growth in CY23 even in the face of a potential macro/semiconductor industry slowdown,” reads the JPMorgan analyst . Accordingly, Sur sees enormous price potential: his price target of 440 US dollars is well above the current level of Synopsys shares.
BRCC share: Premium coffee manufacturer with enormous crisis resilience
The premium coffee and media group Black Rifle Coffee Company (BRCC) is probably only known to a few investment professionals in this country. Wrongly so, according to Tigress Financial Partners analyst Ivan Feinseth. Feinseth is excited about BRCC: “BRCC’s strong brand value and unique customer loyalty positions the company in a unique way to compete in the huge US coffee market,” explains the analyst. Feinseth praises BRCC’s change of strategy to focus more on selling its products for the mass market. Feinseth thinks this new path can lead to higher sales growth and product awareness while reducing capital investment. In addition, the sector with everyday groceries is generally considered to be comparatively resilient to economic downturns, which is why the shares of Coca-Cola and Nestlé are very popular right now.
In line with this, Feinseth also sees considerable upside potential for the BRCC share: he recently increased his price target from 17 to 19 US dollars. Feinseth’s expectation is almost exactly twice the current price of $9.28.
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