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2 “Strong buy” actions that could benefit from inflation
Inflation fears resume and the stock market retreats as a result. Inflation-sensitive stocks, especially tech giants, have slipped in recent trading sessions, as government bond yields have risen. Not surprisingly, the factors causing inflation concerns are directly linked to the pandemic situation. There is the massive fiscal stimulus from the legislative COVID relief plans, which are helping to fuel this inflationary pressure, but there is also the ongoing vaccination program which continues to reach over a million people per day and is holding up. the promise of a return to more normal conditions. So the question now is what should investors do? In the short term, at least, the risk of inflation outweighs the positive news about the COVID outbreak receding. With that in mind, Wall Street pros advise looking into “inflation-resistant” sectors. Using the TipRanks database, we identified two stocks that top-rated analysts believe could potentially gain if inflation sets in. In fact, both received extremely bullish praise from Street, enough to gain a consensus from “Strong Buy” analysts. Applied Materials (AMAT) We will start with a producer of technological goods, Applied Materials. Like any manufacturer, Applied Materials can survive in an inflationary environment; As the cost of raw materials increases, the company will pass them on to its own customers by raising the prices of the finished products. Nobody likes it, but the company’s products are essential in the tech industry. Applied Materials manufactures integrated circuit chips for electronic devices; flat screens used in televisions, computer monitors, smartphones and tablets; and coatings for flexible electronics. AMAT generates over $ 17 billion in annual revenues, owns over 14,000 patents and spends over $ 2.2 billion annually on R&D. In its recent quarterly report, for fiscal 1Q21, Applied Materials reported revenue of $ 5.1 billion, up 24% from a year earlier, and profit of $ 1.22 per share. EPS has been stable sequentially, but up 27% year over year. These results came as the company’s shares posted strong gains. AMAT shares have risen 101% in the past 12 months, far outpacing broader markets. The gains reflect increased demand for the company’s products due to the increase in telecommuting, virtual offices and distance education. In his note on applied materials, B. Riley 5-star analyst Craig Ellis takes an optimistic stance. “We believe takeout confirms a bullish thesis and suspect that Street FY21 & 22 BPA will increase significantly despite maintaining a significant increase in IT / LT… Sales of Semi led first quarter up although all segments have exceeded our expectations, and we believe that robust strength will persist deep into CY21… AMAT’s $ 70 Industry B + CY21 sees surprise on the rise, outperforming its close peers… directionally indicating our point of view from + $ 72 billion to $ 74 billion, ”Ellis noted. To that end, Ellis rates the stock as a buy, and his price target of $ 150 implies upside potential of 30% for the coming year. (To see Ellis’ track record, click here) Overall, there are 22 recent reviews of the applied materials, and no less than 19 are for purchase. The others are takes; analysts’ consensus view on equities is a strong buy. AMAT is priced at $ 115.44 and the average price target of $ 133.95 suggests a 16% rise from this level. (See AMAT stock market analysis on TipRanks) Citigroup (C) Next, Citigroup, is one of the four big American banking institutions. For banks like Citi, which are net lenders, the tendency of inflation to push up interest rates is a boon. In the long run, higher rates will increase loan profitability faster than inflation will eat away at repayments. In this environment, the banking sector could outperform the S&P 500 over the long term, if inflationary trends push up policy rates. In the meantime, a review of Citi’s current situation shows that revenue and earnings are still declining year over year, although EPS has shown solid sequential gains. In 4Q20, the bank reported revenue of $ 16.5 billion, down 10% year-on-year, and EPS of $ 2.08. Profits were down 3% year-on-year, but up 48% from the third quarter. 5-star analyst Chris Kotowski of Oppenheimer advises investors to maintain even pressure despite year-over-year losses. “Our advice to investors is to take a deep breath, look at the numbers and see that they were all basically online and the outlook really isn’t that much changed from what it was before… us. stay with expectations for a significant wave of 2H21E loan losses outlined in our overview [but] we think it is highly likely that this will prove to be far too conservative and that returns will normalize in 2022E, ”said Kotowski. Consistent with his bullish approach, Kotowski rates C as outperforming (i.e. buying) along with a price target of $ 114. Investors are expected to pocket a 62% gain if the analyst’s thesis comes to fruition. (To see Kotowski’s track record, click here) Overall, there is broad agreement on Wall Street about the fundamental quality of the stock. Citigroup’s Strong Buy consensus rating is based on 12 Buy and 3 Hold. C sells for $ 70.38 and the average price target of $ 79.80 suggests an increase of about 13% over the one year horizon. (See Citi Stock Analysis on TipRanks) To find great ideas for stocks traded at attractive valuations, visit TipRanks Best Stocks to Buy, a newly launched tool that brings together all the information about TipRanks stocks. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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