Both China and the U.S. are toughening their positions, and the market is feeling the brunt. According to Deutsche Bank analyst Zhiwei Zhang, there is now a 60% probability that the two sides cannot reach a deal in May and tariffs will be imposed on the remaining Chinese exports (around $300 billion), including mostly consumer goods.
Looking ahead, Zhang still expects the two sides to reach a deal eventually. However, he believes “it could take a few months, until the trade war becomes painful enough for either side.”
For investors it’s not all bad news. With stocks selling off, now could be the time to spot a savvy bargain. To spot the best bargains, I turned to the Street to see which names are among the top stocks to buy that analysts are recommending. After searching long and hard, I determined five of the best names to choose from.
All five stocks score a Buy consensus from the Street and, as you can expect, they offer plenty of upside potential to boot.
The first stock on the list is Apple (NASDAQ:AAPL). As you probably know, Apple is one of the stocks worst affected by the trade dispute. Shares are currently trading down 7% over the last five days. One analyst even called AAPL the poster child for trade tensions. That’s due to fears that the latest tariffs could significantly increase the cost of iPhones globally, hurting both demand and earnings expectations.
However, bear in mind that investors are still looking at an impressive 20% gain year-to-date. And according to top-ranked Wedbush analyst Daniel Ives, now is not the time to give up. The analyst writes “We continue to strongly encourage investors to stay the course on Apple despite the current US/China trade situation as shares are attractively priced with current levels trading at 14x FY20 EPS heading into a major iPhone product cycle.”
He continues: “Importantly, the services business which we assign a valuation of between $400 billion and $450 billion is relatively insulated from trade swirls and remains a key tenet of our bull thesis on the name.” As a result, Ives reiterates his AAPL buy rating with a $235 price target (25% upside potential). Plus AAPL boasts reserves of $225 billion worldwide, providing plenty of support if the worst case scenarios should materialize.
A similar message comes from Bank of America’s Wamsi Mohan, who called the pullback “a particularly attractive buying opportunity.” Overall AAPL still maintains its Moderate Buy Street consensus. That’s with an average analyst price target of $216. Want to learn more about Apple stock? Get a free AAPL Stock Research Report.
At the time of writing, Microchip Technology (NASDAQ:MCHP) has plunged 10% in five days. That means the company is now down 11% this month, but still up 18% year-to-date. Net, the stock is trading at a 41% discount to its peak multiple in 2014. Microchip is a developer and manufacturer of semiconductor products. The company has just released guidance for a flat June quarter, citing a China trade and tariff overhang.
However, MCHP continues to see a 2H pickup with the potential for a stronger China with stimuli. Most importantly, MCHP also noted any trade resolution would be positive as it removes uncertainty even if it implies higher tariffs. “Maintaining Buy, adjusting estimates and PT to $100 (prior $95)” wrote five-star Mizuho Securities analyst Vijay Rakesh on May 9. From current levels that suggests upside potential of 18%.
“We believe MCHP is well positioned with improving operating metrics and market share, lower channel inventories, a strong long-term 63% GM, and getting closer to integrating MSCC on its path to $8 in EPS,” explained Rakesh. Likewise, top-ranked Rosenblatt analyst Hans Mosesmann tells investors: “We are confident that Microchip’s business and execution supports secular market share gains and increasing operating margins. We reiterate our Buy rating for MCHP with a $115 price target.”
Indeed Microchip has maintained its Strong Buy analyst consensus. Its $110 average analyst price target suggests upside potential of 29% lies ahead. Get the MCHP Stock Research Report.
Alarm.com (NASDAQ:ALRM) has had a particularly rough week. The U.S.-based tech stock has plunged 16% in the last five days. As the name suggests, ALRM provides cloud-based services for remote control, home automation and monitoring services. But perhaps what you didn’t know is that a third of Alarmcom’s products are imported from China.
Shares pulled back following earnings results. The company reported flat Non GAAP EPS despite revenue growth above 20% … and earnings guidance was left unchanged because of tariffs on Chinese goods.
“We note the maintained EBITDA and bottom line guidance is primarily due to the recent US government decision to increase the China import tariff on certain products to 25% (from 10%) and we believe management is taking a highly cautious approach due to potential risk of even greater tariff policy changes in the future” summed up Maxim Group’s Nehal Chokshi.
Nonetheless, the analyst sees a buying opportunity at current levels. He boosted his price target from $74 to $79 (34% upside potential) on May 10. Chokshi explained that the price target hike “is primarily a result of our increased confidence in ALRM’s subsidiary businesses’ (PointCentral, EnergyHub, and Building 36) … Our increased confidence is rooted in the Mar-19 Q subsidiary business SaaS revenue performance that accelerated to up 100% y/y.”
That’s alongside a growing base of large homebuilder partners, which now includes D.R. Horton Inc (NYSE:DHI) – the largest home builder by volume. Overall this stock holds a Moderate Buy consensus from the Street, with an average analyst price target of $72 (22% upside potential). Get the ALRM Stock Research Report.
Chinese e-commerce stock Alibaba (NYSE:BABA) is currently down 6% so far in May. But the stock still boasts 100% buy ratings from the Street. And an average analyst price target of $216 (23% upside potential). One analyst singing BABA’s praises is five-star SunTrust analyst Youssef Squali.
“The latest data out of NBS suggests that the macro environment has been improving, a positive for Chinese consumption, and for BABA in particular. The latest moves by the White House bring greater uncertainty, however, as to the sustainability of these improvements short term; long term we view BABA as a winner considering 1) its dominance of the Chinese ecom. mkt and the insatiable appetite for China’s growing middle class, 2) it’s a 25%+ compounder over the next 5 yrs (our ests), and 3) its portfolio of strategic invests” says Squali. He has a $200 price target on BABA.
Plus the company just reported stellar earnings. So this is a stock to snap up fast Thanks to growth in its core e-commerce and cloud computing businesses, Alibaba easily beat analyst estimates. Specifically, revenue rose to 93.50 billion yuan ($13.59 billion) for the three months ended March 31, beating estimates of 91.58 billion yuan. Get the BABA Stock Research Report.
Home improvement retailer Lowe’s (NYSE:LOW) hasn’t escaped the selloff. In May, shares lost 7% and the stock continued its descent this week.
However, Lowe’s is definitely worth a closer look at current levels. “Squishy Q1 print well telegraphed; Self-help story still has legs” was the analysis from top-rated Wells Fargo analyst Zachary Fadem on May 10.
“Shares are -5% in the past week (-1.6% SPX), and we believe weather-driven concerns and renewed tariff fears present a buying opportunity, as compares ease (post-May) gradually for the remainder of the year, consumer/housing metrics appear stable, tariffs manageable and we expect self-help initiatives to drive improving results” the analyst explained to investors.
What’s more, the analyst’s recent store visits revealed “notable progress on initiatives” (including assortment, end caps, floor resets and in-stocks) that he believes support accelerating 2H performance.
Indeed, LOW still scores a bullish ‘Strong Buy’ consensus based on the last three months of ratings. Meanwhile, the average analyst price target of $120 works out to 13% upside potential. Get the LOW Stock Research Report.
TipRanks.com offers exclusive insights for investors by focusing on the moves of experts: Analysts, Insiders, Bloggers, Hedge Fund Managers and more. See what the experts are saying about your stocks now at TipRanks.com. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.