Morgan Stanley: 7 Killer Tech Plays

Posted On September 17, 2018 2:32 pm

These 7 stocks are “at the cutting edge of a data era-driven productivity boom.”

Morgan Stanley has pinpointed the companies that are best positioned to hold a technological edge over the coming years. On this analysis, these stocks should make killer long-term tech picks.

This is the kind of opportunity that only comes along once in a decade, says the firm. And- as you may expect- this particular computing cycle comes with a focus on data tech i.e. AI, Internet of Things, and automation.

“Following nearly two decades of underinvestment in technology, we see enterprises reinvigorating IT spend to enable productivity and believe data technologies support a secular tailwind to IT budget growth,” comments Morgan Stanley’s chief US equity strategist, Mike Wilson.

“Additionally, we see a clear mindset shift at the executive level from viewing technology as supporting the business to technology becoming the business,” he explained.

Here we use TipRanks to dive into 7 of the most compelling stocks on Morgan Stanley’s list.

How does this work? We use TipRanks market data to select the stocks with the most bullish outlook. This is in terms of 1) the overall top analyst consensus rating- think ‘Buy’ rated stocks and 2) the upside potential from the current share price- think big.

Are you ready? Let’s take a closer look at the Street perspective on these stocks now…

1. Netflix (NFLX)

Following positive U.S. & UK survey results and a deep dive into the Indian market, RBC’s Mark Mahaney (Track Record & Recommendations) has reiterated his NFLX Buy rating. He also ramped up his price target substantially from $360 to $440 (19% upside potential).

“We believe that Netflix has achieved a level of sustainable scale, growth, and profitability that isn’t currently reflected in its stock price. This conclusion is based on our assessment of Netflix’s 57 million U.S. Subscriber and 73 million International Subscriber bases” writes this five-star analyst.

He sees Netflix as one of the best derivatives off the strong growth in online video viewing and in Internet- connected devices (tablets, smartphones, Internet TVs), with our proprietary survey data tracking significantly improved customer satisfaction levels.

Overall analyst consensus: Moderate Buy. See what other Top Analysts are saying about NFLX.

2. State Street Corp (STT)

Boston-based State Street Corp has 30,000 employees under its wing and as of last year was managing $238.4 billion in assets. Present-day, the banking giant showcases a whopping $31.5 billion market cap.

Vining Sparks’ Marty Mosby (Track Record & Recommendations) recently reiterated a Buy rating on State Street’s stock with a $115 price target (33% upside potential). The stock has “a few temporary headwinds” when looking at the back half of 2018. State Street is working to close its acquisition of Charles River System (a premier provider of investment management front office tools and solutions) and build capital levels. The impacts of these efforts are not unseen, as Mosby wagers these pressures are baked into the stock price.

“Thus, we believe as these impacts wane and its core profitability begins to be realized, State Street should create over 20% of total shareholder returns over the next 12 months,” sums up the analyst.

Overall analyst consensus: Moderate Buy. See what other Top Analysts are saying about STT.

3. Spotify (SPOT)

In the rapidly changing music world, Spotify is the #1 music streaming service on the planet with 180 million monthly active users (MAU) and 83 million Premium Subscribers.

“Given Spotify’s strong growth trajectory, subscription-based model, solid financial position, global reach and expanding brand recognition, we believe investors will continue to gravitate toward the stock over the next 12 months” predicts five-star Monness analyst Brian White (Track Record & Recommendations) .

Moreover, Spotify leverages machine learning and AI to analyze behavior, creating create unique insights on how to improve the user experience. He has just initiated SPOT coverage with a Street-high price target of $260 (44% upside potential).

Overall analyst consensus: Moderate Buy. See what other Top Analysts are saying about SPOT.

4. Mastercard (MA)

This payments stock certainly has the thumbs up from the Street. Out of 17 recent analyst ratings, 15 are a buy. And most recently RBC’s Daniel Perlin (Track Record & Recommendations) singled out MA as a key stock to watch:

“MasterCard remains one of our best ideas in the space given our belief that investors should look to focus on long-term, secular-driven stories that provide solid organic growth with opportunities for margin expansion” gushes Perlin.

He explains: “Based on our updated 2026 valuation framework, we are increasing our target price to $232 from $223, or a multiple of 30x our CY19 EPS estimate of $7.60.” While the multiple is a premium to the company’s past trading levels, he sees this as indicative of a stable to improving macro environment and in line with the company’s fundamental peers.

Overall analyst consensus: Strong Buy. See what other Top Analysts are saying about MA.

5. Amazon (AMZN)

Amazon is one of the few large-caps benefiting from the secular shift to ecommerce, says Oppenheimer’s Jason Helfstein (Track Record & Recommendations) approvingly. He has a $2,130 price target on the stock.

“The company continues to gain share of global ecommerce with its deep product selection, low-cost express delivery through its Prime program, and breakthrough success of Kindle, Prime Video and Amazon Music” he writes.

Plus the Whole Foods acquisition creates another leg of growth, while AMZN Web Services is now the global leader in cloud computing and has ‘significant value’ says Helfstein.

Overall analyst consensus: Strong Buy. See what other Top Analysts are saying about AMZN.

6. UnitedHealth (UNH)

UnitedHealth Group is a leading diversified healthcare company offering a broad range of products to corporate customers and individuals.

Five-star Oppenheimer analyst Michael Wiederhorn (Track Record & Recommendations) has just selected UNH as his top stock pick for August/ September. “We believe UNH is well positioned by virtue of its diversification, strong track record, elite management team and exposure to certain higher growth businesses” he explains.

Keep a close eye on the company’s health IT Optum business, which is a nice complement to its core managed care operations and continues to account for a large share of earnings. “Furthermore, UNH’s vertical integration strategy strengthens the company’s competitive positioning across many areas of the healthcare landscape” Wiederhorn concludes.

Overall analyst consensus: Strong Buy. See what other Top Analysts are saying about UNH.

7. General Motors (GM)

Auto giant GM may be going through a tricky time right now, but the future looks bright. So says RBC Capital’s Joseph Spak (Track Record & Recommendations). He has just reiterated his Buy rating on the stock with a $49 price target (40% upside potential). “Overall, we remain positive and believe GM is executing on what they can control. Big investor focus is on China and direction of 2019 earnings and while risk remains, we’d argue expectations are very low with GM trading at <3.5x 2019 P/E ex-Cruise, ex-cash” explained Spak following management meetings.

Cruise- GM’s burgeoning self-driving unit- is on track for 2019 deployment. Hopes are high for Cruise, which recently received a massive $2.25 billion investment from Japan’s SoftBank Vision fund.

One extra opportunity for GM could be in robo-taxis, where ‘it has a seat at the table’. “And it’s early enough in the story that we still see a lot of potential for that narrative to take hold and for growth/tech investors to look to GM, increasing demand for the shares and potentially the multiple” points out Spak.

Overall analyst consensus: Strong Buy. See what other Top Analysts are saying about GM.

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