J.P. Morgan analysts have published their monthly list of top idea stocks, and it includes some names you will know.
The list has stocks in three different categories: near-term, growth and value. All the stocks have overweight ratings at the investment firm.
The analysts put one new stock on the list for May: Progyny (PGNY) , the New York fertility-benefits-management company. The stock is part of the growth strategy.
The biggest stocks on the growth list, ranked in order of market capitalization, are Amazon (AMZN) – Get Amazon.com, Inc. Report, Microsoft (MSFT) – Get Microsoft Corporation Report, Eli Lilly (LLY) – Get Eli Lilly and Company Report, and Danaher (DHR) – Get Danaher Corporation Report, which provides medical and industrial products.
The biggest stocks on the value list include drugmaker AbbVie (ABBV) – Get AbbVie, Inc. Report, semiconductor maker Broadcom (AVGO) – Get Broadcom Inc. Report, McDonald’s (MCD) – Get McDonald’s Corporation Report, and alternative-investment manager Brookfield Asset Management (BAM) – Get Brookfield Asset Management Inc. Class A Report.
Morningstar on Amazon
As for Amazon, its stock has slumped 14% since it issued a mixed earnings report last week. Morningstar analyst Dan Romanoff cut his fair-value estimate for the Seattle e-commerce and tech giant to $3,850 from $4,100. But that new figure is still more than half again the recent stock price of $2,488, and he assigns Amazon a wide moat.
On the negative side, “operating margin was a concern, as inflation, excess labor, and excess capacity ate into profitability, which … was well short of our expectations,” he wrote in a commentary April 29.
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“We think profitability challenges will linger for a couple of quarters and perhaps into next year, [though] we expect the second half of the year to show improvements.”
On the plus side, “Amazon dominates its served markets, notably for e-commerce and cloud services,” Romanoff said.
“It benefits from numerous competitive advantages and has emerged as the clear e-commerce leader given its size and scale.”
Morningstar on McDonald’s
Morningstar analyst Sean Dunlop offers a mixed take on McDonald’s. “We view large chain operators like McDonald’s as the best positioned to navigate difficult economic environments,” he wrote in an April 29 commentary.
Those operators have “negotiating leverage over suppliers, competitive pricing, and robust digital platforms,” Dunlop said, adding, “Still, we believe that the market is now outrunning [McDonald’s] fundamentals.”
McDonald’s faces “difficult comparisons and early signs of customer pressure—softening sentiment and modest trading down the menu,” he said.
Dunlop gives McDonald’s a wide moat and puts fair value at $227. The stock recently traded at $245.71.
The author of this story owns shares of Amazon, Microsoft, Elie Lilly, AbbVie and McDonald’s.