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2 “Strong Buy” Stock that could benefit from inflation
Concerns about inflation are rising, and the stock market is down as a result. Inflation-sensitive stocks, especially the technical giants, have slipped in recent trading sessions, as government bond yields have struggled higher. Not surprisingly, the factors behind inflation concerns are directly related to the diffuse situation. The major fiscal stimulus is the statutory COVID relief packages, which help fuel the pressure of inflation, but also the ongoing vaccination program is reaching more than 1 million people per day , and which promises to return to more normal conditions. So the question now is, what should investors do? In the short term, at least, the chances of inflation outweigh the positive news about COVID pandemics. With that in mind, Wall Street pros advise to look at ‘inflation-stable’ sectors. Using the TipRanks database, we identified two stocks that, according to high-profile analysts, could gain if inflation took hold. In fact, the pair have received strong bullish praise from the Street, enough to win a “Strong Buy” analyst consensus. Applied Products (AMAT) We start with a manufacturer of technology products, Applied Materials. Like any manufacturer, Activated Products can survive in an inflationary environment; as the cost of raw materials rises, the company will pass those on to their own customers through higher prices on finished products. No one likes that, but the company’s products are vital in the tech industry. Applied Materials make integrated circuit breakers for electronic devices; flat panel displays used in TVs, computer monitors, smartphones and tablets; and cover for flexible electronics. AMAT generates over $ 17 billion in annual revenue, holds more than 14,000 patents, and contributes more than $ 2.2 billion annually in R&D work. In their recent quarterly report, for fiscal 1Q21, Applied Materials reported a key line of $ 5.1 billion, up 24% from the previous year, and earnings of $ 1.22 per share. EPS was smooth in order, but up 27% year over year. These results came in as the company’s stock has recorded strong gains. AMAT shares are up 101% in the last 12 months, far outperforming the broad markets. The benefits reflect increased demand for the company’s products due to the rise in telecommunications, virtual offices, and remote education. In his note on Applied Materials, 5-star analyst B. Riley Craig Ellis stands firm. “We believe restaurants are confirming a bullish thesis and we suspect that FY21 & 22 EPS Street will move to a higher level despite keeping IT / LT moderately high above… Semi sales led 1Q upside down although all shares went higher than we expected, and we believe that strong strength will continue to deep into CYAT CY $ 70 at AMAT. The B + CY21 industry is seeing a higher surprise, surpassing close peers… pointing directly to our + $ 72- $ 74B outlook, ”said Ellis. To this end, Ellis estimates Buy on the stock, and its $ 150 price target means up to 30% potential for the coming year. (To view Ellis’ s history, click here) In total, there have been 22 recent reviews of Applied Materials, and no fewer than 19 for sale. The rest are Holds; the analyst’s consensus view on the shares is a strong buy. AMAT is priced at $ 115.44 and the average price target of $ 133.95 suggests 16% upside from that level. (See AMAT stock analysis on TipRanks) Citigroup (C) Next up, Citigroup, is one of the four U.S. banking institutions. For banks like Citi, which are net lenders, inflation tends to push up interest rates. In the long run, higher loan profit rates will rise faster than inflation eats at repayments. In that environment, the banking sector could outperform the S&P 500 in the long run, if inflation trends raise key interest rates. Meanwhile, a look at Citi’s current position shows that revenue and earnings are still down year over year, although EPS has shown continued strong gains. In 4Q20, the bank reported a key line of $ 16.5 billion, down 10% yoy, and an EPS of $ 2.08. Earnings were down 3% yoy, but up 48% from Q3. 5-star analyst Chris Kotowski, of Oppenheimer, advises investors to maintain a balanced weight despite the year-over-year losses. “Our advice to investors is to take a deep breath, look at the numbers and see that they were all fundamentally responsive and that the outlook has not changed much from where it was. e before … we live with the expectations for a big wave of loan losses in 2H21E outlined in our forecast [but] we believe there is a strong likelihood that this will be long before maintenance, and yields will normalize in 2022E, ”said Kotowski. According to his optimistic approach, Kotowski ranks C share Outperform (i.e. Buy) along with a $ 114 price target. Investors stand to gain a 62% pocket if the analyst’s thesis plays mach. (To view Kotowski ‘s history, click here) Overall, they have broad agreement on Wall Street about the underlying quality of the stock. Citigroup’s Strong Buy consensus rating is based on 12 Buy and 3 Hold. C is selling for $ 70.38 and the average price target of $ 79.80 suggests an upside of ~ 13% on a one-year time horizon. (See Citi stock analysis at TipRanks) To find great ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that integrates its all TipRanks fair view. Disclaimer: The views expressed in this article are those of the emerging analysts. The content is intended for informational purposes only. It is very important to do your own analysis before making any investment.