McDonalds Big Mac
Wall Street analysts say there’s no shortage of high quality stocks with upside for investors as 2020 gets underway.
Many analysts named their top picks this week and CNBC looked at the most recent research to find the best picks. Stocks include Verizon, McDonald’s, Estee Lauder, Facebook, Simon Property Group, and ViacomCBS.
McDonald’s will be at the forefront of marketing and innovation this year, and that’s just one reason that Evercore ISI said the company is its top pick in 2020.
The firm said in a note to clients it sees a stronger breakfast focus along with McDonald’s first new advertising campaign in many years. In addition, the company is testing out what Evercore says is an “improved premium chicken sandwich.”
The company also continues to be innovative on the technical front by launching a digital customer engagement team to better interact with customers.
“As a result, we believe McDonald’s offers the most favorable risk/reward in our coverage into 2020,” analyst David Palmer said.
Disney, Apple, and Netflix may be getting all the attention in the streaming wars, but there’s another media company one analyst says not to overlook.
“With 2020 now upon us, we are making the newly-formed ViacomCBS our top pick,” Imperial Capital analyst David Miller said.
While the company continues to produce content for Netflix and Amazon, the firm notes that ViacomCBS has the ability to retain programming for later use on its own platforms such as its over-the-top subscription streaming service like CBS All Access and Showtime.
The firm also praised the company’s upcoming movie slate calling it “as good as we have ever seen it” with titles like “Mission Impossible 7” and “Top Gun Maverick” from Paramount.
“We believe investors long this stock will enjoy a number of unique catalysts throughout 2020,” the analyst said.
As the election season heats up, Facebook is another top name to watch, according to Canaccord.
The company said this week it would let people see fewer political ads, but it has continued to face criticism after it said it wouldn’t fact-check political advertising on the social media giant’s website.
Still, Canaccord believes that political advertising spending may give the company a boost leading to earnings beats in 2020. In addition, the firm said it thinks Facebook’s Stories, a live video feature, will also lead to more viewing of ads.
“Looking forward, we think Facebook likely has the biggest upside to estimates in 2020, given the ongoing transition to Stories monetization and likely conservative outlook,” they said.
Here are other top picks by analysts this week:
Wells Fargo – Verizon, outperform rating
“We favor VZ’s current strategy and plan which aligns very closely with its core roots as a network and connectivity provider. The proverbial ‘elevator pitch’ of VZ is a simple one — > it is all about the network! The company has kept this disciplined focus, even while its peers around it venture into new silos (such as media and content). While we acknowledge it is difficult to identify near-term tangible catalysts, we believe 2020 will be a year of important milestones for the company. In our view, VZ’s ambitious fiber roll-out is laying the hardest and most necessary building blocks for a premium 5G network experience.”
Oppenheimer – Estee Lauder, outperform rating
“In 2019, EL shares increased 59% easily outperforming a 29% gain in the S&P 500. As we look forward, we continue to see an attractive case for outperformance from here and reiterate EL as a top pick. We expect continued strength in China, travel retail, and skincare to continue driving above-peer top- and bottom-line delivery. On a relative basis, EL’s valuation is now off a multi-year high, and we continue to believe a premium valuation is warranted.”
BTIG – Simon Property Group, buy rating
“SPG continues to have the strongest balance sheet of any large-cap REIT, generating over $1B annually in retained free cash flow which it is using to redevelop select assets in the portfolio, to generate accretive returns, and to bolster long-term stability in the portfolio. The shares have underperformed as a result of the relentless negative narrative that argues that e-commerce growth will lead to wholesale mall failures. While tenant failures have been elevated, SPG’s properties continue to operate at a strong level with stable occupancy rates and higher average rental rates over the last several quarters.”
Evercore ISI – McDonald’s, outperform rating
“McDonald’s is our top pick entering 2020. … As a result, we believe McDonald’s offers the most favorable risk/reward in our coverage into 2020. Next year, we believe the US story will be more about ‘blocking and tackling’ and would not be surprised to see a combination of: 1) higher value and breakfast focus, 2) improved suggestive selling and personalized marketing with loyalty, 3) a new advertising campaign, 4) a new and improved premium chicken sandwich, 5) sharper price actions with the help of Deloitte, 6) an improved focus on drive-thru speed with the help of technology to better measure car throughput, and 7) higher delivery growth with Doordash and Grubhub onboarded.”
Canaccord – Facebook, buy rating
“The election year should be a tailwind as the majority of digital political ad spend lands on Facebook’s properties, although candidates vocalizing around privacy may impact sentiment. … Meanwhile, candidates advocating increased regulation around privacy and anti-competitive behavior could prove to be a headwind to sentiment for a number of larger companies. … Looking forward, we think Facebook likely has the biggest upside to estimates in 2020, given the ongoing transition to Stories monetization and likely conservative outlook.”
Imperial Capital – ViacomCBS, outperform rating
“We believe investors long this stock will enjoy a number of unique catalysts throughout 2020. … We believe investors have placed too much importance on subscribership to CBS All Access and Showtime OTT and have forgotten that the new VIAC will also produce a panoply of content for third parties, which we appreciate because it gives the combined company optionality in retaining the series for exploitation in later windows within its own platform. … In addition, the upcoming F2020 Paramount movie slate is as good as we have ever seen it, with titles that include The Rhythm Section, A Quiet Place 2, another Spongebob movie and the big one, Top Gun Maverick, which could be a rare $1 billion grosser for VIAC’s Studio line.”