Apple CEO Tim Cook attends the annual session of China Development Forum (CDF) 2018 at the Diaoyutai State Guesthouse in Beijing, China March 26, 2018.
Jason Lee | Reuters
Wall Street analysts aren’t backing down from their buy ratings on stocks that have been hit hard in the latest trade battle between the U.S. and China. While the two countries continue slapping tariffs on each other, many analysts say clients should use the market weakness as a time to buy these beaten down shares because the risks are overblown.
CNBC did a deep dive through sell-side stock research since the trade war escalated to find companies that analysts are singling out in their respective coverage universes.
The Dow dropped as much 719 points on Monday as the trade war continued its escalation but is higher in early trading on Tuesday.
Wall Street will be watching Alibaba‘s earnings report on Wednesday for any signs of the trade war effect on the Chinese e-commerce giant.
The most recent actions by the White House have brought “greater uncertainty,” to the company, but SunTrust analysts are sticking with their buy rated call. “The latest data out of National Bureau of Statistics of China suggests that the macro environment has been improving, a positive for Chinese consumption, and for BABA in particular,” analyst Youssef Squali said.
“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,” he added.
Shares of the company are down 4% over the last week.
Apple has also been hit hard by the ongoing trade uncertainty, but Wedbush analysts say things might not be as bad as they appear.
“That said, for Apple in particular we believe the way things stand today the bark will be worse than the bite for Cupertino around China headwinds and we would be buyers of the name on weakness,” said analyst Dan Ives who’s keeping his outperform rating on the stock.
Apple, which was the worst performer on the Dow on Monday, is down more than 8% over the last week.
Despite the trade dispute, Credit Suisse analysts are not backing down from their calls on some business services stocks.
Alarm.com, provides cloud services for remote control home monitoring services and has an outperform rating at the firm.
The company recently reported earnings and stated that tariffs were indeed having an effect.
“ALRM highlighted on its most recent earnings call that higher tariffs have modestly impacted hardware sales,” analyst Kevin McVeigh said.
The stock is down more than 15% over the last week.
Here are other buy-rated stocks analysts are sticking by in the trade war:
SunTrust- Alibaba, Buy rating
“We maintain a Buy/$200 PT going into F4Q19 earnings due out Wed. 5/15 BMO. 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 ST; LT 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.”
According to TipRanks, Alibaba is a Strong Buy consensus with an average analyst price target of $217 (28 percent upside potential).
Wedbush- Apple, Outperform rating
“Our near-term take continues to be closer cooperation and negotiations around the growing IP theft issue is a potential long term positive for US tech vendors with a focus on curtailing the hundreds of billions of dollars lost annually by US companies around hacking espionage and nation state attacks is long overdue and a major step in the right direction especially on the cyber security front. In a nutshell, the last thing Apple and the tech sector needs right now is a UFC battle on the US/China front that could have a major ripple impact that the Street is fearing as they digest these threats from the White House and gauge retaliation impact from China over the coming days. That said, for Apple in particular we believe the way things stand today the bark will be worse than the bite for Cupertino around China headwinds and we would be buyers of the name on weakness.”
According to TipRanks, Apple is a Moderate Buy consensus with average analyst price target $217 (16 percent upside potential)
Wells Fargo- Lowe’s Companies, Outperform rating
“Near-Term Weather & Tariff Overhangs Present Opportunity To Lean In…That said, 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.”
According to TipRanks, Lowe’s is a strong buy consensus with average analyst price target of $120 (14 percent upside potential).
Cowen- FedEx, Outperform rating
“In the March quarter (remember FDX is on a May fiscal year) there was significant inventory build as companies rebuilt inventories early in the year after the holidays, and then continued to do so to get ahead of potential tariffs in March. As noted, management is somewhat concerned by weak Industrial Production and Business Spending, and is hopeful both pick up later in the year. It probably takes a US – China trade deal to get that to occur, mostly because continuing trade wars, Brexit, weak German auto sales and continuing protests in France is leading to uncertainty.”
According to TipRanks, FedEx is a moderate buy consensus with average price target $206 (20 percent upside potential).
Credit Suisse- Alarm.com Holdings, Outperform rating
“We see ALRM, ARMK, CTAS, EEX, and IRM negatively impacted by tariffs. ALRM highlighted on its most recent earnings call that higher tariffs have modestly impacted hardware sales. Turning to foodservice and uniform, ARMK and CTAS source certain products—steel hangers—from China and this could impact gross margins amid ARMK’s modest exposure to China food service.”
According to TipRanks, Alarm.com Holdings is a moderate buy consensus with average analyst price target $71 (21 percent upside potential).
Wells Fargo- National Vision Holdings, Outperform rating
“Q1 should go a long way towards repairing sentiment; Remains compelling LT story. Heading into the Q1 print, investor sentiment was soured by a series of overhangs (sponsor selling, model confusion, tariffs, etc.), but we view [May 9] better-than expected results as the first step towards repairing the narrative.”
According to TipRanks, National Vision Holdings is a strong buy consensus with average analyst price target $39 (47 percent upside potential).
