New Trade for November 7th, 2022

Stocks rose to start the day as investors prepared for an eventful week of critical economic updates and congressional midterm elections.  The move higher came on the heels of a negative week on Wall Street.  

This week will be quiet on the earnings front, as nearly 85% of S&P 500 companies have already reported earnings.  According to FactSet data, without considering the 139% jump in energy earnings, companies across the S&P 500 have reported a year-over-year 5% decline in profits.  Tech shares have been hit particularly hard this earnings season as the fallout from largely disappointing results from bellwethers such as Facebook parent Meta Platforms, Amazon.com, and Microsoft continued.

The decline in tech may be offering investors what many would consider a once-in-a-lifetime opportunity in some notable names.  With the tech-heavy Nasdaq down more than 30% year-to-date, many investors are looking for diamonds in the rubble.  Wall Street pros call today’s featured ticker a “screaming buy.”  More than 90% of the analysts covering the stock give it a buy rating.  What’s more, the pros forecast a more than 50% upside from the current share price.  

Stock Picks:

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Google parent Alphabet (GOOG, GOOGL) recently dipped below $100 after its 20-for-1 stock split.  At its lowest level in over a decade, the stock is more accessible for investors, which should help when enthusiasm for big tech stocks re-accelerates.   

Over the last five years, GOOGL is up 101%, crushing the Nasdaq’s 64% gain and the Internet Services Market’s 72% gain over the same period.  The company posted earnings per share of $1.21 on revenue that grew by 12.6% year-over-year to $69.69 billion.  The consensus sees earnings dropping 7% in 2022 but rising in 2023 at $5.80 a share.  Top-line growth is expected, with 2022 sales expected to climb 11% and another 10% in 2023 to $260.44 billion.

Key catalysts to watch out for include its artificial intelligence tools that help users search in new ways, such as Google Lens, which is currently being used over 8 billion times a month.   Google also recently introduced a new multi-search feature to help users search with both words and images simultaneously.  Shares also have a strong rebound potential once the digital ad market recovers.   

At 19 times forward earnings, Alphabet shares are trading in line with the S&P 500. Still, the current earnings multiple may underestimate the company’s potential to re-accelerate earnings once its many growth catalysts start to play out.  The stock boasts a 90% buy rating on Wall Street.  According to FactSet, the pros covering the stock forecast a 53% average upside.