Jensen Huang, CEO of Nvidia
Rick Wilking | Reuters
It was a big year for stocks, but 2020 is poised to be even better for some companies, according to Wall Street analysts.
Many well-known stocks — and some not so well known — have been named as top picks in the new year.
This week, Wells Fargo named Nvidia as its top semiconductor stock for 2020. The firm said it liked the upwards trajectory of the company’s three main businesses, which include gaming, automotive and especially data centers.
“We see NVIDIA representing the most significant investor sentiment upside driven by our expectation of a meaningful reacceleration in data center growth through 2020,” analyst Aaron Rakers said.
The key to the data center opportunity is the company’s growing emphasis on artificial intelligence.
Nvidia is a “conversational AI driven story with increasing confidence in data center growth visibility,” he said.
The stock is up almost 80% year-to-date.
Another stock to watch in 2020 is The Trade Desk, according to Needham analyst Laura Martin.
The company’s specialty is its self-service platform, which helps ad buyers manage data-driven digital advertising campaigns.
But Needham says it believes with the election season heating up, the company may have a unique opportunity. That’s because growing regulatory scrutiny may occupy several other big internet giants, the firm said.
“We expect senior executives at FB, GOOGL and AMZN to be distracted by regulatory and legislative pressures in 2020, which might slow ad spending growth inside these Walled Gardens and accelerate ad revenue growth in the ‘open internet’ where TTD is the largest player,” Martin said.
“TTD is our top stock pick for 2020,” the analyst said.
The company is up 135% for the year.
The 2020 election is not the only big event next year. The 2020 Summer Olympic games are due to get underway in late July in Tokyo and there’s one company primed to take advantage, according Guggenheim.
“Nike is our Best Idea as its innovation pipeline is robust ahead of the Summer 2020 Olympics amid a global secular trend toward more active/healthy lifestyles,” analyst Robert Drbul said.
The firm added that Nike is unique in that its strong products allow the company to overcome geopolitical “pressures” around the globe by appealing to people everywhere.
“We surmise NKE is primed to unveil an onslaught of innovation in the coming months,” the analyst said, adding he was especially intrigued by the opportunity in running led by the intense hype surrounding Nike’s new running shoe, the ZoomX Vaporfly Next%.
Shares of the stock are up 35% this year.
Here’s what else analysts like in 2020:
Needham – The Trade Desk, Buy rating
“TTD is our top stock pick for 2020 owing to: 1) GroupM projects US ad spending will grow in 2020, driven by $10B of political ad spending, and we calculate that ad units available will decline owing to rapid adoption of new OTT streaming services with zero ad loads; 2) 100% of TTD’s revenue is from advertising, which is linked to economic strength. The economy is typically robust in a year when a President can be re-elected; and; 3) eMarketer projects US digital ad revenue of $150B in 2020, with FB, GOOGL and AMZN representing about $105B. … Additionally, we expect senior executives at FB, GOOGL and AMZN to be distracted by regulatory and legislative pressures in 2020, which might slow ad spending growth inside these Walled Gardens and accelerate ad revenue growth in the “open internet” where TTD is the largest player.
J.P. Morgan – Apple, Overweight rating
“We see Apple as one of top picks for 2020 given its favorable position to drive an outsized share of early 5G handsets and a strong iPhone volume cycle, and ensuing acceleration in the installed base and Services growth. … The rally in the shares had two big drivers, including: 1) Delivering to sell-side volume expectations for volumes in the 2019 iPhone cycle, but more importantly delivering upside to buyside expectations, which were expecting a lackluster replacement cycle for iPhones with limited hardware upgrades; and 2) Building expectations for a 5G led volume cycle with Apple expected to be a prime beneficiary.”
Guggenheim – Nike, Buy rating
“NKE is our Best Idea as its innovation pipeline is robust ahead of the Summer 2020 Olympics amid a global secular trend toward more active/healthy lifestyles. We remain focused on the strong fundamentals and NKE’s focus on engaging with the consumer through all channels, globally, helping to offset geopolitical pressures. We see several catalysts ahead, most importantly the Summer Olympics, where we expect NKE to unleash its marketing budget and innovation pipeline. We surmise NKE is primed to unveil an onslaught of innovation in the coming months and remain intrigued by the opportunity in Running, particularly given the publicity around the Nike ZoomX Vaporfly Next%.”
Bank of America – AT&T, Buy rating
“Our positive view on AT&T is based upon (1) accelerating earnings growth on new cost cutting initiatives and stock repurchases; (2) significant doubt on the Street regarding execution (3) a heavily discounted valuation relative to the market; (4) historically low investor ownership at 0.2x vs. the S&P 500 weighting; (5) improving cash flow and leverage metrics; (6) better-than-expected wireless business trends emerging; and (7) positive call optionality on extracting value from the merger of AT&T’s distribution network and Time Warner’s content and advertising inventory.”
Wells Fargo – Nvidia, Overweight rating
“NVIDIA is our top semi idea into 2020. We see NVIDIA representing the most significant investor sentiment upside driven by our expectation of a meaningful reacceleration in data center growth through 2020, while also continuing to benefit from strong notebook adoption. We expect NVIDIA to point to continued positive visibility on the recovery in data center revenue growth into 2020 – most notably as it relates to the computational intensity of AI training and inferencing for conversational AI, or national language processing. In addition to revenue growth, we would highlight NVIDIA’s data center seg.”
Morgan Stanley – Coca-Cola, Overweight rating
“Our top pick in US beverages is Coca-Cola, as we forecast clearly superior and highly visible mid-single digit topline growth going forward vs. large cap consumer product group peers in the 3-4% range. Higher KO topline growth is driven by stronger pricing power, ramping innovation, and favorable strategy changes, as well as momentum in emerging markets, which we believe is not reflected in relative valuation close to historical relative levels vs. peers.”
Cowen – Zynga, Outperform rating
“We are naming Zynga as our Best Idea for 2020. Zynga has proven itself to be the most consistent company in the mobile gaming vertical over the last few years, delivering steady growth both through organic efforts and smart M&A. With an exciting 2020 product pipeline, valuation remains attractive against our (likely conservative) estimates for revenue growth; we reiterate our $7 price target.”