In a market that’s lately been as unpredictable as the weather, there’s something incredibly refreshing about a strong dose of optimism. Enter Savita Subramanian, the Head of US Equity & Quantitative Strategy at Bank of America, who’s taking a stand against the gloom and doom that’s been echoing through the financial corridors. Her message is clear: the future’s looking bright for the stock market, and it’s time to grab the bull by the horns.
“I see far more reasons to be bullish on mid and large-cap stocks than to be bearish,” Subramanian boldly declares. “What intrigues me is the constant emergence of new bearish narratives.”
Amidst the sea of pessimism, Subramanian points to a myriad of bullish indicators that paint an enticing picture for the final quarter of 2023. Let’s dive into the compelling factors that are fuelling her optimism:
- The AI Revolution
One of the most electrifying aspects of the current market landscape is the untapped potential of Artificial Intelligence (AI). As AI continues to evolve and disrupt industries, it’s creating opportunities that could reshape the investment landscape. The profound impact of AI on businesses is not only redefining productivity but also opening doors to new realms of growth and efficiency.
- A Resurgent US Manufacturing Sector
Another remarkable trend that’s caught Subramanian’s attention is the revival of US manufacturing. This resurgence isn’t just about making things; it’s a transformation driven by innovation, technological leaps, and a renewed commitment to excellence. It’s not just about ‘Made in America’; it’s about ‘Made in America with Excellence.’
- When Bearishness Turns Bullish
Paradoxically, the increasing bearish sentiment in the market could be a hidden blessing. In the world of investing, contrarian indicators often signal a market about to take off. So, the current chorus of negativity might just be the overture to a resounding market rally.
Subramanian’s optimism goes beyond mere speculation. She’s so convinced that a recession has been averted that she’s revised her end-of-year target for the S&P 500, setting it at 4,600. That implies a potential 7.5% gain by the close of 2023.
Now, let’s set our sights on the stocks that Bank of America has flagged as potential game-changers:
Nutanix, Inc. (NTNX)
Our first contender is Nutanix, a tech powerhouse in the world of cloud software. Nutanix has mastered the art of simplifying complex cloud operations by combining the ease of public cloud with the performance and security of a private cloud. Think of it as the conductor orchestrating the symphony of hybrid multi-cloud operations.
Some big names, including Vodafone, AAA, and Home Depot, have already tuned into Nutanix’s melody. Their platform enables seamless cloud operations, adding applications, managing features, and enhancing storage, visualization, and networking.
Cloud computing is not just an industry; it’s a universe in expansion. Nutanix has hopped on that rocket and is now reporting net profits for the last three quarters. In the latest report for fiscal 4Q23, Nutanix raked in $494.2 million in revenue, surpassing expectations by 18%. It’s not just about top-line growth; the bottom line also shone, with non-GAAP EPS at 24 cents per share, outperforming estimates by a solid 8 cents.
The growth story doesn’t stop there. Annual contract value (ACV) billings soared by a staggering 44% YoY in fiscal Q4, leaping from $193.2 million to $278.7 million. Annual recurring revenue (ARR) followed suit, surging 30% YoY from $1.2 billion to $1.56 billion.
Bank of America’s Wamsi Mohan is singing Nutanix’s praises, foreseeing improved fundamentals in the years ahead. He’s especially keen on the potential for stable revenues driven by renewals and various growth catalysts. With this upbeat outlook, Mohan upgraded the stock to a Buy rating, attaching a $50 price target, suggesting a juicy 38% upside.
Nutanix boasts a Strong Buy consensus rating based on nine recent analyst reviews, with an overwhelming majority of eight Buys and just one Hold. The stock is currently trading at $36.24, with an average price target of $44, implying a potential 22% gain over the next year.
Fisker, Inc. (FSR)
Our second star player is Fisker, Inc., the brainchild of automotive design maestro Henrik Fisker. Fisker, renowned for his contributions to BMW’s luxury vehicle lineup, founded his eponymous car company in 2016, based in sunny Los Angeles. His mission? To ride the electric vehicle (EV) wave that’s reshaping the automotive landscape.
Their magnum opus, the Fisker Ocean, an all-electric SUV, entered full production earlier this year. In a recent production update, Fisker reported delivering 900 vehicles this year and expects to unleash several hundred more onto the streets in the coming weeks. These deliveries are just the tip of the iceberg, with a whopping 5,000 Fisker Oceans already rolling off the production line. What’s more, the company anticipates reaching a delivery pace of 300 vehicles per day to customers in the US and Europe later this year.
This pivot to regular vehicle production and the surge in deliveries marked a significant milestone: Fisker’s first quarter of net positive automotive sales revenue. In 2Q23, the company reported total revenue of $825,000, a jaw-dropping leap from the paltry $10,000 of the previous year. The icing on the cake? The net loss narrowed to just 25 cents per share, a standout improvement over the 2Q22 net loss of 36 cents per share.
Bank of America’s John Babcock is fired up about Fisker’s potential, anticipating a sharp uptick in revenue, earnings, and volume in 2024 with the Ocean CUV’s production ramp-up. Babcock believes this milestone could serve as a game-changer for the stock, potentially pushing Fisker into EBITDA breakeven territory in 2024. Revenues are expected to rocket to nearly $3 billion, up substantially from $1.2 billion in 2023 and a mere $342,000 in 2022. With conviction, Babcock maintains a Buy rating on the stock and carries a $8 price target, implying a potential 33% upside in the coming months.
In summary, Fisker currently enjoys a Moderate Buy consensus rating based on six recent analyst reviews, including five Buys and one Sell. The stock’s average price target stands at $10.20, suggesting a robust 70% gain over the next year, considering its current share price of $6.
As we buckle up for the final quarter of 2023, it’s clear that the stock market is teeming with potential and excitement. Bank of America’s recommendations shine a spotlight on these opportunities, inviting investors to ride the wave of positivity. In a world of uncertainty and volatility, these two companies—Nutanix and Fisker—stand out as potential game-changers.