Wells Fargo highlighted a slate of stocks for September that are poised for major upside. CNBC Pro combed through the firm’s research for overweight-rated stocks that analysts believe have even more room to run. They include Uber Technologies, Microsoft, Burlington Stores, D.R. Horton and Eli Lilly. Burlington Stores “Momentum is building,” analyst Ike Boruchow said of the discount clothing retailer. The firm said Burlington’s recent quarterly report was so strong that it called the results a “thesis affirming print.” Burlington reported beats on the top and bottom lines for the second quarter, along with solid guidance for the third quarter. “With expectations high, BURL indeed delivered a robust 2Q beat/raise — with comps accelerating and margin flow-through impressive,” Boruchow said. The analyst said he continues to be impressed by management’s ability to draw in consumers of all kinds in an uncertain macro environment. Burlington shares are up 33% in 2024 but the price remains “compelling,” Boruchow said. “BURL remains our Top Pick w/ $325 PT,” the analyst said, suggesting 25% upside from Friday’s close. D.R. Horton Shares of the homebuilder are up 22% in 2024, but they are still too attractive to ignore, according to Wells Fargo analyst Sam Reid. The analyst said D.R. Horton is one of the firm’s top picks, especially if the Federal Reserve begins to trim interest rates. “DHI’s risk-reward is best-calibrated w/torque on lower rates but low ASPs [average selling price] offer defense against rising inventories,” Reid said. The firm also raised its price target to $220 per share from $210, adding that “we believe a re-rating could be afoot.” This implies 18% upside from Friday’s close. Reid said the homebuilder has multiple levers to pull, even in a challenging macro environment. “DHI (Overweight) is our primary entry-level pick in homebuilding,” the analyst said. Microsoft The tech giant has an “early lead” in artificial intelligence, according to analyst Michael Turrin. Wells Fargo added the stock to its signature picks list earlier this week, citing a “cloud re-acceleration.” “New disclosures suggest Azure growing +35% y/y cc [constant currency] in Jun’24, well ahead of peers AWS, GCP [Google Cloud Platform],” Turrin wrote. He also said Microsoft has several other levers to pull, including its burgeoning cybersecurity business in addition to share gain potential in Search. Shares of the company are up 33% in 2024, but Turrin urged clients to buy, saying the valuation is fair. “MSFT is a leader & share gainer in cloud infra & we believe set to benefit from a significant AI-enabled product cycle forming,” he added. Eli Lilly “We are refreshing our large-cap rankings to account for some recent ratings changes and news flow. … We continue to think LLY has potential to provide upside surprise with improving supply and OUS [outside the U.S.] growth. … We are less concerned about new competition since we think manufacturing and wealth of data are going to create a big moat for LLY in longer term.” Burlington Stores “With expectations high, BURL indeed delivered a robust 2Q beat/raise — with comps accelerating and margin flow-through impressive. Momentum is building, strategies are bearing fruit and EPS power is compelling. BURL remains our Top Pick w/ $325 PT. … Another thesis affirming print.” D.R. Horton “DHI’s risk-reward is best-calibrated w/ torque on lower rates but low ASPs offer defense against rising inventories. … We raise our PT +$10 to $220, implying P/E at 13x & TBV at 2.5x, an acknowledgement that we believe a re-rating could be afoot. … DHI (Overweight) is our primary entry-level pick in homebuilding, with a production-minded approach to construction.” Uber Technologies “Uber remains top 2H pick. See bear case of decel and AV [autonomous vehicle] terminal risk largely being addressed by YE24. … Our 2024 EBITDA estimate is above the Street, driven by continued international mobility competitive rationality and favorable mix toward mobility bookings. We believe the stock is likely to outperform as consensus converges on our estimates over the next 18 months.” Microsoft “Poised for Cloud Re-acceleration. … MSFT is a leader & share gainer in cloud infra & we believe set to benefit from a significant AI-enabled product cycle forming. … MSFT is one of a few key players in cloud and has an established early lead in genAI. … New disclosures suggest Azure growing +35% y/y cc in Jun’24, well ahead of peers AWS (+19%), GCP.”
