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Wall Street analysts have rolled out a slew of top picks that they say investors must own as the second half of 2023 gets underway. These stocks have the chops to win in a bumpy macro, analysts said, and they have solid upward momentum through the rest of the year. CNBC Pro combed through top Wall Street research to find the winning second-half stocks. They include First Solar, Torrid , Boston Beer, ServiceNow and Boston Scientific. Boston Beer What used to be “areas of caution [are] now areas of upside,” according to Roth MKM analyst Bill Kirk. The firm said in its recent upgrade of the stock that there are indications of a turnaround in two key areas: First, there are signs of stabilization in Boston Beer’s hard seltzer brand, Truly. Second, gross margins seem to be improving. “Now, we believe Seltzer and Truly will benefit in the summer from Bud Light share losses and gross margin lift from production shift will be realized in 2Q,” Kirk said. The analyst noted that Boston Beer has a long-term successful track record in many facets of alcoholic beverages. Still, he urged investors to be calm. “With the success comes large volatile swings in the business and share price,” Kirk added. The stock is down more than 6% in 2023. “While we had written at 1Q that ‘the timing of upside surprises remains unclear,’ we now believe the timing is summer 2023,” the analyst said. ServiceNow Wells Fargo analyst Michael Turrin is expecting a big second half from the workflow software solutions company. “We’re staying positive on the companies with more defensible positioning in the current environment, benefiting from vendor consolidation and platform positioning,” he said. Turrin said ServiceNow is flexing its “platform advantages” toward “second-half outperformance.” Additionally, artificial intelligence is also sure to have an impact on ServiceNow — most likely in a positive way — but it’s too soon to know for sure, he added. “ServiceNow has continued to demonstrate its ability to consolidate spend, expand within customers, and layer on additional functionality and monetize it,” Turrin wrote. Looking ahead to the second half, these trends should allow for greater upside, according to the firm. Shares are up nearly 45% year to date. First Solar There’s no shortage of positive catalysts “brewing” as the second half kicks off, according to Goldman Sachs analyst Brian Lee. That will set the stage for positive estimate revisions and for shares to head higher, the firm said. In a recent note to clients, Lee listed three things for investors to watch in the months ahead. First, he said, “In particular, our field work suggests more active discussions around the manufacturing capacity expansion (likely in Southeast US) could make for the next headline catalyst on the docket heading into 2Q earnings….” Second, Lee said he expects the “health of bookings” to show improvement when the company reports second-quarter results in late July. Finally, the company has an analyst day scheduled for Sept. 7. Goldman Sachs said it will give First Solar a chance to focus on themes like new tech, long-term business model updates and a multiyear earnings per share framework. Altogether, Lee said First Solar has one of the most “attractive risk-reward setups” in the firm’s coverage. Shares are up nearly 27% in 2023. Torrid — Bank of America, buy rating “Sales challenged near-term but multiple drivers for margin improvement in 2H. … We expect freight cost normalization and lapping of product cost inflation to be tailwinds in 2H and model 350bp of margin expansion in 2H. … Torrid is hosting summer events in stores to aid traffic and engagement, and revamping its loyalty program structure so that Torrid Cash events are more easily accessible. We are encouraged by the potential for these initiatives to drive customer acquisition.” Boston Beer — Roth MKM, buy rating “Areas of Caution — Now Areas of Upside. …. Now, we believe Seltzer and Truly will benefit in the summer from Bud Light share losses and gross margin lift from production shift will be realized in 2Q. … With the success comes large volatile swings in the business and share price. … While we had written at 1Q that ‘the timing of upside surprises remains unclear,’ we now believe the timing is summer 2023.” ServiceNow — Wells Fargo, overweight rating “Relief post LT target reset likely to extend as NOW flexes platform advantages & relative resilience toward 2H outperformance. … We’re staying positive on the companies with more defensible positioning in the current environment, benefiting from vendor consolidation and platform positioning. … ServiceNow has continued to demonstrate its ability to consolidate spend, expand within customers, and layer on additional functionality and monetize it.” Boston Scientific — Barclays, overweight rating “Given Recent Reports of Strong Volume Growth, We See BSX as Well-Positioned for Upside in Q2 and 2H23. … Mgmt remains committed to improvements in margins and FCF conversion, and sees continued strong growth driven by pipeline and competitive outperformance. … If continued strong procedure volumes result in a beat and raise for BSX in Q2, we would not be surprised to see the stock trade at levels between our $56 price target and our $60 upside valuation scenario.” First Solar — Goldman Sachs, buy rating “Catalysts brewing into 2H23 set up well for more positive estimate revisions. … In particular, our field work suggests more active discussions around the manufacturing capacity expansion could make for the next headline catalyst on the docket heading into 2Q earnings. … 2Q earnings call – reaffirm the health of bookings. … We reiterate our Buy rating & $272 12-month target and further dive into key debate topics on FSLR that have driven recent underperformance but have created one of the more attractive risk-reward setups in our group ahead of 2H23 catalysts.”
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