The new trading year is getting started, and investors might be looking to make this one either as strong as 2024 was or even stronger yet. To do this, it is always preferred to start on a strong note, meaning that the first quarter of the year has to bring about a net outperformance to give portfolios enough momentum and room to pursue some of the more aggressive growth projects later in the year.
There is one easy way investors can land the right deals this first quarter, as it all has to do with momentum. Wall Street analysts love to upgrade and boost stocks that are considered an “easy win” for them, and that usually has to do with either the strongest thesis out in the market or the stocks with the best momentum. Be that as it may, today’s list of upgrades by Bank of America analysts will serve investors well during this first quarter.
Considering names like Netflix Inc. (NASDAQ: NFLX) as part of the consumer discretionary sector, or shares of Visa Inc. (NYSE: V) as a straightforward financial stock with some of the best moats and tailwinds, and even a stock like Johnson & Johnson (NYSE: JNJ) to represent the consumer staples sector with a significant mix of medical products as well. Investors have a chance at new upside potential backed by strong fundamental themes today.
A Record Quarter for Netflix Stock
A one-hundred-point rally in Netflix shares rocked the markets last week to start the year, a reaction that came from the company’s quarterly earnings results, which were nothing short of a record for the streaming platform. Most Americans are indeed concerned about a rise in the cost of living, but that’s where Netflix thrives.
With a growing selection of popular titles, inflation in other activities makes staying with at-home entertainment all the better for users. But that’s not everything Netflix brings to the table, as the secret to the stock’s success comes from its subscription-based model.
This model allows analysts to predict financials in a more predictable and stable manner, which is why those from Bank of America decided to reiterate their buy rating on the stock as of late January 2025, this time boosting their valuations to a high of $1,175 for the stock.
This view implies an all-time high price for Netflix shares and a net upside of as much as 20.5% from today’s stock price. To back this immense rally prediction, investors can take the current earnings per share (EPS) forecasts for $6.28 for the next 12 months, a significant boost of 47% from today’s $4.27 level.
A Small Bump for Visa Stock Was Enough
Even though Bank of America analysts think that Visa stock is fairly valued today, as was their view during the January 2025 assignment of a neutral rating and a $331 a share price target, the underlying reasoning was enough to drag over millions in institutional buying activity for the company.
During the first quarter earnings results for the big banking names in the market, investors can notice that the profile of consumer credit themes has improved significantly, meaning that there is now more capacity and strength for future earnings in stocks like Visa. This might explain a couple of bullish factors to be covered in the following.
First, those from Cibc World Market decided to boost their holdings in Visa stock by 1.4% as of late January 2025. While this may not sound like much on a percentage basis, the new allocation brought the group’s net position to a high of $285.4 million today and gave investors another bullish gauge to lean on.
With this in mind, it should come as no surprise to see markets overall pay a premium valuation for Visa stock today, as seen in the company’s 16.1x price-to-book (P/B) ratio, which is a steep premium to the sector’s average 5.9x valuation today. Investors need to remember that markets will always pay premiums for the stocks they expect to outperform.
Johnson & Johnson Stock’s Dip Won’t Last
After falling by over 10.5% over the past quarter, shares of Johnson & Johnson have recently become a significant dip-buying opportunity for investors and traders alike. However, it was Bank of America analysts who decided to take the lead on this opportunity and boost the stock ahead of new momentum.
While this one did not receive a boost from Bank of America analysts, this name is setting up to be a potential turnaround in the next round of ratings by Wall Street, especially considering that other analysts have landed on a way more bullish outlook for this company.
Such as the outperform ratings from the Royal Bank of Canada, which this time landed on a $181 a share valuation, calling for a net upside of as much as 23.3% from where the stock trades today. Investors can see the possibility of this happening by the 6.3% decline in Johnson & Johnson stock’s short interest over the past month.
This is a sign of a potential pivot and bottom in the stock and a bearish capitulation in the making. Even if it takes Bank of America analysts a little longer to come around to the company’s fair valuation, investors can enjoy a $4.96 a share payout in the form of dividends, translating to a 3.4% annualized dividend yield.
The article "3 Stocks Upgraded by Bank of America – Here's Why They're Bullish" first appeared on MarketBeat.
