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3 Stocks With Hidden Upside: Top Analyst

Looking for hidden gems in the market? Credit Suisse analyst Jonathan Chaplin tells us he’s just found three.

Chaplin just upgraded Verizon and AT&T to 'Outperform' from 'Neutral' as the carriers fight back on pricing and subsidies.

“The story in the carrier space has been phenomenal adoption of smart phones by consumers driving revenue growth by carriers,” explains Chaplin.

However, he says margins have remained pressured because of the subsidies carrier have been paying.

But now, he says, the carriers have said enough – and they’re pushing back in the following ways:

They now make consumers wait longer before they give them a new phone at a subsidized rate.

In addition, Chaplin says, they’re paying less of that handset cost on your behalf – they’re making you pay more

“Both of those things will make a big difference to margins and earnings growth. I really think investors are under-estimating the lift these stocks will get, as long as they both hold the line,” Chaplin says.

Chaplin’s new price target on Verizon is $45 and his new price target on AT&T is $36.50.

Sounds bullish - However, Chaplin tells us the best name in the space is Sprint .

“I think the discipline around pricing and subsidiaries will help Sprint more than anybody,” he says.

“They’re going to see the same margin expansion. But they also have a lot more leverage so it should have a much bigger impact on the company.”

And he goes on to say, Sprint could double its earnings over the next few years without the economy getting better or the industry getting better.

“They’re running two networks right now – and therefore have twice as many fixed costs as everyone else in the industry. They’re going to shut down one of them and that alone should increase margins. There’s much more upside for Sprint," he says.

Trader Jon Najarian agrees. "I like the thesis," he says. "The carriers are also cutting back on the all-you-can-eat plans. That's not good for consumers but it is good for investors."

* You can find our conversation with Chaplin about 3 minutes into this video clip.


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Trader disclosure: On May 11, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Patty Edwards is long JWN; Patty Edwards is long BMO; Patty Edwards is long BKCC; Patty Edwards is long GLD; Patty Edwards is long INTC; Patty Edwards is long PVH; Patty Edwards is long JNK; Patty Edwards is long LQD; Patty Edwards is long T; Patty Edwards is long NKW; Patty Edwards is long MSFT; Jon Najarian is long GGLU; Jon Najarian is long DDMD; Jon Najarian is long CME; Jon Najarian is long CBOE; Jon Najarian is long CIGX; Jon Najarian is long call spreads in CNO; Jon Najarian is long call spreads in AAPL; Jon Najarian is long call spreads in SPLS; Jon Najarian is long call spreads in JPM; Jon Najarian is long call spreads in MSFT; Jon Najarian is long call spreads in VIVID; Jon Najarian is long call spreads in ARNA; Steve Grasso is long ASTM; Steve Grasso is long AVAV; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long NUAN; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA

For Glenn Schorr
Nomura Securities International, Inc has received compensation for non-investment banking products or services from the issuer in the past 12 months: JPM
Nomura Securities International, Inc had a non-investment banking securities related services client relationship with the issuer during the past 12 months JPM
Nomura Securities International, Inc had a non-securities related services client relationship with the issuer during the past 12 months JPM
A Nomura Group Company had an investment banking services client relationship with the issuer during the past 12 months JPM
A Nomura Group Company has received compensation for investment banking services from the issuer in the past 12 months JPM
Nomura Securities International Inc. makes a market in securities of the issuer JPM

For Michael Binetti
UBS AG, its affiliates or subsidiaries beneficially owned 1% or more of a class of the following companies' common equity securities as of last month`s end (or the prior month`s end if this report is dated less than 10 days after the most recent month`s end): JCP
The U.S. equity strategist, a member of his team, or one of their household members has a long common stock position in NKE
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: KKS
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and investment banking services are being, or have been, provided.: RL
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: KKS
This company/entity is, or within the past 12 months has been, a client of UBS Securities LLC, and non-securities services are being, or have been, provided.: RL
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: KKS
Within the past 12 months, UBS Securities LLC has received compensation from this company/entity: RL

Jonathan Chaplin
As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company: S
As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company: LEAP
As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company: VZ
As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company: T
As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company: CLWR
As of the date of this report, Credit Suisse Securities (USA) LLC makes a market in the securities of the subject company: PCS




CNBC.com with wires.

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