Wall Street analysts say these are some of the top recovery plays this year

Published Sat, Jan 23 20218:08 AM EST

As the economy continues to pick up steam and the end of the coronavirus nears, analysts say there are a slew of companies that will be big beneficiaries. The common trait across these companies is that businesses and consumers will increase their spending, leaving these stocks well positioned, analysts say. CNBC Pro combed through the top Wall Street research this week to find stocks to buy ahead of the recovery. They include Anaplan, Visa , Mastercard, Microsoft , Urban Outfitters and iHeartMedia . Microsoft "Investors focus on headwinds, we see opportunity ahead," Morgan Stanley analyst Keith Weiss said in a note to clients this week. The multinational technology company not only reports second-quarter earnings results on Tuesday but is set up for a big year, according to Weiss. "[Microsoft is] well-positioned to execute and garner outsized share gains in a steadily improving operating environment," he said. Weiss cited recent trends showing robust PC growth, gross margin upside and rising demand as the coronavirus subsides. "MSFT represents a rare combination of strong secular positioning AND a reasonable valuation," he continued. In addition, the firm sees potential upside to estimates due to Microsoft's fast-growing cloud computing service, Azure. "After clearing tough Q2 product cycle comps and lingering Covid impacts, strong secular positioning and an attractive multiple make MSFT a top stock for the recovery," Weiss said. Shares finished the week up 6%. iHeartMedia The radio and media advertising company was named a "favorite late cycle recovery play" by Wells Fargo this week. "We think radio advertising is recovering a bit more slowly, but pacings are starting to improve and we think by year's end IHRT will be back on track," analyst Steven Cahall said. The firm said that companies like iHeartMedia are more exposed to local advertising where smaller businesses may have pulled back their spending over larger ones during the virus. "We see a return to growth in 2Q21E and a return to 2019-esque revenue in 2022E," he said. Cahall noted the stock is down 24% over the last year but also said he sees a lot of what he calls "opportunity' in radio. The second half of the year should really "kick start" ad spend so buy the stock now, he wrote. "We believe IHRT is the best of breed in radio, has a great podcast business and has ripped out a ton of cost, and when that's apparent we see significant stock upside potential," Cahall said. Anaplan The subscription cloud-based business software planning company was recently named a top "recovery" pick in 2021 and added to the conviction list by investment firm Needham. Shares of the company were up almost 1% this week but have underperformed in recent months. But that may be about to change, according to analyst Scott Berg. "Our industry work suggests that demand for Anaplan's leading Planning platform will climb in 2021," he said. Berg noted that as the economy ramps back up and the coronavirus begins to pass, businesses are expected to begin spending again to upgrade critical planning infrastructure. "Our conversations with partners suggest these pandemic corporate planning examples were common and these frustrations are driving new interest in more modern Planning solutions like Anaplan," he wrote. In talking to financial leaders, Berg said it become clearer that the "need for more modern technologies solutions and processes became abundantly clear in the early stages of the pandemic." In addition the firm, which has a Street price target of $95 per share, said 2021 could be Anaplan's most profitable year yet due to sales and marketing investments among other things by CEO Frank Calderoni who joined the company in 2017. "We believe the improving demand will combine with a more profitable operating model and a compelling valuation to set up PLAN shares for outperformance versus our broader universe in 2021," Berg said. Microsoft- Morgan Stanley, Overweight rating "Investors focus on headwinds, we see opportunity ahead. ... .After clearing tough Q2 product cycle comps and lingering Covid impacts, strong secular positioning and an attractive multiple make MSFT a top stock for the recovery. ... .Well-positioned to execute and garner outsized share gains in a steadily improving operating environment MSFT represents a rare combination of strong secular positioning AND a reasonable valuation in software." Urban Outfitters- Barclays, Overweight rating "After an early-year run up and disappointing holiday, URBN shares are resetting as we enter the "shoulder period" of January/February - typically a relatively unimportant profit-contributing period but one that sets the stage for spring spending. We see this consolidation period as an attractive accumulation opportunity for a 2021 leveraged recovery play driven by strong brands and desirable product." iHeartMedia- Wells Fargo, Overweight rating "Radio advertising is recovering a bit more slowly, but pacings are startingto improve and we think by year's end IHRT will be back on track. ... .This is our favorite recovery idea. ... .We see a return to growth in 2Q21E and areturn to 2019-esque revenue in 2022E. ... .IHRT is the best of breed in radio, has a great podcast business and has ripped out a ton of cost, and when that's apparent we see significant stock upside potential.Though we admit the timing of an advertising recovery is still opaque, we feel as though the continued global inoculation campaign should be enough to kick start ad spend in the second half" Visa & Mastercard- Jefferies, Buy ratings "After lagging the SPX over the last 3, 6, and 12 months, V & MA set up well into '21 as high-quality recovery plays, and we see significant upside to Street cross-border revenue estimates in FY22 and FY23 as consensus implies int'l travel to remain ~20% below 2019 levels through 2023 (we assume int'l travel eclipses 2019 in 2023), while consumers in our proprietary survey indicate a willingness to travel at or above pre-COVID levels postvaccine." Anaplan- Needham, Buy rating "Industry work suggests that demand for Anaplan's leading Planning platform will climb in 2021 ... . improving demand will combine with a more profitable operating model and a compelling valuation to set up PLAN shares for outperformance versus our broader universe in 2021. ... .Our conversations with partners suggest pandemic corporate planning examples were common and these frustrations are driving new interest in more modern Planning solutions like Anaplan. ... .The need for more modern technologies solutions and processes became abundantly clear in the early stages of the pandemic.

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CNBC Pro combed through the top Wall Street research this week to find stocks to buy ahead of the recovery.