Analysts from investment banks including Goldman Sachs and JPMorgan are bullish on Europe right now. Here are some of their favorite stocks going into 2022. "We retain a positive outlook on European stocks for 2022 with a 12 [month] price target of 530 for STOXX 600," Goldman analysts wrote in their 2022 outlook. On Dec. 13, the pan-European Stoxx 600 index was trading around 477. JPMorgan analysts said in early December that the economic backdrop to the euro zone "appears very encouraging with respect to vaccinations, pace of growth and the level of policy support." They added that the region was seeing a strong earnings rebound. Another reason analysts say European stocks are looking especially attractive right now is their relative valuations, with JPMorgan saying the region is "trading cheap." Meanwhile, in their outlook published in November, the Goldman analysts said: "Despite record returns, Europe equity now looks cheaper than at the outset of 2021. With a forward price to earnings ratio of 16x and a dividend yield of 3%, it represents good value versus the U.S. and excellent value versus other assets." They added that earnings growth in the euro area should get a boost from higher inflation. The euro zone's inflation rate hit a record high in November , coming in at 4.9%, compared to the same month last year. Stock picks Given this environment, here are five top European stock picks from a range of investment banks: EDF is the largest power generator in Europe, according to analysts at Morgan Stanley, and is likely to benefit from higher inflation — which they expect to continue in the region. "Thanks to its high exposure to nuclear and hydro generation, EDF is a strong net beneficiary from an inflationary commodity environment," the Morgan Stanley analysts wrote in early December. Spanish transport group Ferrovial is also a top stock for the analysts. They cited a number of features, including high margins and strong pricing power, which "makes Ferrovial our play of choice on the higher inflation theme." The banking sector is also expected to profit from higher bond yields and inflation, according to Jefferies. In this context, analysts at the bank named Credit Agricole and ING among their top picks. Goldman Sachs, also bullish on European banks, said the sector had improved its capital positions since the Global Financial Crisis and the "regulatory drag has lessened." Ericsson is another favorite for a number of the analysts, who expect 5G equipment spending to remain strong in Europe. "Both Ericsson and Nokia should also benefit from share gains due to geopolitical issues given that China is now minor to both companies sales starting in 2022," analysts at J.P. Morgan added. Meanwhile, analysts at Goldman said that 5G momentum and solid gross margins were supportive of its "buy" recommendation on Ericsson. When it comes to tech companies, Dutch payment company Adyen is "the company to beat in enterprise payments," according to JPMorgan, who described it as their top pick in this sub-sector.
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Analysts from investment banks including Goldman Sachs and JPMorgan are bullish on Europe right now. Here are some of their favorite stocks going into 2022.