Bank of America reveals its top stocks ahead of earnings, including a favorite solar name

Published Sat, Jan 28 20238:19 AM EST

There still are plenty of stock-buying opportunities as earnings reports continue to roll out, according to Bank of America analysts. The firm is recommending a slew of companies that investors should own in advance of the company's quarterly results. CNBC Pro combed through Bank of America's recent research to find the most attractive stocks that are well-positoned ahead of their reports. They include: Grab , Urban Outfitters, Block, SolarEdge and Fox. Fox Buy shares of the "best positioned" company in media, analyst Jessica Reif Ehrlich said recently about Fox . The company is scheduled to report earnings in early February. Fox has the right mix of content to "drive relative outperformance vs. the market," said Reif Ehrlich, in a recent note to clients. She added, its news and sports programming are a "must-have" mix for some consumers. In addition, Reif Ehrlich said she likes the company's robust balance sheet and called its direct-to-consumer strategy "measured." The firm did admit that Fox is not totally immune to ad market pressures, but said it has the chops to weather the storm. "We anticipate FOX's F2Q23E will reflect the resiliency of Fox's portfolio but also show some signs of the softening macro environment," she said. Still, with shares down 9% over the past 52 weeks and significant free-cash flow generation, the stock remains most attractive, Reif Ehrlich wrote. Grab Holdings The Singapore-based tech company was recently upgraded to buy from neutral by analyst Sachin Salgaonkar. Shares of Grab, which offers deliveries, mobility and financial services through a mobile app, are down 35% over the last year. But Bank of America said the risk/reward is turning more "favorable." "We find Grab well positioned to balance revenue growth with profitability in both its core businesses— delivery & mobility," Salgaonkar said. Grab is also seeing a reduction in competition and its management is keenly focused on cost controls, he said. "We also believe that Grab's super-app gives it a competitive moat over peers and the ecosystem helps unlock synergies across its 4 divisions," he wrote. The balance sheet is also robust and Salgaonkar expects EBITDA profitability by 2025. The company is expected to report its earnings in mid-February. SolarEdge The solar products company is firing on all cylinders, according to analyst Julien Dumoulin-Smith. "Expecting beats across the board in 4Q22," he said ahead of SolarEdge's quarterly earnings report in mid-February. Dumoulin-Smith said the stock is in the "right place at the right time," and raised his price target to $382 per share from $367 earlier this week. "Into 4Q22, we have a Buy rating on SolarEdge Technologies, which we think appears poised to benefit from the macro environment, vs. sustained headwinds throughout 2022," he said. The firm said SolarEdge is obviously a beneficiary of the Inflation Reduction Act , but it also benefits from a stronger euro as it affords consumers more pricing power. "The recovery in EUR/USD modestly benefits SEDG's topline, resulting in a ~$20 mn revenue beat," he added. Shares are up more than 46% over the last year, but Dumoulin-Smith's higher price target suggests there is still room to run. "As tailwinds and structural improvements compound, it seems to us 4Q22 is a particularly attractive entry point for investors, now that SEDG has visibility into fundamental recovery," he wrote. Block The pandemic as well as new product introductions have led SQ's estimated TAM to increase from $60B (Square only) in 2017 to $190B in 2022. We maintain our Buy rating due to: 1) Cash App still has a long runway for growth 2) Square continues to gain traction upmarket and internationally, 3) SQ does not get enough credit for continued opex discipline and has stated its intention to remain disciplined in '23, and 4) crypto and BNPL together represented only 12% of gross profit in 3Q22. Fox "We anticipate FOX's F2Q23E will reflect the resiliency of Fox's portfolio but also show some signs of the softening macro environment. ... .While Fox's collection of sports & news assets should drive relative outperformance vs. market, Fox is not completely immune to the macro pressures in the advertising market. ... .We remain bullish on Fox as we believe it is: the best positioned media company to benefit from sports betting, has a more measured DTC strategy, is an owner of must-have news and sports Grab Holdings " We upgrade Grab to Buy from Neutral as we see risk-reward turning more favorable. Thesis: 1) We find Grab well positioned to balance revenue growth with profitability in both its core businesses - delivery & mobility. ... .We also believe that Grab's super-app gives it a competitive moat overs peers and the ecosystem helps unlock synergies across its 4 divisions." Urban Outfitters "Well positioned into F24 with better ability to chase. We reiterate our Buy rating on Urban Outfitters given our view that it is well positioned with cleaner inventory into F24 (C23), now that its agile supply chain is normalized. ... .Urban is one of the most appealing growth stories in specialty retail, in our opinion. Its three proven concepts each have room for margin expansion and its products are differentiated and compelling." SolarEdge "Expecting beats across the board in 4Q22. ... .Right place at the right time + structural benefits. ... .Into 4Q22, we have a Buy rating on SolarEdge, which we think appears poised to benefit from the macro environment, vs. sustained headwinds throughout 2022. ... .The recovery in EUR/USD modestly benefits SEDG's topline, resulting in a ~$20 mn revenue beat. ... .As tailwinds & structural improvements compound, it seems to us 4Q22 is a particularly attractive entry point for investors, now that SEDG has visibility into fundamental recovery."