Starting with financial companies on the 14th (local time), global companies’ earnings season in the first quarter of 2023 began. Bank of America (BoA), a global investment bank, recommended the purchase of five companies that are expected to perform well beyond expectations. Analysts say that the current stock price is too undervalued compared to the profit outlook.
According to CNBC on the 16th, the BoA recommended five companies whose EPS estimates exceed the market consensus (average forecast) while maintaining their “buy opinion” among the stocks included in the S&P 500 index. U.S. refiner Marathon Petroleum, German pharmaceutical company Merck, U.S. medical device maker LesMed, and global reinsurers Everest Re Group and Arch Capital Group were on the list.
BoA has raised the price target for these companies by $3 to $60 above the current price. Everest Re Group has a price target of $427.43, which is a whopping $64.71 above the current price of $362.72. Marathon Petroleum predicted that its stock price has already risen 11.6% this year, which could rise further by 17.6% in the future. Financial market information provider Refinitiv predicted that Merck’s stock price could also rise by an additional 13% over the next 12 months.
In addition, the BoA predicted that the stock price of Podpoint, a British electric charging infrastructure company, will also surge by 118% over the next year. The stock price of the company listed on the London Stock Exchange is 0.8 pounds (as of the closing price on the 13th), and the BoA raised its target price to 1.74 pounds. This is the result of an increase in sales of electric vehicles (EVs) in the UK from 2023 to 2025, which is 3-4% higher than expected as of February.
However, BoA’s outlook for the stock market as a whole for the rest of the year is pessimistic. This year’s EPS estimate for S&P 500 companies has fallen 13% to $220.00 since June last year. The BoA offered a lower price of $200. In the first quarter alone, the drop rate is 6%, and considering the possibility of an economic slowdown, the fall is expected to be even greater. In fact, since the economic downturn in the early 2000s, the quarterly EPS forecast has fallen for five consecutive quarters, and the average drop was 12%. Since the 2008 global financial crisis, it has fallen by an average of 20% for six consecutive quarters.
