by Analysts at Bank of America named a number of companies this week that they believe are gaining market share in this tough economic environment, giving stocks more room to run. This was a common theme in the latest Bank of America survey, in which the firm named a number of stocks positioned to increase market share. They include: Analog Devices, TJX Companies, Zeta Global, Costco and Union Pacific. TJX Companies The discount retailer has room to grow, especially as shoppers look to save money by shopping down, according to analyst Lorraine Hutchinson. Shares in the company have risen 18 per cent in the past year. “Our buy rating reflects our view that TJX will continue to grow its companies domestically as it captures new customers with strong inventory management and excellent execution,” she said. Hutchinson highlighted TJX’s leadership, noting their track record of delivering for consumers and shareholders. “We see potential upside for compensation and margins if the traffic momentum continues,” she said. TJX is also coming off a mostly mixed quarterly report, but the analyst said investors should remain calm and look past the results. Perhaps more importantly, Hutchinson still sees room for long-term growth. “We maintain our buy rating as we view TJX as a market share winner that is well positioned to benefit from the markdown and high level of inventory availability,” she said. The Costco big-box retailer is firing on all cylinders, the firm said after Costco released its second-quarter financial results report. “COST continues to drive traffic growth in F2Q through February,” analyst Robert Ohmes said. The company sees “strength in consumer goods and membership trends driving compounds,” he added. In fact, Jim Cramer’s Investing Club said it is the “best-run dealer” in the United States. Shares are up more than 4% this year, but Ohmes said the stock’s valuation remains attractive. Costco also sits on the firm’s prestigious top list. Bank of America also likes that Costco’s robust purchasing model goes along with “stable and growing EBITDA margins.” Ohmes said this gives the dealership a competitive edge over its peers. For these reasons, investors should buy the stock, he said. “We reiterate our buy and continue to view Costco as well-positioned LT given: Share gains driven by COST’s strong value proposition and price positioning,” he wrote. Zeta Global Analyst Koji Ikeda recently highlighted Zeta Global’s latest quarterly report, noting that the results demonstrate the strength of the company’s software marketing solutions. “In an environment where many marketing and advertising technology companies are seeing moderating customer spend, Zeta’s performance in the fourth quarter suggests that the platform delivers a strong value proposition,” Ikeda said. The analyst cited upside to revenue growth due to healthy customer additions. “We believe the 4Q results support our view that the business is differentiated, which should result in continued good execution and upside potential to estimates,” Ikeda added. The firm said that traffic growth on the platform over time leads to greater profitability and additional revenue. “We believe Zeta Global has the potential to be a share winner of digital marketing and advertising budgets,” Ikeda said. The shares are up almost 35 percent this year. Analog Devices “Best-in-Class Stock Winner + FCF Leader. Repeat Buy, Raise PO to $230 (from $215) after another strong quarter highlighting resilience from auto demand and industrial diversity. … We rate ADI Buy on its growth projects in communications, automotive and industrial markets along with best-in-class free cash flow growth. We value ADI at the higher end of peers due to ADI’s growth potential and free cash flow generation.” Union Pacific “Raise to Buy; CEO Fritz steps aside with activist call for operational expertise. … On Sunday, UNP released a statement announcing that Chairman and CEO Lance Fritz would step down in 2023 just hours after activist investor Soroban Capital requested his departure. … We raise our PO to $241 from $218 at 20 times our 2024 EPS of $12.05, given increased confidence in a path to operational improvement, and potential for accelerating gains.” Costco “COST continues to drive traffic growth in F2Q and through February…strength and membership trends for consumer goods boost comps….We reiterate our buy (and addition to BofA’s US 1 list) and continue to view Costco as well-positioned LT given: 1) Equity gains driven by COST’s strong value proposition and price positioning, 2) potential store acceleration given surplus demand, 3) competitive advantages offered by COST’s procurement model, 4) stable and growing EBITDA margin and 5) attractive valuation vs. all-time high ROIC.” TJX Companies “We maintain our Buy rating. We view TJX as a market share winner that is well positioned to take advantage of the markdown and high level of inventory availability. …. We see potential upside to comp and margins if traffic momentum continues …. Buy – our rating reflects our view that TJX will continue to grow its companies domestically as it captures new customers with strong inventory management and excellent execution.” Zeta Global “In an environment where many marketing and advertising technology companies are experiencing a moderation in customer spend, Zeta’s fourth quarter performance suggests that the platform delivers a strong value proposition. … We believe 4Q’s results support our view that the business is differentiated, which should result in continuous good execution and upside potential to estimates. … We believe Zeta Global has the potential to be a share winner of digital marketing and advertising budgets…”
Stocks like TJX and COST have more room to run
