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Apple Inc. CEO Tim Cook attends China Development Forum (CDF) 2018 at the Diaoyutai State Guesthouse on March 24, 2018 in Beijing, China. China Development Forum (CDF) 2018 is hosted by the Development Research Center of the State Council of China on March 24-26 in Beijing.
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The coronavirus continues to cause investor anxiety and market uncertainty, but Wall Street analysts told clients this week there’s still plenty of quality stocks to own.
CNBC combed through recent Wall Street research to find where analysts see buying opportunities amid the epidemic. The stocks include Apple, Qorvo, Kontoor Brands, Synopsys, ON Semiconductor, and Nike.
Kontoor Brands
Kontoor, the maker of Lee and Wrangler jeans, is likely to see some effect from the virus but the company’s growing global platform should keep it fairly insulated from any long-term damage according to one analyst.
“Despite the likelihood, near term, of transitory headwinds related to the coronavirus, we think KTB remains well positioned to achieve its ’20 and ’21 financial targets,” Susquehanna analyst Sam Poser said.
The firm also said the company’s strong management is another reason clients should own the stock.
“Patience is a virtue, and a stable strong dividend pays investors to wait,” he said.
The stock was down over 7% on the week.
Nike
Shares of Nike are down more than 4% over the last month, but Morgan Stanley says it’s still a great time to buy.
“Store closures will impact 3Q20 China sales results and may cause NKE to temper its full year revenue guidance,” the analyst warned.
The firm also said the virus could impact the company’s gross margin progress, but added that any of these headwinds would be temporary.
“We expect the market to look past this transitory challenge and would add to positions on any pullback,” they said.
Qorvo
Apple surprised analysts and investors earlier this week when it said that it wouldn’t meet its second-quarter revenue guidance as a result of the coronavirus.
That announcement caused a sell-off in chip stocks and left one firm concerned about the ramifications on one of the tech giant’s key suppliers, Qorvo. The company is a radio frequency chip supplier for the tech giant.
“This news will no doubt cause investors to question QRVO’s $800-$840M Mar-Q revenue guidance given on January 29, despite QRVO’s management addressing this topic last week at a conference and seemingly standing behind guidance,” Wells Fargo said in a note.
The firm urged investors to use caution and said that any supply chain issues would only be short term.
“We believe investors should buy on any weakness in QRVO’s shares on the heels of the announcement issued by Apple,” Wells said.
The stock was down over 7% on the week.
Here is a wrap of the stocks that have been hit by the coronavirus but analysts still say buy:
Synopsys- Buy rating, DA Davidson
“The Coronavirus is wreaking havoc across virtually every hardware company with exposure to China in terms of supply disruptions and (to a lesser degree) demand disruption. Despite this headwind, however, design activity remains robust and SNPS has had no ill effects. Given that the lumpy nature of the Hardware and IP business, we view the softer than expected F2Q (Apr.) guidance as a non issue and would instead focus on the solid FY20 outlook.”
ON Semiconductor- Strong Buy rating, Needham
“While three of its China back-end facilities have returned online, two are operating at sub-optimal levels of 60%, while the third is at 90%. Moreover, ON is seeing customer order push-outs into 2Q and a slowdown in the backlog (both disty and original equipment manufacturer) across all end markets. While mgt. didn’t quantify the impact, we believe it’s prudent to lower our rev and GM ests. to reflect this concern. … We believe the long-term drivers for GM expansion are powerful, namely the transition to 300mm and a favorable mix shift.”
Kontoor Brands- Positive rating, Susquehanna
“Despite the likelihood, near term, of transitory headwinds related to the coronavirus, we think KTB remains well positioned to achieve its ’20 and ’21 financial targets. The transition to one global operating platform should make the company more efficient in the foreseeable future. Hence, patience is a virtue, and a stable strong dividend pays investors to wait.”
Nike- Overweight rating, Morgan Stanley
“Store closures will impact 3Q20 China sales results and may cause NKE to temper its full year revenue guidance. We analyzed a range of outcomes with various revenue and EPS impacts. We expect the market to look past this transitory challenge and would add to positions on any pullback; reiterate OW. … We expect GM will be relatively unchanged given NKE’s low seasonal inventory obsolescence risk, and displaced 3Q20 demand could potentially become a 4Q20 revenue benefit. The coronavirus headwind should be temporary, but lost revenue in NKE’s highest EBIT margin geography could delay its margin expansion progress by a quarter. No change to our longterm thesis.”
Apple- Outperform rating, Baird
“Buyers on weakness. [Monday afternoon] Apple announced that it will not meet its FQ2 revenue guidance due to Coronavirus impacts in China – both supply and demand challenges. With the obvious greater focus on human health, the company noted that both iPhone manufacturing facilities and retail stores are opening more slowly than expected. Importantly, it also stated that demand outside of China remains strong and in line with expectations. Absent a longer running Coronavirus impact, we believe the broader story remains very much intact, and would be buyers on weakness.”
Qorvo- Overweight rating, Wells Fargo
“Late Monday, QRVO’s largest customer, Apple, announced it will not meet its original $63-$67 billion Mar-Q rev guidance issued on Jan 28. This news will no doubt cause investors to question QRVO’s $800-$840M Mar-Q rev guidance given on Jan 29, despite QRVO’s management addressing this topic last week at a conference and seemingly standing behind guidance. Although the coronavirus is still a serious issue yet to be fully controlled, we believe the supply chain issues and retail closures impacting the manufacture of, and demand for, smartphones in China may be temporary in nature. We believe investors should buy shares of QRVO on any weakness related to Apple’s news.”
