With the second half kicking off, Bank of America is noting its top long picks along with one short for the third quarter. In the first half of the year, the mania for all things tied to artificial intelligence bolstered the performance of stocks such as Nvidia and drove up the S & P 500 by nearly 15%. The Nasdaq Composite also saw first-half gains, rallying 18.1%. The Dow Jones Industrial Average underperformed, however, moving 3.8% higher due to a pullback in the second quarter. Here are some of Bank of America’s top individual stock picks entering the back half of the year: In the aftermath of layoffs and restructuring at Spotify in 2023, BofA now sees business conditions turning around. Spotify has several instruments to boost free cash flow, analyst Jessica Reif Ehrlich wrote. Among those catalysts are recent price increases, sustained subscriber growth and a podcast-driven improvement in advertising, she wrote. “The company clearly is at an inflection point which is driving share price performance over the past year and a half,” Reif Ehrlich wrote. Shares of Spotify are ahead 68% in 2024 and 224% in the past two years. On Tuesday, BofA increased its price target on the stock, calling for 21% upside. The bank sees second quarter revenue coming in above Spotify’s previous guidance, and other yardsticks such as premium subscribers at least matching company forecasts. Bank of America is also bullish on Goldman Sachs , seeing it as a way to gain exposure not only to a cyclical recovery in investment banking activity, but also secular themes such as increasing AI adoption. BofA’s price target of $525 implies 13% upside from Monday’s close. Goldman’s obviously explosed to an investment banking rebound, and is the “most leveraged” among the big banks, but is too expensive after a recent rally, Seaport Research Partners worote in a report on Tuesday note . Seaport downgraded GS to neutral from buy. The Wall Street bank has surged almost 21% this year. Automotive retailer AutoNation and railroad operator Union Pacific were also touted as recommendations for the third quarter. Conversely, Bank of America named CarMax , another auto retailer, its short idea for the quarter. The firm’s $50 price target implies nearly 30% downside from Monday’s close. Analyst John Murphy sees multiple headwinds ahead for CarMax, including challenging supplies of late model used cars, which the bank expects to last beyond 2025. “Unlike franchised dealers, KMX has limited offsets to the challenging used market,” he wrote.
