Credit Suisse refreshed its “top of the crop” stock picks for August, betting on some big-name stocks as investors continue to feed the markets with optimism. Stocks have fared well after last year’s sell-off, with the broader market rising despite higher interest rates, several U.S. bank failures, fears of a potential recession and weaker corporate earnings. The S & P 500 has gained more than 16.6% this year—including a 3.1% increase in July alone. Credit Suisse recently highlighted several stocks the bank’s analysts think can outperform this month. Take a look at some of the names that made the cut. Analyst Stephen Ju expects e-retailer Amazon to begin reporting accelerating free cash flow growth this year as it returns to historical levels of its fulfillment capacity by 2024. Amazon’s paid unit growth outpaced the company’s shipping cost growth in the first quarter of this year—a trend that shows a rise in efficiency for the company, Ju noted. Amazon flew past the Street’s earnings expectations for the second quarter when it reported results last week. “It is increasingly clear that greater service levels in the form of faster delivery is leading to consumers assigning a higher value to Prime” memberships, Credit Suisse said. Amazon shares have climbed more than 66.2% in 2023. Credit Suisse has a price target of $176 per share, suggesting 26% upside from Friday’s close, even after Amazon’s 8.3% leap in response to Q2 results. Credit Suisse also named electronics manufacturer Flex Ltd. as a top pick. According to analyst Shannon Cross, Flex will see strong near-term revenue and earnings growth driven by structural changes — including renegotiated contracts, increased stock buybacks and pricing discipline — implemented by management. These changes have allowed Flex to improve execution, expand margins and gain new business, Cross said, leading her to estimate revenue for this year to grow 2% year-over-year. Another earningS catalyst for Flex is the company’s 66%-owned solar hardware maker Nextracker , which went public in February. Flex is outperforming the broad market since the start of 2022, when it climbed 17% before rallying another 26% so far in 2023. Cross’ price target of $36 implies 33% upside from Friday’s close. Merck may outperform based on an annual revenue and earnings per share growth forecast from 2021 to 2026 of 7% and 11%, respectively, the second highest growth rate among industry peers, analyst Trung Huynh wrote. “We believe this level of growth is low risk. With uncertain macro backdrop, we believe stocks with high near-term growth and relatively lower risk should significantly outperform lower-growth peers,” Merck posted second-quarter revenue last week that topped analyst estimates, boosted by strong sales of its cancer drug Keytruda and HPV vaccine Gardasil. Merck reported a quarterly loss, however, hurt by charges tied to its acquisition of Prometheus Biosciences earlier this year. Shares of the company are down 5.4% this year. Credit Suisse assigned a $126 price target on Merck, which implies 20% appreciation from Friday’s closing price. —CNBC’s Michael Bloom contributed to this report.
