As the second quarter kicks off, Wells Fargo’s equity research team has some favorite long plays. Stocks capped a winning — yet tumultuous — quarter at the end of last week, with the three major indexes ending up in a turn from 2022’s selloff. The Nasdaq Composite led the averages up with a 16.8% gain for its best quarter since 2020 as investors bet that growth stocks would fare better in the new year. But it wasn’t an easy ascent. The bank crisis sparked by the closure of Silicon Valley Bank made investors pessimistic on regional banks and other financial names, and the CBOE Volatility Index , Wall Street’s preferred measure of fear in the stock market, neared levels considered highly risky. The broad S & P 500 index at one point last month had given up all of its first-quarter gains, but was able to rally and end the quarter up 7%. By comparison, the Dow Jones Industrial Average posted a relatively modest 0.4% gain in the quarter. As investors look to keep the winning spirit alive in the new quarter, Wells Fargo’s equity research team compiled a list of best long plays. Here’s five that made the list, along with year-to-date performance and the firm’s expected upsides for each: Western Alliance Bancorp is due for a rebound after dropping around 44% last year and notching another nearly 40% drop in 2023, Wells Fargo said. The firm’s price target implies the stock could rally 86.6% from Monday’s close. The regional bank took a 52% hit in March as investors grew skittish amid the broader industry crisis, pulling down the SPDR S & P Regional Banking ETF (KRE) , which lost nearly 29%. But Wells Fargo said the company could absorb incremental market share following Silicon Valley Bank’s closure given its position in the technology sector and sophisticated management. In fact, Western Alliance’s granularity and diversity within the deposit base can also provide evidence that it’s not experiencing massive deposit outflows, the firm said. Around 40% of the deposit base is under separate brands, Wells Fargo said, and 28% of deposits are tied to notably resilient homeowners associations and mortgage warehouse businesses. “As we’ve heard from other banks, this should help eliminate some of the headline risk with the Western Alliance name and stock movement,” the firm said of the 40% figure. WAL KRE YTD mountain Western Alliance and the KRE regional banking ETF Intuit has a seasonally strong fiscal third quarter with the tax filling deadline, which this year is on April 18 , according to Wells Fargo. The firm said the company has a historical pattern of raising its full-year earnings per share expectations, and could raise both full-year earnings per share and revenue guidance despite challenges to the broader economy. “We think INTU is among the most well-positioned in our coverage to weather any macro-induced storm given the certainty of taxes, US-centric business exposure, inbound model + virtual expertise, and valuation support,” the firm said. Intuit has gained 12% since the 2023 calendar year began, regaining some ground after dropping nearly 40% in 2022. Wells Fargo expects the stock to gain another 19.1% over the next 12 months, as of Monday’s close. Spotify will likely introduce a price increase within the U.S. in the second or third quarter, Wells Fargo said. While investors may sell the stock on the news of an increase, it could lead to greater margin expansion than investors expect. Price negotiations with music artists could also impact margins, the firm said. “SPOT has always been a strong consumer product, so the transition is about becoming a stronger business in the eyes of the market,” Wells Fargo’s research team said. Analyst Steve Cahall upgraded the stock to overweight from equal weight in February, saying the stock was “off margin probation.” Just over half of analysts rate the stock a buy, according to Refinitiv. The stock has surged about 70% this year after tumbling 66.3% in 2022. Wells Fargo expects shares could rally almost 32% over the next year. Meanwhile, the firm is underweight on Paramount Global and expects the stock to lose almost 50% from where it finished Monday’s session in the next year. Paramount struggles from industry-wide challenges such as the decline of linear, while also struggling to scale its direct-to-consumer offerings to reach profitability, Wells Fargo said. It added that the company’s current direct-to-consumer business is set to hit peak losses this year with no path to breaking even in sight. “PARA is in the cross-hairs of Media sector challenges,” the firm said, adding that the stock trades at a premium to competitor Warner Bros. Discovery . — CNBC’s Michael Bloom contributed to this report
