The S&P 500 has shown remarkable strength in 2024, largely driven by the tech sector’s robust performance, especially companies benefiting from the surging demand in artificial intelligence (AI).
Despite ongoing concerns about inflation and the possibility of high interest rates, the index is up 10% year-to-date. It reaches a fresh record high almost every week. This robust momentum is significantly attributed to the strong showing of tech stocks, underpinned by the potential of AI to allow businesses to meaningfully cut costs and boost profits and margins.
At the forefront of this revolution are companies like Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT), which have capitalized on AI optimism the best so far.
Goldman Sachs said in a note, “although AI optimism appears high, long-term growth expectations and valuations for the largest (technology, media and telecom) TMT stocks are still far from ‘bubble’ territory.”
The investment giant sees the index potentially hitting as much as 6,000 if mega-cap tech companies continue to deliver. Similarly, Oppenheimer Asset Management boosted its price target on the S&P 500 to 5,500, which is the highest among the big brokerage firms on the Street. It may have to lift it again “should this economic and market outlook prove us too conservative in our projections.”
Below, we dive into three stocks generating buzz among analysts.
Micron (MU)
Micron Technology (NYSE:MU) is a leading global producer of computer memory and data storage solutions, including dynamic random-access memory (DRAM), flash memory and USB flash drives. While its stock struggled in 2022 and somewhat in 2023, Micron forcefully opened the new year with its latest earnings report facilitating a 20%+ move in its shares.
Micron exceeded expectations in its second-quarter financial results after reporting adjusted revenue of $5.82 billion, marking a 58% increase from the previous year and surpassing the analyst estimate of $5.35 billion.
Adjusted earnings per share (EPS) came in at 42 cents, a substantial improvement from a loss of $1.91 per share the prior year, and better than the anticipated loss of 24 cents per share. Adjusted operating income turned around from a $2.08 billion loss to $204 million, against an expected loss of $238.4 million.
In the aftermath of the strong earnings report, analysts at Fox Advisors and Argus raised their ratings on Micron, according to StreetInsider’s rating platform. This is because Micron has emerged as a high-quality AI play thanks to the surging demand for HBM (high bandwidth memory) in the data center market.
“We see value in the MU shares in the early stage of broad-based memory demand growth. MU investors should be aware of the risks of investing in memory technology, where volatile pricing tends to drive big stock swings,” Argus analysts said.
Oracle (ORCL)
Oracle Corp (NYSE:ORCL) is another stock generating buzz among analysts. The tech leader is a major computer technology corporation specializing in database software and technology, cloud-engineered systems and enterprise software products –particularly its own brands of database management systems.
Oracle stock has surged in recent months as the company proved to be a pivotal player in the development of cloud computing solutions, which are closely linked with the breakthrough generative AI technology.
Similar to Micron, Oracle recently posted a better-than-expected earnings report. The company saw adjusted revenue of $13.28 billion, marking a 7.1% increase year-over-year (YoY). Adjusted EPS rose to $1.41 from $1.22 the previous year, surpassing the estimated $1.38.
Notably, Oracle’s cloud revenue, combining infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS), reached $5.1 billion, reflecting a significant 24% growth annually, slightly above the $5.06 billion forecast.
Following this report, analysts at Argus and William Blair lifted their recommendation on ORCL stock.
“In our view, the positive demand commentary and strong bookings growth undergird the structural shift at Oracle that positions the company well for a sustained acceleration in top-line growth,” William Blair analysts said.
Instacart (CART)
Instacart (NASDAQ:CART), or Maplebear Inc., is a leading grocery delivery and pick-up service that connects customers with personal shoppers who buy and deliver groceries from local stores.
The company went public last year in an much-anticipated initial public offering (IPO). Analysts are increasingly bullish on CART with those at Bernstein recently moving their recommendation on the stock to Outperform.
“Q1 guidance implies HSD to LDD GTV growth is feasible near-term, yet consensus has written off the possibility of >10%. Instead, the Street is holding CART to 5-6% GTV growth for the foreseeable future. We think Q2 or Q3 guidance can be the catalyst to drive positive GTV revisions,” analysts said.
More recently, Macquarie analysts initiated research coverage on CART shares with an Overweight rating as they argue the company “is well positioned to capture the slew of retail media ad dollars that continue to shift to the digital medium.”
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
