S&P 500’s robust performance in the first 100 days of 2024 suggests a bullish outlook for the remainder of the year, according to Bank of America (NYSE:BAC) analysts. As markets continue to grind higher, Wall Street analysts are actively issuing analyst upgrades, revisiting their research coverage to update ratings and reflect the optimistic market trends.
According to BofA, when the S&P 500 rises more than 10% within the first 100 days, the index typically continues to perform well, with a 76% probability of further gains and an average return of 7.1%. The bank projects the S&P 500 could reach between 5640 and 5750 by the end of 2024.
“When the SPX trades higher over the first 100 days of a Presidential election year, the rest of the year tends to be strong with the index up 93% on an average return of 10.1% (SPX 5800) and a median return of 8.9% (SPX 5730),” the analysts said.
The markets hitting record highs come when hedge funds have started to sell U.S. equities at a rate not seen since early January. That marks a significant change after five consecutive weeks of net buying.
Goldman Sachs’ (NYSE:GS) analysis indicates this selling trend aligns with recent positive economic growth signs and a firm stance from the Federal Reserve, suggesting that interest rates may remain elevated for an extended period. The sell-off was broad-based, affecting all 11 U.S. sectors.
Despite the widespread declines, some stocks have shown remarkable resilience. Let’s now look at the top three stocks that have soared following significant analyst upgrades.
Microchip Technology (MCHP)
Mizuho analysts upgraded Microchip Technology (NASDAQ:MCHP) from Neutral to Buy, raising the price target from $85.00 to $115.00. Rakesh noted that Microchip has faced significant challenges, with three consecutive quarters of declining top-line guidance and gross margins dropping from 68% to 60%.
However, the analysts see potential for recovery as inventory levels begin to stabilize, potentially leading to improvements in the second half of 2024 and into 2025. Despite concerns about OEMs shifting from MCU to Arm-based processors, Mizuho remains optimistic.
“We believe MCHP could see tailwinds into 2025E with a cyclical recovery as MCUs and Analog supply chains improve,” the upgrade report said.
The analyst believes Microchip could benefit from a cyclical recovery in the MCU and analog supply chains, justifying the upgrade to Buy and the increased price target. Analysts also raised their rating on NXP Semiconductors (NASDAQ:NXPI).
DuPont de Nemours (DD)
Wells Fargo (NYSE:WFC) analysts issued significant upgrades for DuPont de Nemours (NYSE:DD), elevating it from Equal Weight to Overweight, with a price target increase from $80.00 to $103.00. The upgrade followed DuPont’s announcement that it will split into three publicly traded companies while the current CEO is set to retire.
The bank highlighted DuPont’s potential for consistent growth across economic cycles, which could drive multiple expansions — a challenging feat for diversified chemical companies. The analyst believes the company’s new entities will support mid-to-high teen multiples, reflecting stronger valuation metrics.
Although it might take two years to fully execute the planned transactions, Wells Fargo anticipates that volume growth for each business segment will accelerate early in an economic recovery. That acceleration typically results in outperformance for chemical companies, positioning DuPont favorably.
Micron Technology (MU)
Morgan Stanley (NYSE:MS) executed one of the more notable analyst upgrades, moving Micron Technology (NASDAQ:MU) from Underweight to Equal Weight, raising the price target from $98.00 to $130.00. Morgan Stanley was the biggest and only bear on the Street among large banks before admitting it was wrong on the memory chipmaker.
Despite viewing Micron as fundamentally overvalued based on long-term discounted cash flow metrics, the broker acknowledges the positive impact of high-bandwidth memory (HBM) on market sentiment. That sentiment is driving sustained pricing strength, and analyst Joseph Moore anticipates a potential positive earnings preannouncement this quarter.
While the outlook for Micron remains optimistic, the company has faced a significant challenge with a $445 million patent trial verdict in favor of Netlist (OTCMKTS:NLST). However, Micron continues focusing on its HBM product development and aims to secure a larger share of the growing AI and high-performance computing markets.
Although there are concerns that HBM supply may eventually become excessive, the market is still in the ramp-up phase. Additionally, Morgan Stanley is incrementally bullish on NAND flash memory, citing robust capital spending, which should be a significant growth driver next year.
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.
