July 1, 2022 The Goldman Sachs Group (NYSE:GS) and FedEx Corporation (NYSE:FDX)
With H1 2022 finally over, these high-quality names could be the best stocks to buy now.
In a fitting end for the worst first half for stocks since 1970, the Dow fell 0.82%, the S&P 500 0.88%, and the Nasdaq 1.33%. Yet, as investors try to find signals of a bottom, opportunities appear. Now is the chance to buy high-quality names with solid balance sheets and significant upside. Companies such as The Goldman Sachs Group (NYSE:GS) and FedEx Corporation (NYSE:FDX) sit as two of the best stocks to buy now.
First, Goldman Sachs enters the second half of the year with some momentum following a Bank of America upgrade. Yet Goldman remains severely undervalued as the world’s 2nd largest investment bank by revenue and a systemically important financial institution. With an upside as high as 74.74%, and the Fed preparing more rate hikes, get in now. After all, D.A. Davidson sees near-term upside for banking stocks, and Goldman is a prominent player.
Then there’s FedEx, another of the best stocks to buy now. Despite reporting mixed earnings last week (June 23, 2022), the Company released bullish guidance for 2023. Most importantly, however, is its recent analyst coverage. In the last 7 days, count it 7 days; FedEx has received 11 price targets, including 8 upgrades, with roughly 25-50% of upside. FedEx’s importance as a prominent air freight & logistics player in this environment cannot be understated. Fortunately, it’s at a mouth-watering level at a potential ground floor for H2.
We all understand how concerning the current climate is. However, fear is your best friend as an investor. Big companies with long-standing stable operations always win in the end. That’s why Goldman Sachs and FedEx are two of the best stocks to buy now.
The Goldman Sachs Group (NYSE:GS)
A recent BoA upgrade and $519.00 price target from Oppenheimer has the investment banking giant staring at an almost 75% upside.
Goldman Sachs is a prominent player in the capital markets industry and essential to the systemic functioning of the global financial order. With Investment Banking, Global Markets, Asset Management, and Consumer & Wealth Management divisions, Goldman is at the forefront of everything happening economically.
The stock has faced some severe headwinds. Inflation is the worst tax that people can experience and affects investment activity. Yet with the Fed preparing to hike rates again in July, September, and potentially beyond until inflation gets under control, it could benefit the stock price.
After all, with rates expected to end the year at 3.4%, the Fed is “hell-bent” on controlling inflation.
Moreover, according to the Company, stocks historically fall in the run-up to peak inflation and eventually rally.
Goldman Sachs knows what it’s talking about and has seen everything from the Great Depression to two World Wars, to COVID and today’s inflation, since its inception in 1869. It enters H2 at a very buyable level, with a significant upside.
Recent Earnings Beat Estimates Way More Than Its Competitors and Showed Stability in the Face of Turmoil
Goldman’s raw figures from their Q1 earnings may have marked year-over-year declines. However, amidst surging volatility and investor fears, Goldman Sachs beat top and bottom-line estimates, led mainly by its trading desk.
Revenue came in over a billion dollars ahead of estimates at $12.93 billion vs. $11.83 billion. Substantial activity in currencies and commodities sent Goldman’s fixed-income revenue to $4.72 billion, nearly $1.7 billion higher than analyst estimates. Equities desks also produced $3.15 billion in revenue, roughly $570 million higher than forecasts. Although much of these figures marked year-over-year declines, as mentioned, stability in the face of danger is why the Company’s revenue could have a 14.0% 5-year CAGR.
Moreover, EPS came in 21% ahead of estimates at $10.76 vs. $8.89.
Although CEO David Soloman acknowledged a “turbulent quarter,” Goldman’s position of strength compared to other big banks is undeniable. While JPMorgan Chase, Morgan Stanley, and Citigroup also beat analyst projections due to better-than-expected trading revenues, Goldman’s beat was the largest.
It Enters H2 With a Disruptive Partnership in the $300 Million Transaction Banking Space
As Goldman gears up for H2 2022, it announced a potentially transformative partnership with FinTech firm Derivative Path.
A similar 2021 partnership with Fiserv allowed the Company to provide its transaction banking and FX services to 12,000 banking, brokerage, and government clients. Partnering with Derivative Parth, though, could open doors to nearly 4,700 regional and community banks in the United States and credit unions. Goldman’s existing clients are primarily large corporations and governments.
With the $300 billion transaction banking space growing, Goldman’s foray into the industry could disrupt it as a “…FedEx tracker for payments,” according to the Company’s Global Head of Transaction Banking Products and Sales, Eduardo Vergara.
Aggressive Buybacks, Strong Margins, and a Dirt-Cheap Stock
As management continues aggressively buying back shares, Goldman sits as a potentially deep value play with strong fundamental margins.
A deep dive into its margins depicts an immensely profitable investment bank with solid operations and efficient returns from its equity. That tends to happen when you boast an 18.9% ROCE, 88.2% gross margin, and 44.7% operating margin.
GS is also a deep value play with fundamentals like this, and -28.02% below 2022 highs.
Consider also that the 2nd largest investment bank in the world by revenue trades with a dirt-cheap 5.3x trailing P/E, 7.4x forward P/E, 0.19 PEG, and 0.9x price-to-book.
That’s the definition of what it means to be one of the best stocks to buy now.
Don’t Overlook the Dividend, Either
Goldman Sachs currently offers its investors a 2.7% dividend yield. That sits nearly 2% higher than the sector average and is quite solid.
Furthermore, the likelihood that its dividend will grow is quite strong. Goldman has hiked its dividend for the last two years, and projections reveal potential growth of 60.0% at a 5-year 25.2% CAGR.
BoA Recent Upgrade Sees GS Offering “’Protection Against the Coming Storm…” Others See a 74.74% Upside
We may have been onto something when we called Goldman Sachs one of the best stocks to buy now. Several analysts seem to say the same thing.
This week, Goldman Sachs was a big market mover following Bank of America’s upgrade on Wednesday (June 29, 2022). Bank of America analyst Ebrahim Poonawala bumped his rating from NEUTRAL to BUY and price target from $360.00 to $380.00.
Why? Many of the same reasons we discussed, honestly.
He loves the stock’s valuation and risk/reward compared to its peers. He also sees it as providing “protection against the coming storm,” well-positioned to outperform in worsening economic conditions, and a company that could benefit from volatile geopolitics and tightening monetary policy.
While BoA’s price target gives the stock a nearly 28% upside from June 30, 2022’s $297.02 close, others see even bigger things for GS. Oppenheimer gave Goldman an OVERWEIGHT rating and street-high price target of $519.00 on May 3, 2022.
That gives the stock potentially 74.74% of room to run from $297.02.
In total, 11 Wall Street analysts over the last 3 months offered a 12-month price target for GS. As mentioned, its street-high forecast is $519.00. Its low currently sits at $360.00, while its average is $421.36 and represents a 41.86% upside from June 30, 2022’s closing price.
GS’s year-to-date low and high are $278.15 and $412.66, respectively.
The logistics and freight giant upped its 2023 guidance and saw 8 price target upgrades in the last week.
FedEx could be one of the most popular stocks for H2. Its updated 2023 guidance exceeded expectations, it saw shockingly bullish analyst activity, and it has mounting catalysts such as supply chain and logistics demand.
Yet beyond this, the Company is an absolute juggernaut, with several bullish technical indicators while trading at attractive levels.
Upgraded Guidance Could Send the Stock to Record Highs in H2
On the surface, FedEx’s latest earnings report from last week was underwhelming. Both EPS and revenue missed estimates.
However, that did not tell the full story. Revenue came in 8% higher year-over-year, EPS came in 37% higher year-over-year, and FedEx upgraded its 2023 guidance 6% ahead of expectations.
Analysts and investors chose to focus on this rather than missing estimates.
Shares of FedEx rose following the earnings report and could move even higher due to its guidance and aggressive buybacks. The Company reports $4.1 billion under its current authorization and plans to use $1.5 billion during the remainder of the year.
We will detail post-earnings analyst activity later. But let’s preview that by saying 12 price targets, including 8 upgrades in a matter of a week, don’t happen out of thin air.
Strong Margins, Stronger Dividends
FedEx is a logistics giant that’s been around for over 50 years. That in itself makes it one of the best stocks to buy now. In times of uncertainty, large companies with strong balance sheets and tried and true business models that stand the test of time are the way to go.
Several margins reflect that, including its
Helping the matter is its long-standing, strong dividend track record. FedEx currently boasts a 2.0% dividend yield and has hiked its dividend for 2 straight years. It could also grow another 76.9% at a 13.4% 5-year CAGR.
Discounted Valuations By Many Metrics
FedEx is also one of the best stocks to buy now because it trades at a bargain. It currently sits -15.02% below its 2022 highs and has many attractive multiples, including its
Several Technicals Signal a BUY, Too
Besides the stock’s attractive discount, BarChart identifies several technical indicators signaling a BUY, such as FDX’s
- 20-Day Moving Average
- 50-Day Moving Average
- 100-Day Moving Average
- 20-50 Day MACD Oscillator
- 20-100 Day MACD Oscillator
A STRONG BUY With Recent Analyst Upgrades Showing as Much as a 49.53% Upside
As mentioned, since FedEx reported earnings last week, it’s received 11 price targets, with 8 upgrades.
Just look at what analysts have done with FedEx since June 24, 2022:
- UBS Group $312.00 price target
- JPMorgan Chase & Co. $284.00 price target
- Bank of America price target from $276.00 to $287.00
- Deutsche Bank $320.00 price target
- KeyCorp OVERWEIGHT and price target from $300.00 to $325.00
- BMO Capital Markets price target from $270.00 to $280.00
- Credit Suisse Group OUTPERFORM and price target from $294.00 to $314.00
- Loop Capital BUY and price target from $328.00 to $339.00
- Barclays $320.00 price target
- Wells Fargo OVERWEIGHT and price target from $277.00 to $282.00
- Stephens OVERWEIGHT and price target from $285.00 to $295.00
To have these upgrades in one week when economic conditions are what they are is unprecedented. That alone should make this one of the best stocks to buy now. If everything goes as planned and FedEx approaches Loop Capital’s $339 street-high target, the stock could move 49.53% from June 30, 2022’s $226.71 close.
TipRanks also rates the stock a STRONG BUY. Out of 20 Wall Street analysts offering 12-month price targets for FedEx in the last 3 months, 17 rated it a BUY compared to 3 HOLD and 0 SELL. As discussed, FDX has a high forecast of $339.00. It has a low of $245.00 and an average of $300.21, representing a 32.42% upside from $226.71.
FDX’s year-to-date low and high are $192.82 and $266.79, respectively.