Bank of America analysts said this week there are several stocks every investor must own for 2023. The bank said these companies are attractively valued and well positioned, even in a deteriorating macroeconomic climate. CNBC Pro combed through Bank of America research to find its top stocks to own this year. They include Goldman Sachs, Morgan Stanley, Wallbox , Radian Group, Tapestry and Starbucks. Starbucks Shares of the global coffee chain are up 6% already in 2023, but analyst Sara Senatore says clients should buy the stock now. Bank of America says China reopening is a positive catalyst likely to send Starbucks shares higher. “Now that China has largely abandoned its zero-Covid policy, SBUX appears poised to benefit from China’s long awaited economic reopening…,” she wrote. Senatore says the timing of this tailwind is unknown, but the overhang has been removed with the lockdowns in China largely over. Sales levels should recover to “~60-70% of normalized levels in 2023,” Senatore wrote. Starbucks has the “brand, scale, [and] tech” to position for a “strong rebound” she went on, adding that the digital opportunity is especially robust. “SBUX’s transitory China challenges and U.S. margin pressure create a particularly attractive buying opportunity,” she said. Tapestry The owner of Coach and Kate Spade is firing on all cylinders, according to analyst Lorraine Hutchinson. Shares are up more than 25% over the last six months and Bank of America calls Tapestry one of its best ideas for 2023. “Coach has posted three consecutive years of successful average unit retail gains by adding content to the products, cutting choice count by 40%, reducing promotions and making smarter use of discounting,” Hutchinson said, referring to the average selling price of a product. Bank of America sees a long runway for higher pricing, noting that there’s been no obvious pushback from consumers. Hutchinson also says Tapestry’s profit margin outlook looks “positive.” “TPR’s long-term gross margin target of 71% looks very achievable, if not beatable,” Bank of America said. Add in consistent free-cash flow and the stock deserves a long look from investors, Hutchinson wrote. “Tapestry remains a top pick given our view of its sustainable pricing power and solid capital return plan,” she said. Wallbox Shares of Barcelona-based Wallbox are down 70% over the last year, but analyst Marianne Bulot and team say it’s time to buy the dip. After the underperformance, Bank of America says it’s bullish on the electric vehicle charging company’s prospects for growth, particularly in the United States. Even as electric vehicle sales lag globally, the pace of adoption in the U.S. continues to pick up year over year, according to Bulot. “We forecast the North American region will account for [circa] 21% of the group sales in 2022, c40% in 2026 & c48% in 2030,” she said. The bank said “political ambition means opportunity,” particularly with respect to last year’s passage of the Inflation Reduction Act. With a price target of $11 per share, the stock’s valuation is just too “attractive” to ignore at these levels, she wrote. “Strong growth prospects, position in the U.S. and continued gross margin strength sets Wallbox well apart from its peers,” Bulot wrote. Starbucks “Now that China has largely abandoned its zero-Covid policy, SBUX appears poised to benefit from China’s long awaited economic reopening, though we note that the timing of this tailwind is still uncertain as the economy struggles with the fallout of policies. … .Brand, scale, tech all position SBUX for strong rebound. … .We expect that China will recover to ~60-70% of normalized levels in 2023. … SBUX’s transitory China challenges & U.S. margin pressure create a particularly attractive buying opportunity.” Morgan Stanley & Goldman Sachs “Buy-rated Goldman Sachs-GS and Morgan Stanley-MS enter 2023 with investors laser focused on the ability of both management teams to defend ROTCE (return on tangible common equity) in a tough investment banking backdrop. Positively, the limited credit risk and interest rate sensitivity relative to the Main Street banking peers positions both stocks attractively heading into a potential U.S. recession.” Tapestry “Tapestry remains a top pick given our view of its sustainable pricing power and solid capital return plan. …Coach has posted three consecutive years of successful average unit retail gains by adding content to the products, cutting choice count by 40%, reducing promotions and making smarter use of discounting. …Margin outlook is positive… TPR’s long-term gross margin target of 71% looks very achievable, if not beatable.” Radian Group “We upgrade mortgage insurer Radian Group to Buy from Neutral following recent weakness in the stock. RDN currently trades at about 6.0x our 2023e EPS estimate and 78% of book value. At the current valuation, we think that RDN shares could offer an attractive 34% total return to our price objective from a combination of price appreciation and dividends. We view risk/reward as favorable, and we upgrade to Buy from Neutral. … .Current valuation is historically attractive.” Wallbox “We forecast the North American region will account for [circa] 21% of the group sales in 2022, c40% in 2026 & c48% in 2030. … .Strong growth prospects , position in the U.S. and continued gross margin strength sets Wallbox well apart from its peers. U.S. still behind but political ambition means opportunity. …Valuation remains attractive.”
