Stocks have momentum if seasonal headwinds flare up
A handful of stocks backed by momentum, bullish sentiment and strong buybacks could help investors weather the rest of September and any storms that blow in October. September has traditionally been the worst month of the year for the S&P 500 since 1950, according to data from the Stock Trader’s Almanac. The broad market index has fallen an average of 0.7% each September. The three major averages started the month on a sour note. But after the Federal Reserve cut interest rates by half a percentage point on Wednesday, stocks have continued to weather the traditional seasonal headwinds that September typically brings. The S&P 500 is up about 1.5% so far this week and more than 1% for September. The problem is that stocks aren’t out of the woods yet. October is also known for big drops. With that seasonal volatility in mind, Evercore ISI has been screening for stocks that could continue to outperform in the current environment. The investment bank has screened the Russell 3000 for stocks that are in the top quintile for momentum, sentiment, and acquisitions. These companies also need to have a market capitalization of at least $2 billion and a share price of at least $5. Here are some of the names that made it onto Evercore ISI’s screen. One company that made it onto Evercore ISI’s screen is mobile technology company AppLovin. The stock is up 209% through 2024. UBS upgraded AppLovin from neutral to buy this week. The bank cited improved visibility into medium-term revenue growth, supportive valuations, and potential opportunities in gaming and e-commerce as catalysts. While Wall Street is broadly bullish on the name, the consensus price target calls for about 15% downside from current levels, according to LSEG. However, one firm, BTIG, has a $150 price target on AppLovin, the highest among analysts polled by FactSet. Financial trading platform Robinhood, which has soared 80% by 2024, has also risen on Evercore ISI’s screen. Eight of the 17 analysts covering the stock rate it a hold, with the average price target suggesting a 5% upside, according to LSEG. Barclays upgraded Robinhood from underweight to equal weight earlier this month, with analyst Benjamin Budish pointing to its maturing business model and potential top-line catalysts. Robinhood announced a $1 billion share buyback program earlier this year. Evercore ISI also highlighted Sprouts Farmers Market as a potential outperformer. Shares of the organic-focused grocery retailer have soared about 118% so far this year. Evercore ISI upgraded Sprouts to outperform from equal this week. Analyst Michael Montani wrote that Sprouts could benefit from healthier eating trends, and his $125 price target is the highest on Wall Street, according to FactSet data. However, 13 of the 16 analysts covering the stock still rate it hold, according to LSEG, and the consensus price target suggests a nearly 9% downside.
