The 4th quarter earnings reporting season is about halfway over the results are pretty clear. Q4 earnings growth was even worse than previously expected, and the outlook is dimming for the S&P 500 but the news is not all bad. Some of the companies hit worst by corrective action in 2022 are starting to bounce back, while others, not hit hard and in much better positions, are rallying on results and outlook.
The takeaway here is that Meta Platforms (NASDAQ: META), Netflix (NASDAQ: NFLX) and ONSemi’s (NASDAQ: ON) are the 3 most-upgraded stocks for the 1st month of 2023, and that is driving their price action.
Meta Platforms “Year of Efficiency”
Meta Platforms is the #1 most upgraded stock since 1/1/2023, with 36 analyst actions to its credit. The bulk of these commentaries came out in the wake of the Q4 release and include several upgrades and numerous price target increases that have both the sentiment and target trending higher.
The takeaway from the report, however, isn’t so much that Meta is out of the woods and growing but that business isn’t getting any worse and now they are focusing on profits.
The market wanted to hear that Mr. Zuckerburg would stop spending willy-nilly and that the company would tighten the hatches and control its cash burn. In this light, profitability will improve without revenue growth and set the company up for levered earnings growth should top-line strength become reinvigorated.
Also of note is a new $40 billion buyback authorization that is sure to help support sentiment and price action over the next year or 3.
Meta stock has formed a clear VEE bottom because of this activity. The stock is now back above a key resistance point and in a position to continue rebounding should the news improve. The risk for investors is that price action could move sideways over the next quarter or 2, or longer, or even pullback to test for firm support before it moves significantly higher. As it is, the analysts are looking for Meta to gain about $15 and trade near the $203 mark.
Netflix Gets Its Mojo Back
Investors wanted to hear from Netflix that its subscriber count was growing, new ad-tiers were working, and they got what they wanted. That’s resulted in a good 28 commentaries from the analysts, and most include price target increases or upgrades (there is 1 downgrade, FYI).
This activity has sentiment and price target firming, although the target assumes the stock is fairly valued. The takeaway, however, is the price target is trending higher again and most of the recent targets are above the consensus, including the latest, which is just shy of the highest target. That target is $440 and implies about 33% of the upside for this market.
ONSemi, The Right Stuff At The Right Time
ONSemi’s Q4 report proves that its shift toward OEM and industrial use cases is working. The shift has the company focused on products in demand today, unlike competitors with overly large exposure to consumer products and gaming. This means that ONSemi is growing and guiding for growth while most other chipmakers (not all) are forecasting a slowdown.
The analysts have picked up on this difference and are now upgrading the stock. The company has received 18 commentaries since the 1st of the year, and 16 came out following the Q4 results. They include 1 upgrade and 15 boosted targets with the sentiment firming and price target trending higher versus last month, last quarter and last year. This has the stock breaking out to new highs and on track to rally into the end of 2023.
