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S&P 500 Could Reach All-Time High in 2024, Says J.P. Morgan Strategist — Here Are 2 Top Stocks to Bet on It

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The market landscape for 4Q23 is starting to emerge through the fog, and some of the experts at banking giant J.P. Morgan are pleased with what they’re seeing.

Despite an end-of-September sell-off sparked by the Fed’s indications of ‘higher rates for longer,’ JPMorgan Global Wealth Management global investment strategist, AJ Oden, believes the S&P 500 will hit a record high next year. According to Oden, the S&P may gain as much as 11% by the middle of next year, to reach above 4,800.

Backing his thesis, Oden points out two factors in particular supporting this thesis. First, Oden expects that, despite Jerome Powell’s recent statements, the Federal Reserve will shift to rate cuts sooner rather than later, and that pivot will be bullish for stocks. And second, Oden notes that consumer spending has remained robust in recent months, even in the more restricted credit environment caused by the Fed’s tighter monetary policies.

So, with that positive outlook in tow, the question is, which equities should investors be loading up on at present? The J.P. Morgan analysts have been busy seeking out those names and have homed in on two they think make good additions to a portfolio in this environment.

And they are not alone; according to TipRanks’ database, both are also rated as ‘Strong Buy’ by the analyst consensus. Let’s see why they are drawing plaudits across the board.

DraftKings Inc. (DKNG)

We’ll start in the world of online betting, with DraftKings, a leading firm in the realm of online sports betting and fantasy sports leagues. DraftKings offers customers a wide range of products, including online casino gaming, a comprehensive sports betting package, and a popular fantasy sports league, covering most of the professional sports – American football, baseball, basketball, hockey, international soccer, and even college basketball. It’s all in line with the company’s belief that customers will enjoy the event more if they have skin in the game.

DraftKings is always looking to expand its offerings and its footprint, quick to take advantage of changing legal regimes in the various states. Just last month, the company entered the Pennsylvania online casino market when its subsidiary, Golden Nugget Online Gaming, launched both online and mobile casino products in that state. And, DraftKings will be launching its mobile sportsbook products in Kentucky as of September 28, in a move that will make online sports betting available to Kentuckians.

Sports and betting have always been popular, and the combination is a natural winner. DraftKings has seen its revenues take a mostly upward trajectory over the last several quarters. This was clear in the last set of quarterly financial results, from 2Q23, in which the company showed a top line of $875 million, for an 88% year-over-year increase. The revenue total also beat the analyst forecast by over $112.16 million.

At the bottom line, DraftKings ran a net profit for the quarter, with a non-GAAP EPS of 14 cents per share. The net-positive EPS was 28 cents per share better than had been anticipated, and marked a strong turnaround from the 29-cent EPS loss reported in 2Q22.

More importantly, for the outlook on the company, DraftKings raised its 2023 full-year revenue guidance by $315 million at the midpoint, bringing it up to $3.5 billion. The guidance update points toward a full-year revenue gain of 56% at the midpoint.

For J.P. Morgan analyst Joseph Greff, the key point here is DraftKings’ expansion, which he sees bringing not just the advantages of more business, but also lower per capita cost of customer acquisition at scale.

“DKNG stands to benefit from a continued increase in market share from higher hold rates (driven by parlay mix and better risk/ trading) and improved loyalty (from brand recognition, trust, and product enhancements). Customer acquisition costs can continue declining as national scale is achieved and sales/marketing costs fall precipitously. These translate to better flow-through and rapid EBITDA margin expansion,” Greff opined.

The 5-star analyst goes on to add, “We think DKNG has a strong moat (product, scale, brand) that should allow it to compete against new entrants like PENN’s ESPNBet and Fanatics, much like it competed against Caesars.”

For Greff, these comments support an Overweight (i.e. Buy) rating on DKNG shares, while his price target of $37 implies a one-year gain of 24%. (To watch Greff’s track record, click here)

With 25 recent analyst reviews on file, breaking down to 20 Buys, 4 Holds, and 1 Sell, DraftKings gets a Strong Buy from the analyst consensus. The shares are trading for $29.74 with a $36.60 average price target, pointing toward a 23% upside potential in the next 12 months (See DKNG stock forecast)

First Citizens BancShares (FCNCA)

The second JPM pick we’ll look at comes from the retail and commercial banking sector. Based in Raleigh, North Carolina, First Citizens BancShares is a holding company, the owner of First Citizens Bank. The bank has over $200 billion in total assets, and its network of branches extends to 500 locations across 23 states. First Citizens’ largest presence is in the Carolinas, Virginia, Georgia, and Florida, where it has nearly 900 branches and ATM machines – but it also has 122 branches and cash machines in California.

Through this network of locations, the bank offers its customers a full range of services, including personal banking with checking and savings options, home loans, credit cards, and retail and commercial loans. Digital banking, with a mobile app, allows customers to easily track transactions and move funds as needed. The bank also offers specialized services tailored for small businesses.

Banks have not had a happy time this year. The smaller regional banks took a hard scare in the spring, when the failure of Silicon Valley Bank sparked a – fortunately short-lived – banking crisis. While the situation has stabilized, the NASDAQ bank index is down 25% year-to-date.

First Citizens, however, has outperformed. FCNCA shares are up 83% over that same period. In part, this comes from a major boost the company – and its stock – received in March of this year, when First Citizens acquired through purchase and assumption all deposits and loans of the failed SVB. According to the FDIC, First Citizens acquired $72 billion in assets at a discount price of $16.5 billion.

In the second quarter of this year, the company delivered strong financial results. Revenues jumped 146% year-over-year, to $2.42 billion, beating the forecasts by $80 million. The revenue total included the net interest income of $1.96 billion, which was up an impressive $1.11 billion year-over-year. At the bottom line, the bank company’s non-GAAP earnings per diluted share came to $52.60, or $4.45 ahead of expectations.

Taking note of the company’s strength, JPMorgan analyst Steven Alexopoulos writes: “With First Citizens acquiring many parts of SVB’s business in late March from the FDIC, while SVB failed due to management actions, we believe the underlying business at SVB was among the most valuable in the U.S. with the company being the bank of the innovation economy.”

Alexopoulos sees that acquisition as a true gain for First Citizens, and believes that the bank’s management will act accordingly: “As we evaluate the combination of the First Citizens management team being one that thinks and acts for the long term with the opportunity for SVB to regain its former self, we are optimistic that the best days for the SVB franchise might be ahead.”

Quantifying this stance, Alexopoulos rates First Citizens shares an Overweight (i.e. Buy), and is $1,850 price target suggests the shares will gain 33% on the one-year time frame. (To watch Alexopoulos’ track record, click here)

Overall, there are 3 recent analyst reviews here, and they are all positive – making the Strong Buy consensus rating unanimous. The stock is priced at $1,391 and its $1,716.67 average price target implies a potential one-year upside of ~23%. (See FCNCA stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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