Key points
- The market’s sustained uptrend has led to a flurry of improving activity on Wall Street, including recent improvements in food stocks.
- A total return of 22.5% for a low-risk defensive stock like Hershey might be worth considering.
- This week, Northcoast Research upgraded Jack in the Box shares from Neutral to Buy with a $95.00 price target indicating 20% upside.
- 5 stocks we like better than Hershey
If this week ends as it began, the U.S. stock market will enter the weekend with new all-time highs.
Despite the light news flow, major indexes posted strong gains on Monday before taking a breather on Tuesday. Call it the calm before the storm.
Signs of a soft economic landing and hopes of an aggressive rate-cutting campaign by the Fed have helped the S&P 500 index close higher in 12 of the last 13 weeks. The closing bell arrives on Friday, will it be 1pm to 2pm?
It’s a bet.
The direction of the market could change dramatically in the coming days due to a number of important events:
- Mega-cap tech companies included Alphabet Inc. NASDAQ:GOOGL, Microsoft Corporation (NASDAQ:MSFT), The Apple company. NASDAQ:AAPL, Amazon.com Inc. (NASDAQ: AMZN) AND Meta Platform Inc. NASDAQ: META – report earnings mid-week. Each of them is an indicator of consumer and B2B activity, their results and outlook will likely have a major impact on the near-term path of the S&P index.
- The Federal Open Market Committee (FOMC) will meet on Wednesday. Although a rate cut is not expected, there is talk of an accommodative monetary policy. A surprise in one direction or the other could produce a big shift in investor sentiment.
- A three-day streak of jobs data concluding with Friday’s release of nonfarm payrolls will offer clues to the health of the U.S. labor market and the need (or lack of need) for rate cuts by the Fed.
Time will tell if the rampant bull still has fresh legs or is getting tired.
Meanwhile, a side effect of the market’s sustained uptrend has been a flurry of improving Wall Street activity. Does this make sense. If the national economy strengthens as expected, corporate earnings should do the same. But which improvements should investors pay more attention to?
At a sector level, IT is crushing it. Upgrades in this group, while potentially valuable, run the risk of chasing performance and paying high P/E multiples. Companies in sectors that have lagged the broader market, on the other hand, may be safer bets. On Tuesday, Morgan Stanley updated its financial peers Bank of America NYSE:BAC, Citigroup Inc. NYSE:C AND The Goldman Sachs Group NYSE:GS to overweight.
Another group receiving mass updates is food supplies. From snack makers to restaurants to distributors, food-related businesses have been the subject of several recent analyst updates. According to their new bulls, these two stocks have the best total return potential.
What’s the upside to Hershey stock?
Bernstein updated the Hershey Company on Monday NYSE:HSY from market perform to outperform. The analyst noted that the sales volume and market share performance of the leading US candy maker are improving.
Aside from the fact that Hershey is capitalizing on last year’s Mars candy recall setback, product innovation is a source of consumer demand and potential outperformance. Earlier this month, Hershey released Snoopy & Friends Kisses in time for Valentine’s Day. The first Reese’s Caramel Big Cup and the KIT KAT Chocolate Glazed Donut are other recent innovations. Bernstein also said rising cocoa and sugar prices (which are passed on to buyers) could drive stronger revenue growth in 2024.
Bernstein’s target of $235.00 equates to stock price appreciation of approximately 20% over the next 12 months. The pot gets sweeter when you add in Hershey’s 2.5% dividend yield. A total return of 22.5% for a defensive, low-risk candy maker might be worth considering.
Is Wall Street Bullish on JACK?
Wall Street has mixed opinions about Jack in the Box Inc. NASDAQ: JACK. Seven companies are bullish and ten are neutral. However, the quick-service burger chain gained ground this week when Northcoast Research upgraded its stock from Neutral to Buy. Northcoast has a $95.00 price target on JACK indicating 20% upside. Earlier this month, Loop Capital named the restaurant to its 2024 Best Ideas list with a much more ambitious goal of $120.
Northcoast’s update comes after Jack in the Box held its annual Investor Day on January 24. Like Hershey, innovation will be a key part of the company’s growth agenda. This month it introduced the Smashed Jack Burger, which beat out cyclical consumer favorites like McDonald’s Co. NYSE: MCDBurger King and Wendy’s Company NASDAQ: WED as the best fast food burger in a recent consumer taste test. Jack in the Box will look to “bounce back” from a disappointing fourth-quarter report when it announces fiscal 2024 first-quarter financials on Feb. 21.
Before you consider Hershey, you’ll want to hear this.
MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Hershey wasn’t on the list.
While Hershey currently has a “Hold” rating among analysts, top analysts believe these five stocks are better buys.
View the five stocks here
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