It’s not exactly easy for investors out there right now. For starters, there’s the current market turmoil surrounding the collapse of a number of regional banks. As if we needed that on top of the uncertainty over the direction of the broader economy and Federal Reserve interest rate policy. The recent volatility makes good stock picking all the more important. And if you can lean on research from one of the top investment banks in the world, why wouldn’t you? After all, there are no prizes for going it alone. Today we’ll be looking at three Morgan Stanley stocks you may want to consider.
| RACE | Ferrari | $260.06 |
| AMD | Advanced Micro Devices | $82.01 |
| MSFT | Microsoft | $253.92 |
Ferrari (RACE)
Today’s first pick from Morgan Stanley is Ferrari (NYSE:RACE). Earlier this month, the Italian luxury-car maker replaced Tesla (NASDAQ:TSLA) as the favorite U.S.-listed automaker of Morgan Stanley analyst Adam Jonas. According to Jonas, Ferrari has the “longest order backlog, greatest earnings visibility and highest pricing power of any company we cover.”
Jonas upped his price target on shares from $280 to $310, implying upside of 19% from current levels. With RACE trading just 5.4% below its 52-week high of $274.08, the chances of a breakout seem good. Over the past year, the stock has gained nearly 37%, and it is up 21% so far this year.
While shares may not be cheap, trading at 49 times earnings, the company has been delivering. For 2022, Ferrari reported strong results with a 13% year-over-year jump in profits and a record 13,221 vehicles delivered. What’s more, management said it expects 2023 to be an even better year amid “persistently high demand” for its high-end sports cars.
While Ferrari has yet to produce a fully electric vehicle, its hybrid models accounted for more than one-fifth of shipments in 2022. The company plans to launch an electric sportscar in 2025, with a goal of 40% of its production being fully electric vehicles by 2030.
“Building on their learnings from hybrid and applying the racing DNA, we believe Ferrari can offer an EV that will be just as high in demand as what investors are used to from internal combustion engines,” Morgan Stanley’s Jonas wrote.
Given Ferrari’s focus on high-end clientele, it may be the most recession-proof auto company today.
Advanced Micro Devices (AMD)
Next up is Morgan Stanley’s top chip stock for 2023: Advanced Micro Devices (NASDAQ:AMD). After a brutal sell-off in 2022, shares have rebounded, rising 27% year to date.
In December, Joseph Moore, who covers the semiconductor sector for Morgan Stanley, reaffirmed his “overweight” rating for AMD. Since Moore declared Advanced Micro Devices his top pick for 2023, over former pick Lam Research (NASDAQ:LCRX), shares have run past his $77 price target. However, according to TipRanks, the average analyst target for AMD is $93.18, implying upside of nearly 14%.
Advanced Micro Devices reported fourth-quarter earnings in late January, beating analyst estimates on the top and bottom lines. Revenue of $5.6 billion was up 16% year over year, while EPS of 69 cents came in 2 cents ahead of forecasts. The company did see a sharp drop in net income, though, to $21 million from $974 million in Q4 2021. Management also said it expects a 10% drop in sales for the first quarter of the fiscal year due to slowing consumer demand.
While AMD is not immune to the cyclical challenges of its industry, I think the stock will be a long-term winner. In addition to the strength the company has seen recently in its data center segment, with revenue up 42% year over year in Q4, Advanced Micro Devices should benefit from the CHIPS and Science Act enacted last year.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is another Morgan Stanley pick that makes an excellent addition to a long-term portfolio, providing both growth potential and stability. While the tech stock struggled last year, shares are up 168% over the past five years compared with a 40% gain for the S&P 500.
On Feb. 13, Morgan Stanley analyst Keith Weiss told clients that he expects to see five consecutive quarters of accelerating growth in earnings per share for Microsoft, which he said provides a “setup supportive of shares moving higher.”
Growth in data management and cloud services should provide a catalyst for the stock moving forward. The company recently extended its long-term partnership with OpenAI, the company behind ChatGPT. I believe this “multiyear, multibillion dollar investment to accelerate AI breakthroughs” will pay off in the long term and could drive more short-term interest in the stock as well.
Microsoft has also been making headlines with its new AI-powered Bing Chat feature, which helped drive the search engine’s daily active users above the 100-million mark.
Consider buying shares of MSFT while they are still on sale so you can reap the rewards of the company’s innovation and long-term growth.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.