Stocks have rebounded off their recent lows, but lingering macroeconomic uncertainties have left some investors wary of diving back into the capital markets. With geopolitical tensions still a serious point of concern, traders are also weighing the policy implications of stubbornly high inflation and softening economic data.
However, with the Fed's rate-hike campaign expected to end next year, markets look ripe with potential buying opportunities right now. In this environment, investors may want to look for companies with attractive valuation metrics, reliable dividend yields, and top ratings from Wall Street analysts to help identify the top stocks to buy.
Here's a look at two stocks that fit this description - one from the telecom space, and one pharma pick - that could be compelling value plays right now.
AT&T
AT&T (T), founded way back in 1885, is one of the biggest multinational telecommunications corporations, providing a plethora of services, including 5G, entertainment, and advertising. It is the third-largest telecom company in the world by revenue, and the largest wireless carrier in the U.S. Its market cap currently stands at a mammoth $113.25 billion.
Offering an impressive dividend yield of 7.01%, which is above the sector median of 3.62%, AT&T stock is down about 15% on a YTD basis.
The stock now looks attractively valued following its share price decline. AT&T stock is trading at a forward p/e of 6.49, well below the sector median of 14.77, and the forward price/sales ratio of 0.93 also represents a discount to its industry peers.
In its latest results for Q3 2023, AT&T reported revenues of $30.4 billion, up 1% from the prior year. EPS of $0.64 slipped by almost 6% from the year-ago period, but surpassed the consensus estimate of $0.62. The company's EPS has beaten estimates in each of the past five quarters.
Meanwhile, the company's free cash flow grew substantially to $5.2 billion from $3.8 billion in the year-ago period. AT&T hiked its full-year free cash flow forecast as a result, which should bode well for future dividend payments.
Further, the company is doubling down to expand its fiber network. With 24 million locations already by the end of Q3, AT&T remains on track to cross 30 million fiber locations by the end of 2025. Aided by its joint venture with BlackRock (BLK) and the federal funds allocation via the BEAD program, this strategic shift away from the declining satellite TV market should also support AT&T's bottom line.
Analysts have a “Moderate Buy” rating on the stock with a mean target price of $20.03. This denotes an upside potential of about 28% from current levels. Out of 19 analysts covering the stock, eight have a “Strong Buy” rating, one has a “Moderate Buy” rating, and 10 have a “Hold” rating.
Bristol-Myers Squibb
Founded in 1887 and based out of New Jersey, Bristol-Myers Squibb Company (BMY) is a global biopharmaceutical giant with a broad portfolio of products, including treatments for cancer, cardiovascular disease, hepatitis B, and HIV/AIDS. The company, which currently commands a market cap of $106.39 billion, also has a strong pipeline of new products in development.
Bristol-Myers stock has lagged in 2023 so far, declining more than 27% since the start of the year. However, its dividend yield of 4.36% is now well above the sector median of 1.46%. Moreover, the company has been raising dividends consistently over the past seven years.
Based on valuation, Bristol-Myers also looks appealing. The stock is trading at a forward p/e of 6.94 versus the sector median of 18.35, with a price/sales ratio of 2.38, compared to the sector median of 3.54.
In its latest results for the third quarter, BMY reported revenues of about $10.97 billion in Q3, while adjusted EPS arrived at $2.00. Both numbers surpassed Wall Street's expectations, continuing a longer-term trend for the company.
Also in Q3, the company's Reblozyl, used for the treatment of anemia, received U.S. regulatory approval, while its Opdivo cancer treatment received U.S. and European regulatory clearance.
BMY's impressive oncology portfolio received an additional boost via the acquisition of Mirati Therapeutics. Its Krazati oncology drug has managed to capture a >40% share of new patients, with phase 3 trials ongoing to expand the potential indications of the drug. Additionally, the company has nine new drugs and more than 45 compounds under development which could potentially generate over $25 billion in annual revenue by 2030.
Analysts have a consensus “Moderate Buy” rating on the stock, with a mean target price of $63.06. This indicates an upside potential of roughly 20.6% from current levels. Out of 18 analysts covering the stock, six have a “Strong Buy” rating, 11 have a “Hold” rating, and one has a “Strong Sell” rating.
