Wall Street is currently conflicted as to where they believe the stock market is headed. On one hand, you’re being told now is the time to buy. On Friday, Bank of America analyst Savita Subramanian wrote that "The bear market is officially over." On the other hand you have bearish analysts like Mike Wilson of Morgan Stanley, who wrote in a note on Monday that, "“We expect an abrupt reset on the equity risk premium once the market starts to worry about the risk to earnings.”In confusing times like these it can be prudent for investors to consider adding established mega-cap stocks to their portfolios that have a proven track record of outperformance.
A mega-cap stock refers to a publicly traded company with an extremely large market capitalization. Market capitalization, or market cap, is calculated by multiplying the current share price of a company by the total number of outstanding shares. While there is no strict definition for what constitutes a mega-cap stock, it generally refers to companies with a market capitalization of $200 billion or more.
Mega-cap stocks are typically the largest and most well-established companies in the market. They often have a global presence, significant brand recognition, and generate substantial revenue and profits.
Here are three mega-cap stocks Wall Street analysts rate a Strong Buy:
Mastercard
Mastercard Incorporated (MA) is a solid long-term choice among stocks analysts remain confident about today. Even in this day and age where the payment space continues to evolve, Mastercard stock has remained in a top position that continues to hold Wall Street’s attention.
The stock now holds such a wide moat for its business that it would be basically impossible for a new company to edge in on the company’s global territory. In fact, the use of electronic payments more and more has been beneficial for Mastercard stock. Therefore, it continues to be a solid long-term investment even as the world continues to shift and change its payment methods.
According to some analysts, there is a further opportunity for Mastercard in emerging markets, and this suggests there is more room to grow even as developed markets stabilize. But one of the best parts about Mastercard stock? Its fees.
No matter what’s happening in the payment space, Mastercard stock will continue to see revenue roll in thanks to earning fees no matter what kind of payment method is used. Of course, short-term issues will remain as the economy remains volatile, and Americans look to keep their cash in hand. However, long-term there will likely be steady growth investors can look forward to.
Out of twenty-four analysts, twenty of them rate MA a Strong Buy. “Overall, we think that the wide-moat company continued to show good resilience in the face of economic uncertainty,” said Brett Horn, Senior Equity Analyst for Morningstar (MORN). “Management's commentary focused on the resilience it is seeing in consumer spending, but we see the macroeconomic environment as fluid going forward…Longer term, we think the scalable nature of the business should allow for margin expansion over time.”
Alphabet
When it comes to quality, it doesn’t get much better than Alphabet (GOOGL) according to analysts. Despite short-term issues, such as the rise of ChatGPT, pushing prices down in recent months, Alphabet stock has come roaring back lately. And even if it drops once more, analysts would see that as a buying opportunity, rather than an issue.
Alphabet stock continues to dominate the artificial intelligence space, and even the growth of ChatGPT shouldn’t damage future performance. The company continues to dominate the online search market, with over 80% of global share belonging to Google. Through this, the company continues to bring in strong cash flow and revenue growth, and this leadership position should continue in the near and distant future.
Furthermore, the company’s purchase of YouTube will also contribute to the growth of Alphabet stock. As Alphabet continues to strengthen its products with more users using its search tools, this only increases online advertising services. Thus, advertisers and publishers seek them out first, resulting in even more ad revenue, and the process begins again. And that’s without even mentioning the growth of its Android mobile operating system, which continues to edge in on the mobile market share.
Out of thirty-four analysts, twenty-seven rate GOOG a Strong Buy. “Increasing competition on the artificial intelligence side, whether in the cloud or the advertising segment, is forcing the firm to keep investing in enhancing computing capabilities. Nevertheless, we believe Alphabet has the necessary technology and talent to successfully battle AI competitors, especially on the search side,” said Ali Mogharabi, Senior Equity Analyst for Morningstar. “Overall, we believe Alphabet is well positioned to benefit from an improving economic climate, which will accelerate ad spending.”
Amazon
Now if we really want to get into market domination, we have to discuss Amazon (AMZN). This spans from the domination of e-commerce, as well as cloud services. However, Amazon stock has been expanding in other areas that have proven successful as well.
But before we get there, it’s important to discuss the reason for Amazon stock and its strength these days. The company has become the clear e-commerce leader, becoming unmatched in terms of choice, price and shipping speed. Even as the company remains enormous in scale, it continues to find ways of eating up more of the market share.
Furthermore, Amazon stock and its Prime membership has brought in a steady stream of clients and therefore revenue for years. There is access to one-day shipping on millions of products, award-winning video content, as well as many other offerings that continue to interest newcomers.
Amazon Web Services has also allowed the stock to increase its presence in the cloud services sector. In fact, Amazon Web Services and advertising growth have been outpacing e-commerce growth these days. This should even continue over the next several years, which would drive higher margins. Yet there is still room to grow. This would include groceries, luxury goods, and of course technological innovations.
Out of thirty-eight analysts, thirty-two rate AMZN a Strong Buy. “We still envision healthy long-term growth driven by e-commerce proliferation, AWS, and advertising even as the near term remains a bit of a work in progress,” said Dan Romanoff, Senior Equity Analyst for Morningstar . “Management remains rightfully upbeat on AWS and is continuing to invest heavily in the segment.”
On the date of publication, Amy Legate-Wolfe did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
