Arista Networks, a name that keeps popping up on analysts' list of top AI stocks, and cruise line RCL stock lead this weekend's watch list of 5 stocks near buy points, with all of them already actionable. Chipmaker Monolithic Power Systems, which is getting a lift from AI-related demand, also is in focus. Diabetes and weight-loss pharma giant Novo Nordisk and high-end credit-card leader American Express round out the list.
ANET, MPWR and RCL stock are part of the flagship IBD 50 list of leading stocks. Royal Caribbean also was featured as an IBD Stock Of The Day over the past week.
With the Federal Reserve and European Central Bank hiking interest rates to fight persistently high inflation, setting up a challenging economic environment in the second half of 2023, NVO stock's combination of recession-resistant demand and new growth avenues is compelling. The continued resurgence in travel demand, with China's reopening providing added fuel, should help RCL stock buck economic turbulence. American Express, meanwhile, should avoid the worst of any upturn in credit-card losses given its focus on high-end customers.
The market rally showed renewed strength last week, bringing more quality stocks into buy range or on the cusp of doing so.
AI Stocks Rally
The two tech stocks on the list have come to the fore even as tech's outperformance to start the year faded over the past month. Interest in AI stocks revved up on Friday after C3.ai reported better than expected results and CEO Thomas Siebel noted a "dramatic change" in business sentiment vs. mid-2022. C3.ai shares surged nearly 34% on Friday. ANET stock rallied 3%, Nvidia 2.5% and GitLabs 4.6%.
Meanwhile, two of the biggest AI stocks, Meta Platforms and Microsoft, rose 6.1% and 1.7%, respectively. Facebook-parent Meta and Microsoft together made up over 41% of revenue for Arista Networks in 2022.
ANET Stock
Arista Networks reported its fifth-straight quarter of accelerating earnings growth on Feb. 14, posting 72% EPS growth. Needham analyst Alex Henderson, who hiked his price target to 165 from 155 with a buy rating, said that Arista is providing that AI is a "major use case that requires major investments." Market-share gains serving the enterprise market — corporate, government agency and educational institution networks — are another significant growth driver, he wrote.
ANET stock rose 3.8% over the past week to 140.68, finding support at its 21-day moving average. ANET stock has a 140.91 buy point from a cup base, 10 cents above its Dec. 1 high. That buy point is still valid despite a breakout attempt in mid-February that stalled out.
Arista Networks has already broken above a short downtrend, offering an early entry just below the official buy point.
MPWR Stock
Monolithic Power's chips provide power solutions for industrial applications, telecom infrastructure, cloud computing, automotive and consumer applications. Strength in demand for automotive and storage applications has helped overcome other areas with softer trends, KeyBanc analyst John Vinh wrote in Feb. 9 note touting MPWR's resilience following Q4 earnings.
Needham analyst Quinn Bolton, who hiked his price target to 525 from 460, highlighted Monolithic's strong traction providing graphics processing units for AI use cases, noting a next-generation GPU that will ramp up in the first half of 2023.
MPWR stock rose 2.5% to 506.03 on Friday. MPWR has an official 530.75 buy point from a cup-with-handle base. However, Friday's move broke the downtrend from the top of the handle, offering an early entry point.
RCL Stock
After taking on water — and loads of debt — early in the pandemic, RCL is now riding high again. With three new ships set for delivery this year, capacity will reach 14% above pre-Covid levels. Load factor recovered to 95% in Q4 vs. below 60% a year earlier, with 100% meaning two passengers per cabin.
The early-booking period, known as the wave season, for 2023 "has exceeded all expectations, even when considering our capacity growth," CEO Jason Liberty said on the Feb. 7 earnings call. He noted that the seven biggest booking weeks in company history all occurred since the Q3 earnings report in early November.
China's technical cruise industry ban should end in the first half of the year, as should Japan's testing and potential quarantine of Chinese tourists.
RCL stock rose 2.9% to 74.02 on Friday. The move over the past week broke a downtrend that followed RCL stock's post-earnings rally, offering an early entry point.
The official entry point is 76.40, 10 cents above the Feb. 9 high, which is the top of the handle at the end of a consolidation that began last April.
Royal Caribbean stock's relative strength line, the blue line in IBD charts that tracks its progress vs. the S&P 500, is right near its highest point since last April.
RCL stock is one of many travel-related names showing strength in 2023.
NVO Stock
On Thursday, Morgan Stanley analyst Mark Purcell named Novo Nordisk a "catalyst driven idea" ahead of Phase 3 data for Wegovy to treat obesity. His base case has both Novo and Eli Lilly to trade up 5% to 10% as Wegovy demonstrates a 12% to 17% benefit for cardiovascular events.
NVO stock also gotten a lift from approval of its Rybelsus oral drug for type 2 diabetes, the first such oral treatment. Earlier this year, the FDA said patients can now use Rybelsus without previously trying another treatment for type 2 diabetes.
NVO stock rose 0.9% to 144.90 on Friday, edging past a 144.88 buy point from a flat base.
AXP Stock
AXP stock climbed 2.1% to 179.09 on Friday. The official buy point is 182.25 from a long cup-with-handle base. However, Friday's move also flashed an early entry with a break of the handle trend line.
On Feb. 8, Morgan Stanley analyst Betsy Graseck upgraded AXP stock to outperform with a 186 price target, while downgrading other names. She named AXP her top pick in consumer finance because of higher credit quality and sustainable revenue growth. While AXP could see credit losses rise back to pre-Covid levels by 2024, other credit card players will see credit metrics deteriorate much further.
AXP boosted its dividend 15% to 60 cents per share in late January.
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