The fourth-quarter is underway, and Wall Street analysts named some of their favorite buying opportunities this week. These stocks are well-positioned into year-end and have the right characteristics to navigate a tough macroeconomic environment, analysts said. CNBC Pro combed through top Wall Street research to find the top stocks to buy in the fourth-quarter. They include: Ferrari, BAE Systems, Ulta, Burlington and Entergy. Entergy The electric and energy utility company is the right stock to buy at the right time, according to Bank of America. The firm recently named Entergy one of its top pick for the fourth-quarter. “Entergy Corp is exposed to many positive themes among regulated utility peers and is an attractive defensive utility for an uncertain macro backdrop,” analyst Paul Zimbardo said. The recently passed Inflation Reduction Act also makes Entergy shares underappreciated, the firm said. “The IRA incentives improve the solar economics for ETR’s commercial and industrial (C & I) customers, driving greater demand.” Finally, Zimbardo noted that Entergy is a reshoring beneficiary. “The reshoring dynamics have only strengthened and accelerated with the European industrial backbone stressed by the surge in power prices,” he said. Shares are down 10% this year, but investors should buy the stock now since it’s trading at favorable discount, he wrote. Ulta The beauty and makeup retailer was recently named as a top “high conviction” idea and key fourth-quarter name by investment firm DA Davidson. Analyst Michael Baker said in a note to clients that consumers appear to be “absorbing inflation.” Beauty in particular is holding up quite well, the analyst said. “We believe the ‘reopening” play has room to go,” he wrote, adding that the stock is “recession resistant.” “ULTA’s comps have lead our Retailing / Broadlines & Hardlines coverage group this year, as it did last year as well,” he said. Shares are down over 6% this year, however Baker, who has a price target of $490 per share, sees a compelling risk/reward outlook “ULTA is a best in class retailer, taking market share within the beauty space, an area of retail that is seeing outsized growth, with less markdown exposure than other areas,” Baker said. Ferrari “Ferrari is a luxury stock,” RBC analyst Tom Narayan said. The firm recently named it one of its top stocks to buy in the fourth quarter. While consumers may view Ferrari as a car company, Narayan said it really isn’t, and that’s a key reason for investors to buy the stock. “Ferrari’s EBITDA margins, stock price movements, and customer base are more similar to those of luxury stocks than auto OEMs (original equipment manufacturers),” he wrote. The company also has pricing power and many of its clientele are repeat customers, Narayan added. More than 40% of customer’s already own a Ferrari, according to the firm. Narayan says new product launches are on the horizon, too and Ferrari has drastically increased production. Additionally, Narayan says management’s electrification strategy continues to impress. “Longer term, we believe Ferrari can fully electrify its fleet,” Narayan wrote. Shares are down 16% this year. Entergy- Bank of America, Buy rating “Entergy is exposed to many positive themes among regulated utility peers and is an attractive defensive utility for an uncertain macro backdrop. … The IRA incentives improve the solar economics for ETR’s commercial and industrial customers, driving greater demand. … The reshoring dynamics have only strengthened and accelerated with the European industrial backbone stressed by the surge in power prices.” Ulta – DA Davidson, Buy rating “The consumer is absorbing inflation. … High conviction ideas are BJ, ORLY and ULTA ULTA is a best in class retailer, taking market share within the beauty space, an area of retail that is seeing outsized growth, with less markdown exposure than other areas. … ULTA’s comps have lead our Retailing / Broadlines & Hardlines coverage group this year, as it did last year as well. … We believe the ‘reopening’ play has room to go.” Ferrari- RBC, Outperform rating “Ferrari is a luxury stock. Ferrari’s EBITDA margins, stock price movements, and customer base are more similar to those of luxury stocks than auto OEMs. … Moreover, Ferrari is already using electric technology to enhance performance and expects EV mix to reach 80% of vehicle sales by 2030. Longer term, we believe Ferrari can fully electrify its fleet.” Burlington- Wells Fargo, Overweight rating “….we hosted an investor meeting with CEO, Michael O’Sullivan, CFO, Kristin Wolfe, and CMO, Jennifer Vecchio. Management acknowledged their mis-execution in 1H, which was exacerbated by a challenged macro for their consumer. However, we believe CEO O’Sullivan also exuded confidence in the go-forward business—. … All in, we believe a material comp acceleration appears likely as we move into 2023, while a return to pre-COVID margins is on the table over the next few years. We remain OW, and name BURL a ‘Top Pick.'” BAE Systems- Bernstein, Outperform rating “We recently presented BAE Systems as our top pick in European Aerospace & Defense as part of a Best Ideas presentation at Bernstein’s Strategic Decisions Conference. … Other larger European A & D companies (Airbus, Safran) are driven by commercial aerospace. … While these hybrid stocks have also performed very strongly this year, the point remain that if investors want a large European stock singularly driven by defense, there is only BAE Systems.”
