Wells Fargo’s equity research team has some ideas for investors as the new quarter kicks off. The firm’s list this quarter includes eight names with near-term catalysts that can drive their share prices higher. Wells Fargo also identified two stocks that may retreat. Investors are quoestioning whether the first half’s strong gains will continue in the back end of 2024. The broad S & P 500 rallied more than 14% in the first six months, while the artificial intelligence craze drove the tech-heavy Nasdaq Composite higher by more than 18%. Against this backdrop, Wells Fargo ran a screen looking for stocks that its analysts rate overweight, and that have positive catalysts in the third quarter quarter. Its report was published Monday July 1. Here’s which stocks made the cut: Capital One has a potential catalyst if the Discover merger goes through, according to Wells Fargo. On top of that, lower-income credit card holders may prove more resilient than currently believed. Concerns around its credit card holders have led Capital One to underperform this year, rising around 6% against the S & P 500 surging more than 14%. Wells Fargo is out of step on Wall Street, as the average analyst has a hold rating on Capital One. The average price target implies more than 10% upside, while Wells Fargo’s target would equate to an 18% rally. For Ontario-based Algonquin Power & Utilities , Wells Fargo said the third quarter could provide clarity on the $5 billion market cap utility’s strategic review of its non-regulated renewables platform. Algonquin’s stock price reflects a belief that the renewable business won’t be highly valued, whereas Wells Fargo thinks it could fetch $2.4 billion. Proceeds can be used to recapitalize Algonquin and authorize a large share buyback, the bank said. Algonquin shares, which yield more than 7%, have fallen more than 13% so far this year. The typical analyst surveyed by LSEG sees a bounce of more than 15%, while Wells Fargo sees the stock running up more than 44% without the dividend. By contrast, the average analyst has a hold rating, according to LSEG. Like other analog/mixed-signal chip companies, On Semiconductor is “beginning to see green shoots of a cyclical upturn” that imrpve gross margins, Wells Fargo said. Until now, On Semi has suffered as investors spurned automotive chipmakers this year. Its shares are down more than 14% in 2024, while the iShares Semiconductor ETF (SOXX) has soared more than 28%. ON .IXIC,SOXX YTD mountain On Semi vs Nasdaq Composite and iShares Semiconductor ETF year to date. On Semi may also benefit from announcements of important wins from original equipment manufacturers in China, including BYD, for its silicon carbide chip business, according to Wells Fargo. The average analyst polled by LSEG is also bullish. The typical price target implies nearly 16% upside, while Wells Fargo sees the stock soaring more than 37% from Monday’s close. On the other hand, Wells Fargo said Tesla and Old Dominion Freight Line could see downside from negative catalysts in the third quarter. That call hasn’t panned out so far for Tesla, which has soared 25% this week after reporting better-than-expected second-quarter vehicle deliveries.
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