First-quarter earnings season may be nearing its end, but Morgan Stanley believes there are still stocks worth winning after the results. About 78% of the S&P 500 – or 394 companies in the index – have reported earnings so far. Of those, nearly 85% reported positive earnings surprises, while 78% posted revenue above Wall Street’s expectations. But Morgan Stanley sees potential in some stocks that haven’t yet been reported. In a note Wednesday, the bank shared a basket of stocks from the MSCI US index that are expected to post gains between May 7 and June 2, are rated overweight by equity analysts at Morgan Stanley and fall in the top two quintiles of what it calls the Earnings Surprise Composite Score. Below are some stocks from the basket: Ulta Beauty is expected to report earnings on Monday, June 1st. Bank of America upgraded the cosmetics retailer to “buy” from “neutral” on Tuesday. Analyst Lorraine Hutchinson believes Ulta is more attractive after a decline, especially since the retailer could benefit from some recent investments. Ulta shares are down 12% year-over-year and 24% over the past three months. The stock fell after the company told investors in March that it spent $434 million to renovate and open new stores, improve information technology systems, expand its Wellness by Ulta retail space and expand internationally. “ULTA used [its recent investments] “We want to build a flywheel to drive growth, rather than just walking on a treadmill to keep up,” Hutchinson wrote. “The withdrawal, in our view, brought investors’ heightened expectations back down to earth and created an opportunity to invest in a high-quality compounder at a discount to competitors.” The analyst’s price target of $685 provides 29% upside potential from the shares’ Tuesday closing price in 2022 and 2025. In a note to clients on Tuesday, Citigroup maintained its neutral rating on Target but raised its price target from $117 to $133, matching where the stock was already trading: “Since the last earnings release, sentiment has become significantly more positive at TGT and the stock is in up 16% in the last three months.” [group] Mean -9%. “While we expect positive results and a positive tone, the bar is unusually high and if not raised could be viewed as disappointing,” Citi analyst Paul Lejuez wrote. Chip equipment maker Applied Materials is scheduled to report earnings on Wednesday, May 13. In a note on Monday, Morgan Stanley analyst Shane Brett maintained his overweight rating on AMAT. “Expectations for AMAT are not low, but we believe AMAT can keep up with the competition with another strong beat and rise,” the analyst wrote. “We viewed the JanQ print as a leap in the right direction; we believe this print will represent another leap.” Brett’s revised price target of $454, raised from $432, provides future upside potential of nearly 11%. Shares are already up 66% this year. Two other names on Morgan Stanley’s list are Nvidia and Deere & Co.
