Following a stellar Q1, RBC Capital has now revealed its updated list of top global stock ideas for 2019. This list of premium stock picks is created by RBC Capital Markets’ Global Equity Research Department as a compilation of its top investment ideas for the year ahead. “Our analysts focus on a 12-month investment horizon when selecting ideas… we publish quarterly updates to highlight performance metrics as well as any potential updates to our investment thesis or price targets” explains the firm.
And so far, the performance of these stocks looks very impressive. Through the first quarter of 2019, RBC Capital’s full list of 30 stocks returned 16.1% vs. the NDDUWI ’s 12.5% (the MSCI Developed World Index). With this in mind, here we use TipRanks data to delve into 7 of the stocks that look particularly appealing right now:
Walt Disney (DIS – Research Report)
Disney has laid out its long-term strategy and it’s all about taking its content direct-to-consumer (DTC).
In later 2019 the DIS OTT service will launch domestically and it is already gearing up investments and pulling back on licensing. With the acquisition of assets from Fox, DIS owns 60% of Hulu, which gives it access to more adult-centric content and the ability to self-distribute ESPN through Hulu’s streaming TV service.
“We see DIS’s evolution from the world’s best family content company to a global DTC player as reason to drive a sustainable rerating” cheers RBC Capital analyst Steven Cahall. He has a Top Pick rating on DIS, alongside a $140 price target (24% upside potential).
This optimism is shared by the Street: Disney also has a Strong Buy analyst consensus based on all the ratings received over the last three months.
ServiceNow (NOW – Research Report)
Founded back in 2004, ServiceNow delivers SaaS-based applications to automate and standardize IT business processes. Customers use NOW to create a single system of record for IT, which reduces costs and streamlines operations.
“We are bullish on the company’s ability to take share in the IT Service Management (ITSM) market as ServiceNow becomes the “ERP for IT” [enterprise resource planning]” writes five-star analyst Matthew Hedberg.
Moving beyond IT, he believes ServiceNow could become the platform for the enterprise as customers and partners write custom SaaS applications for HR, finance, facilities, legal, procurement, etc. on its platform.
With a $250 price target, Hedberg is just ahead of consensus when it comes to upside potential. See what other Top Analysts are saying about NOW.
ONEX Corporation (TSE:ONEX – Research Report)
Canadian stock Onex also scores an elusive Top Pick status from RBC. Founded in 1984, Onex is a highly successful private equity firms with approx $31 billion of assets under management.
“We continue to view Onex as a core holding with an attractive risk-reward profile” writes RBC Capital’s Geoffrey Kwan. He has a C$98 price target on the stock, indicating 28% upside potential lies ahead.
“We think the stock is a more defensive investment idea in part from high cash levels (~28% of NAV [net asset value], giving greater NAV visibility) and a shareholder base that we believe takes a longer-term view of the company than in prior cycles, which we think has resulted in a less volatile share price” the analyst concludes. See what other Top Analysts are saying about ONEX.
Facebook (FB – Research Report)
Social media giant Facebook is the only FAANG stock to make the cut. FB has more than 2.7B active users and is still growing users double-digits Y/Y, points out RBC’s Mark Mahaney.
“Facebook remains the largest social media platform in the world with ~2.3B MAUs, with Instagram in second and arguably the fastest growing Social Media platform. And Facebook also owns the two largest messaging assets in the world in FB Messenger (~1.3B+ MAUs) and WhatsApp (~1.5B+ MAUs). Which we believe are significantly undermonetized” writes Mahaney.
He believes that the large amount of data collected on these users is a unique and valuable asset for ad and content targeting. From current levels, the analyst sees shares surging 14% to $200. Bear in mind, shares have already exploded 33% year-to-date after dropping 25% in Q4.
Nutrien (NTR – Research Report)
Nutrien is the world’s largest fertilizer producer and ag input retailer, formed through the merger of Agrium and PotashCorp in January 2018.
“We believe the company has built the most diverse, vertically integrated agricultural input business with an attractive earnings profile, growing free cash flows, and solid balance sheet” writes the firm’s Andrew Wong.
Wong has a $65 price target on the stock- which suggests 20% upside from current levels. Potential catalysts include realizing the $600 million synergy target; and returning capital to shareholders.
“We expect Nutrien to generate $8-10B in FCF from 2019-2021, which should be deployed through a combination of share buybacks, dividend increases and accretive Retail M&A” says Wong. This could include a $1.5B share buyback program mid-2019 and another moderate dividend increase in late 2019.
GDS Holdings (GDS – Research Report)
GDS is one of the leading datacenter providers in China. Unlike rivals, GDS is focused on being a carrier- neutral datacenter operator with national reach. The company targets high-performance self-developed datacenters located in key cities.
According to Top 25 RBC Capital analyst Jonathan Atkin, “GDS is well-positioned to capitalize on strong secular and macro trends, such as faster- than-average GDP and increased IT outsourcing.” He has a $53 price target on the stock for 39% upside potential.
“We believe GDS has potential to outperform its peers given its positioning in an under- penetrated, growing market with strong customer demand trends and limited competitive supply” sums up the analyst. The biggest risk (under the company’s control) is management’s ability to successfully manage its expansion plan. See what other Top Analysts are saying about GDS.
Waste Connections (WCN – Research Report)
Waste Connections collects, transfers, and disposes of solid industrial wastes, a niche that has made it the third largest trash collection company in North America.
RBC sees Waste Performance supported by superior performance, specifically the company’s best-in-class EBITDA growth. In addition, “management’s effective cost discipline and price-led organic growth should drive excess cash generation.”
Analyst Derek Spronck, impressed by the “high-quality management team and the defensive attributes of the waste industry,” raised RBC’s price target on WCN to $90, and recommends Waste Connections “as a core portfolio holding… a top idea in our coverage universe.”
Notably, 100% of analysts are bullish on Waste Connections. In the last three months the stock has received 7 back-to-back buy ratings- with an average analyst price target of $92.
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