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With earnings season in full swing, things are almost certain to get more volatile.
But that doesn’t mean you should completely bail on stocks.
According to Goldman Sachs, you might even want to do the exact opposite if the market continues to slide — buy more.
“Any further significant weakness at the index level should be seen as a buying opportunity, in our view,” said Goldman analyst Peter Oppenheimer in a note to investors earlier this week.
Investors’ main concern right now is the Fed’s changing stance on easy money. But Goldman Sachs points out that a rising interest rate environment doesn’t necessarily lead to sell-offs.
“Historically, a Fed tightening cycle that is accompanied by accelerating growth tends to be associated with strong returns and relatively low volatility,” Oppenheimer added.
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Despite the recent market weakness, Goldman has issued buy ratings on several big-name companies, projecting meaningful upside ahead. Here’s a quick look at three of them.
General Electric (GE)
General Electric is one of the leading industrial conglomerates in the world. As a century-old company, GE has built a strong presence in aviation, healthcare, renewable energy and power.
Its share price, however, has been anything but strong. Despite reporting solid Q4 results earlier in the week, the stock is off 8% in 2022.
The company earned $20.3 billion of revenue in Q4, down 3% year over year. Adjusted earnings surged 59% year over year to 92 cents per share, easily topping Wall Street’s expectation of 85 cents.
More importantly, management completed a $25 billion debt tender transaction, effectively reducing its gross debt by $87 billion over three years.
Goldman analyst Joe Ritchie forecasts a strong rebound for the shares due to GE’s strengthening financial position.
“The bottom line is the narrative on GE has shifted (at least temporarily) from [free cash flow] to earnings as the company has effectively demonstrated its ability to de-lever faster-than-expected,” he said.
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On Jan. 26, Ritchie reiterated a buy rating on the company and set a price target of $124, implying a potential upside of close to 40%.
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Coinbase Global (COIN)
Coinbase shares have fallen about 30% year to date, and it’s not hard to understand why.
Coinbase operates the largest cryptocurrency exchange in the U.S., earning a transaction fee every time someone buys or sells on the platform. But right now, cryptos aren’t exactly hot commodities.
Bitcoin — the largest cryptocurrency in the world — was trading at $47,700 apiece at the beginning of the year. Today, it’s at around $37,000, representing a year-to-date decline of more than 20%.
That said, Goldman Sachs sees a major rebound in Coinbase shares. Analyst Will Nance reiterated a Buy rating on Coinbase this week, saying that the company remains a “blue chip way to gain exposure to the continued development of the crypto ecosystem.”
In Q3, Coinbase had 7.4 million retail monthly transacting users. It earned $1.1 billion in transaction revenue and $145 million in subscription and services revenue.
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With a price target of $288, Goldman is projecting more than 60% upside in Coinbase shares.
Microsoft (MSFT)
Software giant Microsoft has been bucking the market downtrend over the past few days with some positive headlines.
On Jan. 18, the company announced that it would acquire video game giant Activision Blizzard in an all-cash deal valued at $68.7 billion. It would mark Microsoft’s biggest deal to date, more than twice as large as its $26.2 billion purchase of LinkedIn in 2016.
The company also reported strong quarterly earnings earlier this month. For the December quarter, revenue rose 20% year over year while earnings per share increased by 22%.
Trading at around $300 per share, Microsoft is already a massive company commanding a market cap of more $2 trillion. But Goldman expects the tech gorilla to add another C-note to its stock price, fueled largely by strong cloud computing growth prospects.
Goldman analyst Rangan Kash has Microsoft on the firm’s conviction buy list with a price target of $400, representing upside of roughly 30%.
“[W]e continue to view Microsoft as uniquely positioned to benefit on digital transformation initiatives and public cloud adoption (amongst other secular tailwinds) with a strong presence across all layers of the cloud stack (applications, infrastructure, and platforms),” Kash wrote.
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
