The best stocks to buy, according to Goldman Sachs

It’s safe to say that the first quarter of this year has been rough for the stock market. All major stock benchmarks suffered their worst losses in two years, with the S&P 500 declining 4.6% and the Nasdaq Composite falling 9%. When dissecting the roots of the problem, several factors come into play. “Uncertainty surrounding monetary policy, elevated inflation, and impacts stemming from Russia’s invasion of Ukraine has weighed on the index since the start of the year,” says David Kostin, stock strategist at Goldman Sachs, adding “Slower domestic and global growth paired with higher commodity prices should continue to pose a risk to earnings and margins.

Needless to say, the current market situation gives investors an attractive buying opportunity. But, for the investments to pay off in the long-term, investors should be on the lookout for stocks that satisfy certain criteria, such as strong stability throughout high inflationary periods, and capacity for further growth. Kostin’s team at Goldman Sachs has identified and proposed several companies that are well-positioned in the current market and are expected to have huge upside ahead compared to the investment firm’s target prices.

Bath & Body Works (BBWI)

Bath & Body Works is an American retail chain, specializing in body care products and home fragrances. Impressively, Bath & Body Works continues to grow despite ongoing setbacks like the fierce competition from online marketplaces.

We believe there is upside potential to current consensus estimates given the expected rollout of the company’s loyalty program to the entire chain in mid-2022,” writes Goldman Sachs analyst, Kate McShane. Further, McShane sees a long-term benefit in category expansion, such as haircare and skincare, acknowledging though that an earnings impact is unlikely until after 2024.

For the fourth quarter of 2021, the company reported net sales of $3.03 billion, an increase of 11 per cent compared to 2020’s fourth-quarter net sales of $2.72 billion. Likewise, adjusted earnings per share from continuing operations increased 17 per cent year-over-year to $2.30.

 “Driven by our focus on staying close to our customers and our commitment to operational excellence, Bath & Body Works achieved record sales and earnings during the fourth quarter,” CEO of the company, Andrew Meslow, commented, adding: “Importantly, we are ending the fiscal year with approximately $2 billion in cash, and our strong balance sheet is allowing us meaningful opportunities to drive enhanced value for our shareholders. As we begin 2022, we are focused on leveraging our strong brand positioning, continuing to execute with excellence, and delivering sustainable growth.

Goldman Sachs has set a price target of $85 for shares of Bath & Body Works (NYSE: BBWI), which is approximately 70 per cent above where the stock sits today.

Salesforce (CRM)

Salesforce is an American cloud-based software company, providing customer relationship management (CRM) software as well as numerous other applications, such as for sales, customer service, and marketing automation. Launched in 1999, Salesforce has grown into a cloud-based software giant, with more than 56,000 employees in 2021 (almost triple from 2015). Currently, approximately 150,000 companies are using the company’s CRM platform to scale their business.

Salesforce experienced a remarkable year. Their most recent fourth-quarter revenue was $5.82 billion, up 20% year-over-year. Similarly, total financial revenue for the year was $21.25 billion, an increase of 24% year-over-year.

We never could have predicted a year ago what was in store, which makes me incredibly proud of how well we pivoted our company to adapt to this pandemic world,” said Marc Benioff, Chair & CEO of Salesforce. “We had a record quarter and year by innovating more and faster than ever, enabling our customers to be successful from anywhere, and becoming more relevant and strategic than ever. And we continued to serve all of our stakeholders in a time when they needed it most.

In March, Goldman Sachs assigned Salesforce a “Buy” rating and raised the target on the shares to $360 from $340, implying a potential upside of more than 80 per cent. In a note to investors back in 2021, Schwartz maintained that the company’s stock is worth owning because of its large market opportunity, leadership position, and predictability.

Penn National Gaming (PENN)

Penn National Gaming is an operator of casinos and racetracks, with 44 facilities in the United States and Canada. The company also provides online sports betting in 13 jurisdictions.

The company’s revenue for 2021’s fourth quarter, ending December 31, 2021, was $1.57 billion, a 53 per cent increase year-over-year. Likewise, Penn’s total revenue for 2021 was $5.90 billion, a 65% increase year-over-year. “I am pleased to report a strong finish to another transformative year for Penn National,” President and CEO, Jay Snowden, commented.

PENN’s shares, though, declined nearly 46% in 2021, which might be considered a bargain for those hunting for an opportunity, especially seeing how much the company’s business has improved. Goldman Sachs seems to share the same sentiment, trusting that PENN has rebound potential. Goldman Sachs has a “buy” rating on Penn and a set price target of $77. With the stock currently trading at around $38, Sachs’ target price suggests a potential upside of an astonishing 103 per cent.

Other stocks from companies that, according to Goldman Sachs, are expected to have a considerable upside, include, among others, Fortune Brands Home & Security, Las Vegas Sands, General Motors, Whirlpool, Boeing, and Meta Platforms.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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