Reopening, Secular Tailwinds, And Profits Are Driving These Markets
With the Q1 earnings season about to begin and the economic data pointing toward accelerating growth the analyst’s upgrades are more important than ever. The analysts have been trailing reality in regard to the consensus estimate for the last three quarters. With activity accelerating, it is likely the analyst’s consensus is still too conservative despite the recent uptick in expectation for the S&P 500. In this scenario, the market is set up to outperform the analyst’s consensus once again and possibly by a very wide margin. What’s more, with the outlook for Q2 and Q3 on the rise this situation could linger well into the second half of the year if not beyond and lead the market higher the entire time.
1. JetBlue Gets Upgrade From Oppenheimer
Traffic at American airports is on the rise with the decline of COVID and the pace is accelerating along with the use of vaccines. This is leading to upgrades throughout the airline and travel industry at large. While the analysts are still mostly neutral on JetBlue Airways Corp (NASDAQ:JBLU) the stock has been getting some attention over the past few weeks. There have been four major sell-side firms out with research or commentary that are not only positive for the company but the industry as a whole. The latest is from Oppenheimer who lifted the stock to OutPerform from MarketPerform and upping the share price target to $24 or 18% upside.
Among the company’s attraction are a move to add more services. JetBlue is launching a site it calls Paisley that will connect JetBlue flyers with hotels, restaurants, theme parks and rental cars. In the future, the site will include listings for home rentals similar to Airbnb. Shares of the stock are up more than 3.0% in the wake of the upgrade putting the price just shy of a multi-year high. 
2. Roblox Opens The Gates To Mobile
Roblox (NYSE:RBLX) is an interesting company for more reasons than one. Not only is the company a leader in the mobile gaming industry it went public via a direct list, an option that more companies are turning to instead of the traditional IPO model. Roblox makes and services a platform for gaming that allows it and other developers to build out and monetize 3-D gaming environments for mobile phones. According to Bank of American, the company is the “cure for the common mobile investment” offering unique exposure to the large and growing mobile market. Analysts there initiated the stock’s coverage with a buy and a $78 price target.
Bank of America (NYSE:BAC) thinks the company could grow its user base 44% by 2025 with leverage gains in conversion and earnings per user to drive revenue and profitability. Stifel is in the same camp, initiating the stock at Buy and an $85 price target, citing its unique position at the junction of content and social that should drive higher engagement and monetization. Shares are up 4% on the news and look like $78 will be an easy target to reach. 
3. Oppenheimer Bullish On Banks, Focus On Profits
Oppenheimer put out a note on the banking sector saying it had high confidence in the sector despite the impact of the pandemic. Although bank business has been negatively affected by the pandemic, the banks were not hit with the load-losses first thought leaving them overly capitalized and in a position to return that capital to shareholders. The problem in the near term for the banks is tough comparisons for revenue but that’s not what Oppenheimer is focused on. Instead, Oppenheimer is focused on increased profitability gained over the past year and the outlook for earnings. The S&P 500 Financial Sector is expected to post a 68% increase in Q1 earnings and 23% for the year.
The Financial Select Sector SPDR® Fund (NYSE:XLF) is moving higher in the wake of the note and on track to set a new high. There is resistance at the current high, near $35, but we don’t think it will hold up. With earnings from the big banks set for later this month, we see a major move about to unfold. A break to new highs would be very bullish and may lead the stock to as high as $37 in the very near term and $41 by the end of the year.