Wells Fargo’s equity research team has some ideas for investors as the new quarter begins. The firm’s list for the current quarter includes eight stocks with near-term drivers that could boost their stock prices. Wells Fargo also identified two stocks that could fall. Investors are questioning whether the strong first-half gains will continue into the second half of 2024. The broad S&P 500 rose more than 14% in the first half, and the artificial intelligence boom boosted the tech-heavy Nasdaq Composite Index by more than 18%. Against this backdrop, Wells Fargo ran a screen looking for stocks that analysts rate overweight and have positive drivers for the third quarter. The report was released on Monday, July 1. The selected stocks are: Capital One has potential drivers if its merger with Discover goes through, according to Wells Fargo. What’s more, low-income credit card holders may be more resilient than currently thought.Concerns over credit card holders have led Capital One shares to languish, rising about 6% this year while the S&P 500 has surged more than 14%. Wells Fargo is out of step with Wall Street, with analysts averaging a “hold” rating for Capital One. The average price target suggests upside of more than 10%, but Wells Fargo’s target equates to an upside of 18%. As for Ontario-based Algonquin Power & Utilities, Wells Fargo said the $5 billion market-capitalization utility’s strategic review of its unregulated renewable energy platform could be clarified in the third quarter. Algonquin’s stock price reflects a view that its renewable energy business is not valued highly, but Wells Fargo believes it could fetch $2.4 billion. The bank said the proceeds could be used to recapitalize Algonquin and authorize a large share buyback.Algonquin shares, which have a dividend yield of more than 7%, have fallen more than 13% so far this year. Wells Fargo sees the stock rising more than 44% without the dividend, while a typical analyst surveyed by LSEG expects an increase of more than 15%. In contrast, the average analyst rating is a hold, according to LSEG. Like other analog/mixed-signal chip companies, ON Semiconductor is “starting to show signs of a cyclical upswing,” boosting gross margins, Wells Fargo said. So far ON Semiconductor has struggled as investors have shunned the auto chipmaker this year. The company’s shares are down more than 14% in 2024, while the iShares Semiconductor ETF (SOXX) has soared more than 28%. ON .IXIC, SOXX YTD Mt. ON Semi vs. Nasdaq Composite Index and iShares Semiconductor ETF YTD. On Semi could also benefit from significant order announcements from Chinese OEMs, including BYD, for its silicon carbide chip business, according to Wells Fargo. Analysts surveyed by LSEG on average are also bullish. A common price target suggests an upside of nearly 16%, but Wells Fargo sees the stock surging more than 37% from Monday’s close. Meanwhile, Wells Fargo said Tesla and Old Dominion Freight Line could see negative factors cause them to fall in the third quarter. That prediction has so far not held true for Tesla, which has surged 25% this week after reporting better-than-expected vehicle deliveries in the second quarter.
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