AI stock standout Arista Networks (ANET) and Netherlands-based biotech Argenx (ARGX) lead this weekend’s watch list of 5 stocks holding in or near buy range despite tough market conditions. In addition to ANET stock and ARGX, the list includes Boeing (BA), Visa (V) and Baker Hughes (BKR), which provides equipment to oil and gas producers.
Both ANET stock and ARGX are part of the flagship IBD 50 list of leading growth stocks. Arista also was featured as IBD Stock Of The Day on Aug. 14.
Keep in mind that investors need to exercise serious caution now that the AI-led stock rally has been knocked off stride and is still looking for a floor. The surging 10-year Treasury yield, which is testing its highest level in 15 years, has helped take the steam out of growth stocks in particular, with the Nasdaq putting in three straight down weeks for the first time all year.
The coming week for the stock market could be pivotal, with earnings from AI-chipmaker Nvidia (NVDA) due on Wednesday and Fed chair Jerome Powell giving a high-profile speech on Friday. Be sure to read IBD’s The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.
Arista sells computer network switches that speed up communications among racks of computer servers packed into “hyperscale” data centers. In 2022, Facebook-parent Meta Platforms (META) accounted for 26% of Arista revenue, while Microsoft (MSFT) chipped in 16%.
However, in an Aug. 1 note, KeyBanc analyst Thomas Blakey said that sales to enterprise customers are a growth engine and could rival its Cloud Titan data center segment in the second half of 2023.
Blakey hiked his ANET stock price target to 217 from 206, keeping an overweight rating, after Arista’s strong Q2 earnings beat.
Argus analyst Jim Kelleher said he sees Arista as uniquely positioned to benefit from accelerating growth in cloud-based data-center networking thanks to generative AI.
However, Arista has said it doesn’t expect meaningful AI revenue until 2025, as pilot projects turn into large deployments.
ANET stock climbed 3.2% to 180.54 last week, reclaiming a 178.36 buy point that it first eclipsed on Aug. 1 following its Q2 report.
ANET stock has outperformed the S&P 500 recently, which is reflected in a rising relative strength line, the blue line in IBD charts.
After being mostly rangebound for the past year, Argenx stock caught fire on July 17. The biotech released a study showing better-than-expected results for its Vyvgart Hytrulo drug in preventing a relapse of patients with a progressive nerve disorder, chronic inflammatory demyelinating polyneuropathy, or CIDP.
H.C. Wainwright analyst Douglas Tsao called Vyvgart a “game-changer,” noting that rival therapies have intolerable side effects and long infusion times. The FDA approved a subcutaneous shot of Vyvgart in June.
Numerous analysts boosted their price targets for ARGX stock in July, with a couple citing a Vyvgart’s $3 billion CIDP revenue opportunity.
ARGX stock gapped above a 423.99 buy point on July 27, soaring 28% to 484.43. The run-up carried Argenx all the way to 550.76 on July 21.
ARGX stock has since pulled back to its 21-day exponential moving average, but it has held above the gap formed on July 17.
ARGX offered an entry when it bounced off its 21-day line earlier in August, breaking a trend line from its July 21 peak. Last week’s revisit to its 21-day line sets up another potential opportunity, if ARGX stock can clear last week’s high, though a longer consolidation might be desirable in this volatile market.
The big picture for Boeing looks bright, with commercial air travel seeing a strong post-Covid recovery and the defense business benefiting from strong domestic and international demand made more urgent by Russia’s invasion of Ukraine.
Another big plus could come from renewed 737 MAX deliveries to China. While U.S.-China tensions have been a hurdle, a recent visit by Stan Deal, who leads Boeing’s commercial airplane division, with China’s aviation authority head is seen as a possible precursor to renewed deliveries.
On July 26, while reporting Q2 results, Boeing said it expects to ramp up 737 production from 38 per month to 50 by 2025-2026. Meanwhile, production of its 787 wide-body jet should ramp from 4 per month to 10.
BA stock broke out on July 26, flying 8.7% to clear a 223.91 buy point from a short flat base. Boeing has since pulled back, testing its 50-day moving average on Friday, but finishing up 0.9% on the session to 226.65, re-entering a buy zone.
Boeing’s relative strength line has been trending higher recently and isn’t far off its 52-week high, which should give investors a degree of confidence that it can weather market turbulence better than most.
Credit-card processing giant Visa, part of the Dow Jones Industrial Average, has continued to show strength as consumers have so far defied downbeat forecasts. After retail sales rose a stronger-than-expected 0.7% in July, economists are suddenly expecting GDP growth to accelerate past 3% this quarter.
With the recovery in entertainment and travel ongoing, Visa and rival Mastercard are also seeing growth in lucrative cross-border transaction fees. Plus, Visa stands to benefit from value-added services, whose growth should continue outpacing core payments, Jefferies analyst Trevor Williams wrote in a Wednesday note. He hiked his V stock price target to 280 from 270, keeping a buy rating.
Visa stock bounced higher after a test of its 50-day moving average on Friday, closing up 0.3% to 238.17. The payments giant is already in a buy range, above a 235.57 flat-base buy point that it first cleared on June 30.
Visa also has a new flat base, or base-on-base pattern, with a 245.37 buy point. A move above the Aug. 10 high of 243.95 could be a good entry.
Baker Hughes is part of the IBD Big Cap 20 list of leading large-cap growth stocks, as is Schlumberger (SLB), another member of the Oil & Gas-Field Services industry group.
While oilfield services and equipment account for about 60% of sales, its industrial and energy technology, or IET, division has been in focus lately. With its Q2 earnings on July 19, Baker Hughes highlighted strength in IET orders, including for liquid natural gas, or LNG.
Baker Hughes also said that, despite lower oil prices in the first half of 2023, market softness in North America should be more than offset by strength in international and offshore markets.
On July 24, BofA analyst Saurabh Pant hiked the firm’s price target for BKR stock to 40 from 38, citing a unique portfolio that “offers strength today, tomorrow and well into the future.”
BKR stock rose 1.1% to 35.26 on Friday, back above the 21-day line as it added another week to what is now a five-weeks-tight pattern, with a 36.48 buy point. That formation could be viewed as a handle on a long consolidation back to June 2022.
BKR stock’s relative strength line is near a 52-week high.
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