Microsoft Is One Of Credit Suisse's Top Picks For March‍

As the market reversed its January rally and began a renewed decline, Credit Suisse updated its top stock picks for March.

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Since the beginning of the year, the S&P 500 has gained roughly 1.3%, up until early Friday, after losing 2.6% in February, as traders grow more worried about the impact of higher interest rates on stocks as well as the broader economy as a whole. Despite persistently high inflation, Federal Reserve Chairman Jerome Powell added to investor pessimism on Tuesday when he told Congress that he expects rates to remain high for a longer period at least due to persistently high inflation. 

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In light of the growing market uncertainty, Credit Suisse has highlighted several stocks that it thinks will nonetheless outperform in the months ahead, regardless of the market uncertainty. As part of its top picks, the bank has added four new companies to its list: T-Mobile, Microsoft, New Relic, and NiSource.

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Microsoft is in a prime position to benefit from the boom in artificial intelligence, according to analyst Sami Badri. He also mentioned that Microsoft's forecasts have not yet factored in an estimated $40 billion uplift in revenue from ChatGPT as of yet.

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“Microsoft is a direct beneficiary due to its own position of OpenAI (effectively 75% today), as well as the associated exclusivity agreement around providing Azure infrastructure services to not only ChatGPT, but for all OpenAI models. This makes MSFT an important player in the proliferation of AI-driven application productivity,” Badri writes.

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Shares of Microsoft have risen more than 5% in 2023, which has contributed to the tech stock rally. This stock is coming off of a losing year, as it has declined almost 29% in 2022. Analysts at Credit Suisse set a price target of $285 per share, implying an upside of about 13% from Thursday's closing price.

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Moreover, Credit Suisse expects a strong performance for T-Mobile going forward. The firm set a price target of $175 on the stock, which implies a potential upside of about 24% from Thursday's close.

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“We expect rural and enterprise market share gains in the coming year, modest growth in fixed wireless and advanced network services for enterprises, and increasing margins as a result of merger synergies, all paired with a strategy of leveraging stock buybacks to allocate capital. It is our view that this is quite compelling at this point", analyst Douglas Mitchelson said in a note to investors.

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2023 shares of T-Mobile are unchanged after surging 21% in 2022.

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New Relic, a software-as-a-service provider, is well positioned to gain market share as its new leadership reinvigorates its product development capabilities, according to analyst Fred Lee, who believes the company is well positioned to gain market share.

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“After (1) reinvigorating its customer-centric product development capability, (2) shifting to a [product-led growth] model, and (3) experiencing structural changes (e.g., positive inflections of unit economic margins and revenue growth rates), we believe New Relic's multiple could increase if it continues to execute well and accelerates revenue growth for a few more quarters,” Lee said.

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The shares of New Relic have risen 27% this year through midday Friday, after sliding 49% in 2022. Approximately 25% upside is implied by Lee's price target of $90.

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Among the other stocks on Credit Suisse's list are Chipotle Mexican Grill, ServiceNow, and Amazon.

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In terms of performance, Chipotle shares have outperformed the market so far in 2023, rising almost 13% so far. Analyst Lauren Silberman believes that the restaurant chain is on track to continue its strong performance as a result of its "on-trend initiatives", which are putting it on track to continue its strong performance. It has recently been announced that the fast-casual chain is one of the rare compounding growth stories with the potential for double-digit top-line growth, margin expansion, and unit growth acceleration over the coming years, thanks to the strength of its brand and sophisticated loyalty program.

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There has also been a positive start to the new year for ServiceNow shares, with shares up 7.5% through Friday's midday. The company reported stronger-than-expected earnings for the fourth quarter, and Credit Suisse's 12-month price target on the stock implies a 34% gain over the stock's close on Thursday.

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“ServiceNow is well positioned to consolidate share of IT budgets as it crosses-sells workflow automation tools into their existing customer base as a 'platform-of-platforms' due to its broad applicability and comprehensive understanding of automation, management, and enterprise workflows. As a result, it has a long runway for organic growth as a 'platform-of-platforms.’, Badri stated.

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Again, Amazon made the bank's list of top picks. The fulfillment center capacity built out since 2020 will normalize by 2024, according to analyst Stephen Ju.

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"Now that we have solved the problem of higher-than-normal shipping costs caused by misalignment of inventory, what remains to be done is to grow into the higher capacity we have created since 2020. I believe that Amazon will likely be able to return to historical levels of fulfillment center efficiency by 2024, based on historical nominal dollars of YOY GMV growth four quarters to four quarters," said Ju.

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