5 stocks for the Christmas wishlist: Hoping for a pullback

Key Points

• The market is led by tech mega-caps in rally mode and heading higher.
• These stocks are good targets to buy-on-the-dip if a dip ever comes. 
• The next major catalysts for these stocks are the Q4 earnings reports due out in January and early February 2024. 

The holiday season is fast approaching, and investors and traders hope Santa Claus will visit Wall Street. Among the wishes for those with some capital to invest is another chance to get into some of this year’s market-leading stocks. As good as this year was for names like Meta Platforms NASDAQ: META, NFLX NASDAQ: NFLX and NVIDIA NASDAQ: NVDA (which all produced triple-digit gains in 2023), it looks like next year could be equally good for tech giants. Because the stocks are trending higher, a pullback in the price action will likely result in a trend-following entry and market-leading gains for investors in 2024. 

Meta Platforms is no longer a Most Upgrade stock 

Meta has been prominently listed at or near the top of Marketbeat.com’s Most Upgraded Stock list, but no more. While the analysts continue to support the name, their activity tapered off in the 2nd half of the Q3 reporting cycle, resulting in the omission. The takeaway is that analysts continue to rate Meta at Moderate Buy, and their price targets suggest another rally is ahead.

The consensus target assumes fair value near current price levels, but every target issued since late July has been above that level. The consensus of targets for the last two months has this stock trading in the $380 to $400 range or at a new all-time high. The next visible catalyst is the Q4 results, which are expected in late January. Because the analysts' revisions have been mixed and the last report included strength in DAUs, MAUs and ad impressions, it’s likely Meta will outperform the consensus, and it is a solid forecast. Analysts expect top-line growth to sustain above 20%. 

Microsoft rides high on AI push

Microsoft NASDAQ: MSFT is moving higher on a trifecta of good news that includes persistent gains in the cloud, announcing new AI-centric chips and the reinstatement of Sam Altman to his position at OpenAI. The news has the analyst reaffirming their ratings and targets, rating and targets that got a lift from the Q4 guidance, with a possible 5% to 15% upside at the high end of the target range. The next earnings release is due at the end of January and is expected to show another solid gain.

Analysts expect revenue growth to accelerate to 16% YOY and for the margin to widen. Because the analysts expect the margin to contract sequentially and the revisions are mixed, there is a chance for outperformance. Regardless, the stock reached a  new all-time high recently and appears ready to continue higher. A pullback may provide a 5% to 10% discount relative to current pricing. 

NVIDIA pullback is imminent

NVIDIA stock is trading near all-time highs after a series of beat-and-raise quarters, with revenue up 200% in the latest quarter. This trend is expected to continue over the next few quarters, although there is concern for international business, specifically with China. Those concerns may produce a pullback in the price action, but the trend remains up. Analysts see this stock rising another 20% at the mid-point of their range, and this mid-point is up about 200% compared to last year. The most recent targets have the stock trading another $200 above the consensus or about 60% above the current price action. 

Amazon enters reversal

Amazon NASDAQ: AMZN shares are in reversal following solid Q3 results. The AWS, cloud and AI sides of the business outperformed and came with a robust outlook for growth. The analysts see AWS growth accelerating over the coming quarters and are raising their price targets for the stock. The consensus implies about a 15% upside but is trending higher, and the range's high-end adds another 35%. Amazon next reports in early February; analysts may be underestimating the strength of AI because growth is forecast to slow to 11% from 13%. 

Netflix in rally mode

After multiple quarters of improving user metrics and margins and evidence that the new pay and add-supported tiers are working, Netflix NASDAQ: NFLX is in rally mode. Analysts are helping to drive the market higher, but the consensus target lags behind price action. The consensus is up sharply compared to last year, about 45%, with the freshest targets implying a double-digit upside. The last 6 weeks of market action include several strong green candles, including a Three White Soldiers continuation pattern. The next big hurdle for the market is resistance at the recent highs, near $485. That level may provide enough resistance for a pullback in prices.