Bank of America Highlights Top Buy-Rated Stocks Poised for 2024 Outperformance

Bank of America has identified a selection of buy-rated stocks predicted to significantly outperform the market in the remainder of 2024. The investment bank’s analysts highlight these companies as being exceptionally well-positioned for growth, demonstrating strong performance across key metrics. Among the “best-in-class” companies highlighted are some prominent names across diverse sectors, including streaming (Netflix), automotive retail (Carvana), industrial technology (ESAB), restaurants (Texas Roadhouse), and building technologies (Johnson Controls). Each company presents a compelling narrative for continued success, fueled by various factors ranging from strong operational efficiency to favorable market conditions, and Bank of America’s analysis provides a compelling outlook for investors in 2024 and beyond.

Key Takeaways: Bank of America’s Top Stock Picks for 2024

• Netflix (NFLX): Boasting a 69% share price increase in 2023, Netflix is deemed “best-in-class” with strong margin outlook and a growing ad business.
• ESAB: This industrial company shows 43% share growth year-to-date and is highlighted as a “best-in-class compounder” showing resilience even during a weak manufacturing climate.
• Texas Roadhouse (TXRH): Up 62% in 2023, Texas Roadhouse’s “best-in-class” traffic growth and margin outlook makes it a compelling investment for 2024.
• Carvana: Demonstrating strong eCommerce growth and benefiting from a North American car production shortage, Carvana is believed to have high levels of sustained growth in the long term.
• Johnson Controls (JCI): With a strong focus on data centers and smart building technology, JCI is showing significant promise for outperformance.

Netflix: A Streaming Giant with Continued Momentum

According to Bank of America analyst Jessica Reif Ehrlich, Netflix’s October earnings report demonstrates that everything is “on track” for the streaming giant. Profit margins are rising, and the company’s strategic investments are seen as solidifying its market-leading position. Ehrlich emphasizes that “NFLX’s existing scale advantage is bearing fruit as healthy revenue growth and cost discipline are driving operating leverage, leading to an increased 2024 margin outlook to ~27%.” The bank anticipates further upside, projecting that earnings per share will outperform in the coming quarters.

Netflix’s Growth Drivers

Ehrlich adds that “In our view, Netflix remains one of the best positioned companies within media & has several growth drivers, including the accelerating ramp of its burgeoning ad business which is expected to double in ’25 and become a multi-year growth driver in ’26 and beyond, along with Gaming, Live & Sports.” This diversification strategy, coupled with its established subscriber base, positions Netflix for sustained growth, making it a compelling investment opportunity. The impressive 69% share price increase in 2023 further supports this optimistic outlook.

ESAB: Thriving in a Challenging Market

BofA analyst Sherif El-Sabbahy highlights ESAB, a fabrication technology and welding company, as too attractive to ignore. He notes that “The firm continues to compound even in a weak manufacturing backdrop,” showcasing its resilience and strong performance despite industry headwinds. El-Sabbahy describes ESAB as “thriving in a tough backdrop,” with expanding free cash flow. This indicates a strong internal operating strength, unaffected by macroeconomic uncertainties.

ESAB’s Future Prospects

The analyst attributes ESAB’s success to its strong domestic and international market positioning, anticipating further market share gains. A robust balance sheet reinforces the company’s capacity for growth. With a 43% year-to-date share price increase, El-Sabbahy reiterates his buy rating, calling ESAB a “best in class compounder with short cycle upside.” The belief is that as the manufacturing economy recovers, ESAB’s earnings will further compound, pushing the multiple expansion.

Texas Roadhouse: Best-in-Class Traffic and Margin Outlook

Following Texas Roadhouse’s late October earnings report, BofA analyst Sara Senatore remains bullish on the company’s prospects. Senatore points out that “As beef prices continue to prove more favorable than expected, TXRH is well-positioned to maintain restaurant-level margins even as pricing rolls off in [fiscal] 2025.” This favorable cost environment provides a strong foundation for sustained profitability.

Texas Roadhouse: Growth Runway and Operational Excellence

Bank of America highlights Texas Roadhouse’s operational strengths, including low staff turnover, innovative technology, and consistently improving same-store sales. Senatore specifically underscores the company’s “best-in-class traffic growth,” highlighting month-to-month improvement even as the broader restaurant industry faces considerable challenges. The 62% year-to-date share price increase showcases the market’s recognition of the company’s strong performance. Looking ahead, Senatore believes that “We believe Texas Roadhouse has a long growth runway, with room to expand its store count in the U.S. by 70% to about 1000 stores,” indicating significant expansion potential in the coming years.

Carvana: Growth Mode and Market Leadership

Bank of America’s analysis positions Carvana as a company “in growth mode,” emphasizing its “best-in-class eCommerce growth” driven by market expansion and increasing penetration in existing markets. The report highlights the company’s favorable positioning, stating “We think the company is well positioned for high levels of sustained growth long term and see upside potential in the medium term given strong inventory levels, resilient consumer demand and [a] North America car production shortage.” The current market dynamics, particularly the car production shortage, create a compelling environment for the company’s continued expansion.

Johnson Controls: Data Centers and Smart Buildings

Bank of America’s call on Johnson Controls (JCI) emphasizes its “best-in-class data center assets” and the transformative changes within the sector. Analysts view data centers as one of the most promising sectors, with JCI in a prime position for growth. The report emphasizes that “We believe data centers to be one of the more profitable verticals.” Beyond data centers, JCI’s growth is further bolstered by its focus on “smart buildings controls and software.” The arrival of a new CEO is also seen as a positive catalyst, signaling a fresh perspective and further potential for strategic initiatives. The overall assessment is one of positive self-help and structural growth opportunity.

Conclusion: A Diversified Portfolio of Promising Investments

Bank of America’s selection of buy-rated stocks offers a diverse portfolio of promising investment opportunities across various sectors. Each company exhibits strong fundamentals, highlighting the potential for significant returns in the remainder of 2024 and beyond. Whether it’s Netflix’s dominance in streaming, ESAB’s resilience in manufacturing, Texas Roadhouse’s strong performance in the restaurant industry, Carvana’s e-commerce prowess or Johnson Controls innovative technology, these companies demonstrate why Bank of America has identified them as promising opportunities for investors. This positive outlook, backed by detailed analysis from esteemed analysts, underscores the compelling investment narrative surrounding these companies for prospective investors preparing for 2024.