These top stock picks from Morgan Stanley are well positioned for 'resilient growth'
There's a wide range of stock ready to pop regardless of what direction the market goes, according to Morgan Stanley. These stocks have the potential to grow and be resilient amid the ongoing uncertainty, the analysts wrote. CNBC Pro combed through recent Morgan Stanley research to find some of the firm's favorite stocks. They include Epam Systems , Bill.com , SLB, Microchip Technology and Ingersoll Rand. Bill.com Holdings Bill.com has showed "solid execution yields resilient growth in a worsening macro," analyst Keith Weiss said following the company's earnings report earlier this month. Weiss added he is impressed by the automated cloud-based software company's execution in spite of a tough environment and sees further upside in shares which were up almost 18% on the week. "Amid this macro warning sign, management remained upbeat on retention and the top of the funnel, as evidenced by the record net adds," he said adding that fundamentals are robust. Another positive catalyst going forward is the addition of two new bank partnerships, according to Morgan Stanley Throw in "durable growth, improving profitability, [and] continued momentum," and the stock starts to look even more attractive, Weiss said. "Bottom line, Q1 results show how Bill's value proposition of automating back-office tasks and serving as a way to cut costs continues to resonate with SMBs, even in a softening macro environment, and continued strong execution at the company," he went on to say. Microchip Technology Shares of the semiconductor supplier are too attractive to ignore, analyst Joseph Moore said earlier this month. The stock is up 27.3% over the last month with room to run, the firm said. Moore wrote that Microchip "appears to be discounting a much more severe downturn than peers," and investors should therefore buy the stock. In fact, Moore noted that the company historically has a solid record of "protecting earnings" in tough macro conditions. The firm acknowledged that almost all suppliers, including Microchip, are likely to be impacted in some way by a downturn. But for now, Microchip is an outlier with a strong backlog of non-cancelable business. "The bottom line is that the company has a strong track record of managing these relationships, with notable resiliency in margins during downturns," he said. Moore added that management is executing through choppy waters, and that's not something shareholders should overlook. And even though the stock might not get ahead of peers, the firm says Microchip is just "not getting enough credit for the improvements discussed above and we believe their multiple can move higher as they continue to execute," he went on to say. SLB The company formerly known as Schlumberger is firing on all cylinders, according to analyst Connor Lynagh. "The overarching optimism regarding the duration and resilience of the current cycle was palpable throughout SLB's [recent] Investor Conference," Lynagh wrote earlier this week. The firm said it has increased conviction that this cycle in particular is very "well -suited" to the oil field service company's strength. "SLB provided an in-depth look at the substantial technology it has developed across its Core, Digital, and New Energies offerings," he said. Growth drivers were front and center, Lynagh says, with substantial demand in offshore markets and the Middle East which reinforces the firm's bullish view. Lynagh, who raised his price target to $55 per share from $52, said investors should be particularly impressed by SLB's execution during an intense period of economic upheaval. "While we admittedly see some scope for peers to catch up to SLB's recently-stellar share price performance, the fundamentals of SLB's business and opportunity set are clearly robust," he wrote. Shares are up 83% this year. Epam Systems "Demand resilient, but seeing signs of moderation. Management showcased another quarter of resiliency as it accelerates its globalization of delivery while also winding down operations in Russia. Continued execution on the company's phased approach helped reshape delivery capacity such that impacted regions now constitute 30% of delivery capacity. ... That said, we remain constructive on EPAM's ability to return to +20% y/y revenue growth by the end of CY23 given what we believe to be resilient demand for EPAM's high-value services." Ingersoll Rand "Orders Continue to be Strong, Deals and Execution Support. ... 2023 IR has been a tale of two stories in 2022 with exceptional orders and solid management commentary met with skepticism intraquarter as European macro continues to look more challenged. We expect more of the same, but results remain resilient and 2023 tailwinds look sufficient to support consensus. ... Our base case is based on organic growth of ~14.5% in 2022 followed by MSD in 2023 and 2024." SLB SLB provided an in-depth look at the substantial technology it has developed across its Core, Digital, and New Energies offerings. ... The overarching optimism regarding the duration and resilience of the current cycle was palpable throughout SLB's Investor Conference. As we have said before, this cycle is very well-suited for SLB's strengths. ... While we admittedly see some scope for peers to catch up to SLB's recently-stellar share price performance, the fundamentals of SLB's business and opportunity set are clearly robust." Bill.com "Solid Execution Yields Resilient Growth in a Worsening Macro ... Amid this macro warning sign, mgmt. remained upbeat on retention and the top of the funnel, as evidenced by the record net adds. ... Bottom line, Q1 results show how Bill's value proposition of automating back-office tasks & serving as a way to cut costs continues to resonate with SMBs, even in a softening macro environment, & continued strong execution at company. The combination of durable growth, improving profitability, continued momentum with the company's defensible go-to-market channels, & an attractive 8x EV/CY24 Sales multiple or 0.22x EV/Sales/Growth keeps us OW." Microchip Technology "MCHP appears to be discounting a much more severe downturn than peers. ... Some discount is appropriate given higher financial leverage & the fact that the business was built inorganically, but the company's track record of protecting earnings in a downturn has been pretty strong historically. ... MCHP's underperformance YTD is unwarranted & although we don't think their fundamental performance is going to necessarily track well ahead of peers for the year, they aren't getting enough credit for improvements discussed above & we believe their multiple can move higher as they continue to execute.