The start of September has been quite turbulent for the stock market, especially for companies in the semiconductor space. Nvidia, a leading chipmaker, experienced a significant drop of 9% in its stock price on the first trading day of the month, resulting in the loss of approximately $279 billion in market capitalization. This downturn marked the biggest one-day drop in the history of the U.S. stock market. The VanEck Semiconductor ETF (SMH) also suffered, with a nearly 12% decline last week, making it the worst weekly loss in over four years. The major averages all saw sharp declines, with the S&P 500 recording its worst week since the regional bank crisis of 2023.
As the new trading month began, Mizuho highlighted 24 of its highest-conviction ideas across six sectors. Among its top stock picks for September are chip giant Micron Technology and oil and gas company Coterra Energy. Despite Micron’s recent struggles, including a 10% decline last week, Mizuho sees the company as well-positioned in the artificial intelligence (AI) arms race. With potential tailwinds from increased AI adoption in the coming year, Micron is expected to benefit from share gains in the high bandwidth memory market.
Energy Transfer is another one of Mizuho’s top picks for September, primarily due to its attractive free cash flow yield, growth outlook, and discounted valuation. The stock has a price target of $20, indicating a potential upside of nearly 26% from its current price. Similarly, Wolfe Research has recently added Energy Transfer to its Alpha List, forecasting significant upside for the company ahead.
Retail Sector Stocks
Lowe’s is one of the standout names on Mizuho’s list, with a bullish outlook compared to the Street’s consensus. Despite receiving buy or strong buy ratings from only 16 out of 36 analysts covering the stock, Mizuho sees substantial upside potential for Lowe’s. With a target price of $280, implying a 15% upside, the firm believes Lowe’s is well-positioned to benefit from the recovery in demand within the industry. Analysts are optimistic about the home improvement sector transitioning into a post-pandemic growth phase, with Lowe’s expected to capitalize on increased consumer spending on DIY projects.
Analyst Insights
Analyst David Bellinger from Mizuho believes that any future easing by the Federal Reserve could unlock significant pent-up demand, particularly in the housing market. The firm envisions a scenario where existing home sales rebound to a level of around 4.5 million annually, driving sector demand upwards. Furthermore, JPMorgan has also included Lowe’s in its September focus list, indicating growing confidence in the company’s performance this year.
Despite the volatility and uncertainty in the market, Mizuho’s top stock picks for September reflect a blend of cautious optimism and strategic foresight in identifying companies with strong growth potential. By analyzing industry trends and market dynamics, investors can navigate the current economic landscape and position themselves for long-term success.