J.P. Morgan Analysts Say These 3 Stocks Are Their Top Picks for 2023

Anyone involved in the investing game will know it’s all about “stock picking.” Choosing the right stock to put your money behind is vital to ensure strong returns on an investment. Therefore, when the Wall Street pros consider a name to be a “Top Pick,” investors should take note.

Using the TipRanks platform, we’ve looked up the details on three stocks that have recently gotten ‘Top Pick’ designation from the analysts at banking giant J.P. Morgan.

So, let’s dive into the details and find out what makes them so. Using a combination of market data, company reports, and analyst commentary, we can get an idea of just what makes these stocks compelling picks for 2023.

Zoetis Inc. (ZTS)

The first JPM pick we’re looking at is a biopharmaceutical company – but with a twist. Zoetis is specializing in medicines and vaccines for veterinary purposes. We don’t often think about that, just assuming that human and veterinary drugs have a lot of overlap, but there are significant differences in active and inactive ingredients, dosages, and even delivery mechanisms. Veterinary medicine can overlap with human treatments, but it does not always, and many of its treatments and drugs are species-specific. This is the world in which Zoetis works.

Veterinary care, for pets and livestock, is a huge business, with impacts on some of the most personal aspects of our lives, from the animals we take into our home to our very food supply. Zoetis regularly brings in close to $2 billion per quarter in revenues; the last quarter reported, 4Q22, showed $2 billion in revenue, and adjusted net income of $539 million, or adjusted diluted EPS of $1.15. Looking ahead, the company is projecting 2023 revenue between of $8.575 – $8.725 billion, above Street estimate of $8.55 billion.

At the same time, Zoetis has kept up its small, but highly reliable dividend payment. The payment, of $0.375 cents per common share, annualizes to $1.5 and gives a yield of 1%. The company has been keeping up reliable payments for over a decade now.

Against this backdrop, JPMorgan analyst Chris Schott lays out a reasoned explanation for keeping Zoetis as a Top Pick: “We see ZTS as well-positioned with an innovative and differentiated portfolio (derm, parasiticides, pain & diagnostics) that should translate to further upside to numbers over time. And while the company had supply issues in 2022, these appear to have been largely addressed with little to no impact expected on 2023 results… We see a very attractive setup for the stock in 2023.”

Seeing a sound current position, and room for future expansion, Schott rates this stock an Overweight (i.e. Buy), and sets his price target at $225 to indicate his belief in a 31% one-year upside to the shares. (To watch Schott’s track record, click here)

Overall, this veterinary medical firm gets a Strong Buy rating from the analyst consensus, based on 4 recent reviews that include 3 Buys and 1 Hold. The stock is selling for $171.64, and its $202.50 average price target implies an 18% gain by the end of this year. (See ZTS stock forecast)

Juniper Networks (JNPR)

We’ll now switch gears and move over to the tech sector, where Juniper Networks is specializing in the development and marketing of routers, switches, network management software, security products, and software-defined networking tech – in short, all of things that are needed to put together and maintain networking and cybersecurity solutions.

Networking has become an essential business in our digital world, and Juniper has realized consistently high revenues and earnings from it. In 2022, the company has reported $5.3 billion in total revenues, up from $4.73 billion in the prior year, for a year-over-year gain of 12%.

Preliminary 4Q data showed an 11% y/y gain for revenues, to $1.448 billion. The GAAP net income came to $180 million, or 55 cents per share, up 36% y/y, and by non-GAAP measures, the income of $213 million (65 cents per diluted share) was up 16% y/y. The company has deep pockets, although cash reserves are down from 2021; Juniper finished 2022 with $1.23 billion in cash and liquid assets, compared to $1.69 billion at the end of 2021. Looking ahead, Juniper guided toward a 15% y/y revenue gain for 1Q23, to approximately $1.34 billion.

Of note for return-minded investors, Juniper authorized an increase of 5% for its common share dividend, starting with the March 22 payment. This brings the dividend to 22 cents per common share, or 88 cents annualized, for a 2.77% yield.

Covering Juniper for JPMorgan, 5-star analyst Samik Chatterjee writes, “We see the recent earnings print further underscoring our rationale for Juniper being our Top Pick for 2023, led by the company’s resilient revenue/ earnings, which we believe is supported by a large share gain opportunity in Enterprise, a robust backlog, and customer vertical diversification.”

Chatterjee backs that ‘share gain opportunity’ with an Overweight (i.e. Buy) rating and a $42 price target, which implies a one-year upside of ~33%. (To watch Chatterjee’s track record, click here)

Overall, there have been 11 analyst reviews on Juniper in recent weeks, and they break down to 5 Buys, 4 Holds, and 2 Sells, for a Moderate Buy consensus rating. The shares are priced at $31.65 and the $36.09 average target indicates room for ~14% over the next 12 months. (See Juniper stock forecast)

T-Mobile US (TMUS)

Last up is a company that likely doesn’t need much introduction. T-Mobile is one of the US’ largest wireless service providers, and one of the leaders in expanding 5G network coverage across the country. T-Mobile’s 5G network covers more than 325 million people in North America, mostly in the US. The company boasts nearly 2.65 million customers for high-speed internet as of Q4 2022, up 25% from Q3 – and up from just 646,000 at the end of 2021.

T-Mobile reported solid gains in subscriber numbers in its 4Q22 report, adding 1.8 million postpaid net customers and 927K postpaid phone customers in the quarter. High-speed internet net customer additions came to 524,000. Overall, the company generated Q4 revenue of $20.27 billion, a 2.5% year-over-year decrease, and $390 million below consensus estimate. However, GAAP EPS jumped 247% y/y to $1.18, beating Street estimate of $1.07.

Cash generation was also eye-catching. T-Mobile saw its annual free cash flow jump more than 35% y/y, from $5.65 billion in 2021 to $7.66 billion in 2022. The FCF gain was driven by a massive spike in Q4; the $2.18 billion in FCF from 4Q22 was up more than 96% y/y.

These are solid numbers, according to JPMorgan analyst Phillip Cusick, who writes: “T-Mobile is our top pick for 2023 across our coverage as we see substantial synergy and operating efficiencies over the next several years driving strong EBITDA and cash flow growth.”

The company’s cash flow growth potential back up Cusick’s Overweight (i.e. Buy) rating on the shares, and his $200 price target suggests a 35% upside over the coming year. (To watch Cusick’s track record, click here)

All in all, Wall Street generally was impressed by T-Mobile’s performance, and that shows in the analyst reviews. Of the 16 on file, 14 are to Buy against just 2 to Hold, for a Strong Buy consensus rating. The stock’s $179.92 average price target implies ~22% upside from the $147.87 trading price. (See T-Mobile stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.