A selection of stocks buoyed by momentum, positive sentiment, and robust buyback activities may assist investors in navigating the remainder of September and potential challenges in October. Historically, September has been the worst month for the S&P 500 since 1950, as per data from the Stock Trader’s Almanac, with the broad market index averaging a 0.7% loss each year in September. Despite a dismal start to the month, stocks have demonstrated resilience following the Federal Reserve’s recent half-percentage-point rate cut on Wednesday. The S&P 500 has gained approximately 1.5% this week and has risen over 1% in September so far.
However, the situation remains precarious as October is also notorious for significant market drawdowns. Considering this seasonal volatility, Evercore ISI has identified stocks that may continue to outperform under current conditions. The investment bank screened the Russell 3000 to find stocks in the top quintiles for momentum, sentiment, and share buybacks, with additional criteria including a market capitalization exceeding $2 billion and a minimum share price of $5.
One company identified by Evercore ISI is AppLovin, a mobile technology firm. The company’s stock has surged 209% in 2024. UBS recently upgraded AppLovin to a buy from neutral, citing enhanced visibility into medium-term revenue growth, supportive valuation, and potential opportunities in gaming and e-commerce as catalysts. Despite prevailing bullish sentiment on Wall Street, consensus price targets indicate a potential 15% decline from current levels, as reported by LSEG. Nonetheless, BTIG has set a $150 price target on AppLovin, the highest among analysts surveyed by FactSet.
Financial trading platform Robinhood, which has risen 80% in 2024, was also highlighted by Evercore ISI. Among the 17 analysts covering the stock, eight rate it as a hold, with average price targets suggesting a 5% upside, according to LSEG. Earlier this month, Barclays upgraded Robinhood to equal weight from underweight, with analyst Benjamin Budish noting a maturing business model and potential top-line growth catalysts. Robinhood also announced a $1 billion share repurchase program earlier this year.
Evercore ISI further underlined Sprouts Farmers Market as a strong performer. The stock of this organic-focused grocery retailer has soared approximately 118% year-to-date. Evercore ISI upgraded Sprouts to outperform from in line this week. Analyst Michael Montani noted that Sprouts could gain from the trend towards healthier eating, with a $125 price target, the highest on the Street according to FactSet data. Despite this optimism, 13 of the 16 analysts covering the stock rate it as a hold, with consensus price targets implying nearly 9% downside, based on LSEG data.
