Mizuho’s June Top Contrarian Picks: Research Firm More Bullish Than Wall Street

Contrarian investors can still generate extra returns (alpha) even in the current bull market, according to Mizuho Securities. Stocks have been reaching new heights recently, with the Dow Jones Industrial Average closing above 40,000 and the Nasdaq Composite surpassing 17,000. Despite the market rally, Mizuho believes that investors who go against the grain can find opportunities in stocks that have fallen out of favor with Wall Street analysts.

In a recent note, Mizuho shared a list of top stock picks where its analysts’ price targets are 10% or more above the average analyst consensus. Among these picks, Mizuho highlighted Lowe’s and PayPal as having investment ratings above the Street consensus. Lowe’s, a home improvement retailer, has seen its shares slip 2% year-to-date. Mizuho’s analyst, David Bellinger, has a $280 price target for Lowe’s, suggesting a potential 29% rally from its current price. Bellinger sees Lowe’s as well-positioned to benefit from recovering home improvement demand and expects double-digit earnings growth as a result.

PayPal, a financial technology platform, has only risen about 4% this year. Mizuho’s analyst, Dan Dolev, finds PayPal’s valuation compelling at current levels. Dolev believes that PayPal should trade at a premium due to upcoming opportunities such as its Fastlane service. He has a $90 price target for PayPal, which is 42% higher than its current price. Dolev’s analysis of Fastlane suggests the potential for significant transaction margin dollar growth due to the addressable e-commerce market.

Another company on Mizuho’s list is Oracle, a database management provider. Despite a 14% increase in the stock price this year, Mizuho’s analyst, Siti Panigrahi, has a $160 price target for Oracle, implying a 34% potential upside. Panigrahi points to Oracle Cloud Infrastructure (OCI) as a catalyst for future growth, noting that the company’s cloud computing service is attractively priced compared to competitors like AWS. Panigrahi believes Oracle has significant room for growth in the cloud business and is confident in the company’s ability to expand operating margins to 45% by 2026.

In conclusion, Mizuho Securities believes that contrarian investors can still find opportunities for alpha in the current bull market by looking at stocks that have fallen out of favor with Wall Street analysts. Lowe’s, PayPal, and Oracle are among the top picks highlighted by Mizuho, with the potential for significant upside based on the analysts’ price targets. Despite the overall market rally, Mizuho sees these stocks as undervalued and positioned for growth in the near future. Investors who are willing to swim against the tide may find these contrarian opportunities appealing for generating additional returns in the current market environment.