Analysts are upbeat toward S&P 500 stocks for 2022, though some of the optimism has moderated following a volatile start to the year.
Between talk of higher interest rates on the way to the wind-down of the "stay-at-home trade" that drove returns in 2021, investors have repositioned themselves for what could turn out to be a very different year on Wall Street.
There have also been a number of significant disruptions to companies in the wake of earnings – including a meltdown in high-profile stocks such as Facebook parent Meta (FB) and streaming giant Netflix (NFLX).
As a result, Goldman Sachs strategists recently lowered their year-end 2022 price target on the S&P 500 to 4,900 from 5,100. Still, they "continue to see upside to U.S. equities as prices rise alongside earnings."
And for every challenge for investors, there is also an opportunity. As we get rolling into the rest of 2022, it's worth looking at the stocks that the analyst community is most bullish on right now.
Today, we're going to look at the 10 best S&P 500 stocks to buy now, according to the Wall Street pros. These are the most highly rated components in the index – making them the top 2% of U.S. large caps according to the "smart money" – based on analyst data from S&P Global Market Intelligence.
There's no guarantee that these analysts are going to be right, or that we won't see more curveballs thrown our way in the months ahead. But if you care where the biggest investment banks and institutional traders are putting their cash right now, then you want to look at this list.
Data is as of Feb. 11. Analysts' consensus recommendations courtesy of S&P Global Market Intelligence. Stocks are listed in reverse order of analysts' consensus rating.
Caesars Entertainment
- Market value: $17.9 billion
- Dividend yield: N/A
- Analysts' consensus recommendation: 1.40 (Strong Buy)
Many consumer discretionary stocks were brutalized by the social distancing requirements and pandemic-related disruptions of 2020. And gaming giant Caesars Entertainment (CZR, $83.74) was among them, seeing its share price cut by roughly 90%, from a high around $70 per share in February to a low of about $7 in March.
But things have improved, with shares not only reclaiming their pre-pandemic highs but surging to new ones. Right now, CZR stock is trading well above $80 – and it's picking up more positive sentiment, with several in the analyst community taking a bullish position on the stock of late. Morgan Stanley, Wells Fargo and Deutsche Bank are among those that rate Caesars a Buy or equivalent.
The reasons are pretty clear as to why. To begin with, CZR is forecast to comfortably return to profitability in fiscal 2022. And despite plotting a staggering 180% rebound in revenue across 2021, CZR is not done, with a prediction of 15% revenue expansion in 2022 as well.
With easing regulations on sportsbooks specifically and gambling generally, there are clear tailwinds from a policy perspective. And with a recovering economy now that the worst of the pandemic is over, coupled with a lot of wanderlust from folks who haven't been able to get out and about, it's a pretty safe bet (pardon the pun) that CZR is going to follow through on these strong forecasts.
There is always risk in a stock like this that has seen volatility and is closely tied to cyclical spending. But when the economy and consumer confidence move in the right direction, as they are doing now, there is a lot of upside potential.
Signature Bank
- Market value: $20.4 billion
- Dividend yield: 0.7%
- Analysts' consensus recommendation: 1.39 (Strong Buy)
Signature Bank (SBNY, $335.59) is a regional financial stock, focused on the humdrum business of commercial banking services, consumer checking accounts, mortgage lending and the like. It's not a tiny outfit, with $20 billion in market value at present and almost $3 billion in annual revenue, but it's certainly not on par with global megabanks like JPMorgan Chase (JPM).
For low-risk investors, that's actually kind of a good thing. Banks like Signature aren't involved in risky proprietary trading or aggressive investment banking activities that could go sideways if we see market disruptions. And in a rising interest rate environment where Signature can command better margins on its loans, the day-to-day operations of SBNY are enjoying a pretty nice tailwind right now.
Specifically, SBNY is looking at a 35% increase in its top line in fiscal 2022 and an almost 30% again in fiscal 2023. Those are growth rates you wouldn't expect from a regional bank, and are testament to the favorable environment and Signature's well-run operations.
After strong earnings in January, Signature saw a spate of positive analyst reports including from Goldman Sachs, Wells Fargo, and Morgan Stanley all maintaining their Buy or equivalent ratings. And that's with the stock up more than 60% over the last year.
If you're looking for a high-octane growth stock, SBNY may not jump out at you. But given its sustained uptrend in both share price and revenue, it's easy to see why Wall Street thinks this is one of the best S&P 500 stocks right now.
Alaska Air Group
- Market value: $7.2 billion
- Dividend yield: N/A
- Analysts' consensus recommendation: 1.36 (Strong Buy)
Yes, an airline makes the list of the best S&P 500 stocks right now. And no, there's not a glitch in our screening methodology. The fact is that Alaska Air Group (ALK, $56.84) has long been one of the best-run carriers in North America, and the recent recovery in the travel industry from COVID-19-related disruptions has finally allowed ALK to win positive attention once more.
Let's start with the fundamentals. In October, ALK returned to profitability – without any adjustments for pandemic-related aid – to prove it can stand on its own two feet. Then, at the end of January, Alaska Air reported net income for its fourth quarter that hit 14 cents a share, a dramatic turnaround from the $3.60 per-share loss in Q4 of the prior year.
Looking forward, analysts are projecting an amazing 49% year-over-year surge in revenue for fiscal 2022 and another 10% in 2023. It continues to grow beyond just the U.S. Northwest, with a recently announced flight from Seattle to Miami to mark its 100th non-stop route. ALK also recently expanded partnerships with Helsinki and London airports to give it a better international presence.
And best of all, ALK was the only U.S. airline featured in AirlineRatings.com's annual Top 20 Safest Airline Report. Alaska Air Group also regularly ranks at the top of customer satisfaction rankings across the industry. So it's not a company sacrificing service in the name of growth.
There are admittedly risks in taking a flier (pardon the pun) on a cyclical stock like this amid challenges around inflation eating into consumer spending or the risk of yet another pandemic resurgence. Still, Wall Street seems to think this is one of the best S&P 500 stocks, and it's hard to argue that ALK is overpriced given it is still off about 20% from early 2020 highs.
If you believe in the reopening of the global economy and the rise of travel spending in 2022, then Alaska Air could be worth a look.
Microsoft
- Market value: $2.2 trillion
- Dividend yield: 0.8%
- Analysts' consensus recommendation: 1.34 (Strong Buy)
Enterprise software giant Microsoft (MSFT, $295.04) is a Big Tech stock with broad analyst support. With more than $2 trillion in market value at present and operations that rake in $200 billion in annual revenue, it may be hard for casual observers to imagine MSFT getting much bigger. But the software giant is indeed growing despite its already dominant footprint.
Specifically, MSFT just put up quarterly earnings in January that showed revenue increased by 20% from a year earlier, and net income swelled by 21%. Looking forward, the prospects are equally rosy, with projections of 18% revenue growth in the current fiscal year with a 16% increase in earnings per share.
This is in large part because of its dominant Office suite and other software offerings, but also because MSFT continues to make big inroads into cloud computing with its Azure arm.
On top of that, Microsoft dove even deeper into the lucrative video game entertainment market with a big-ticket buyout of publisher Activision Blizzard (ATVI) for $68.7 billion, the largest deal in MSFT's 46-year history. That adds franchises including Call of Duty to its already impressive array of Xbox hardware and related software.
Small wonder that Wall Street thinks Microsoft is one of the best S&P 500 stocks right now, with Buy and equivalent ratings everywhere, including at Citi, Oppenheimer and Morgan Stanley. The consensus price target of $373.68 is healthy too, implying about 27% upside from here.
And the strong long-term performance of MSFT proves this is a company worth banking on – particularly given the rocky environment elsewhere on Wall Street in 2022.
Iqvia
- Market value: $46.7 billion
- Dividend yield: N/A
- Analysts' consensus recommendation: 1.32 (Strong Buy)
With a market capitalization of about $47 billion, Iqvia (IQV, $244.28) is the largest healthcare data science company out there.
Unlike risky development-stage biotech companies that burn cash in pursuit of the next blockbuster drug, Iqvia is a very different play on drug research. It's a leader in commercial outsourcing services, including facilitating those all-important clinical trials that companies depend on for Food and Drug Administration (FDA) approval.
In other words, rather than taking a flier on an individual company's research pipeline you can instead depend on IQV that cashes in by facilitating those trials – regardless of which drugs work and which don't.
The product of a 2017 mashup between Quintiles and IMS Health, Iqvia has global operations and unrivaled scale. Unlike hot biotechs that regularly make flashy headlines, there's not a ton of chatter around this slow-and-steady stock. Still, Wall Street sentiment is very strong right now with a consensus price target of about $304 per share – almost 25% above current levels.
And it should go without saying that as long as there are sick people in the world and untreated conditions like cancer, Alzheimer's, rare genetic disorders and the like, there will be a constant quest for the next generation of cures. That means a pretty reliable source of revenue into the future – and based on projections of more than 20% top-line growth in fiscal 2021, a growing source of revenue, too.
If that's not enough, IQV is one of the best stocks to protect against inflation.
Alphabet
- Market value: $1.8 trillion
- Dividend yield: N/A
- Analysts' consensus recommendation: 1.32 (Strong Buy)
Google parent Alphabet (GOOGL, $2,685.65) is another titan of tech that's on this list of the top-rated S&P 500 stocks. The company has managed to squeeze out all other rivals and has a consistent and dominant business, as well as a strong tailwind at its back in 2022.
Consultancy firm Zenith Media estimates that of all global adspend, 60% of marketing budgets are dedicated to digital channels like the ones dominated by Google. What's more, the pie is growing fast, with projections of 14% growth in digital adspend in 2022.
Perhaps unsurprisingly, then, analysts are projecting a nearly 18% uptick in revenue this year, with projections of more than $300 billion for Alphabet's top line. There's little sign of that growth slowing down either, with another 15% growth predicted in fiscal 2023 on top of that.
While some stocks have stumbled to start this year, GOOGL blew the doors off with a strong fourth-quarter earnings report in February and news of an Alphabet stock split – and saw a spate of rosy analyst ratings as a result. These included Buy or equivalent recommendations from firms including Goldman Sachs, Morgan Stanley, Credit Suisse, Argus Research and BofA Securities to name a few.
There's also a consensus price target of almost $3,500 per share that gives Alphabet nearly 30% upside from here if things go as Wall Street expects.
As one of the dominant mega-cap stocks out there, there's very little that will bring Alphabet down in the near future. And with a strong tailwind of optimism after earnings, it seems a very safe bet to lean on this leader for outperformance in 2022.
Monolithic Power Systems
- Market value: $19.6 billion
- Dividend yield: 0.7%
- Analysts' consensus recommendation: 1.31 (Strong Buy)
Semiconductor design firm Monolithic Power Systems (MPWR, $424.29) is a specialized chipmaker that serves various industries including automotive, industrial, communications and consumer-oriented business. In addition to its solutions regarding power systems, MPWR also provides lighting control systems including those used in LCD panels for laptops and TVs.
Global supply-chain disruptions and a chip shortage is weighing on a host of industries. The reality of supply and demand, however, means that the smaller number of chips are going to be more expensive and producers like MPWR can operate at full capacity while still commanding generous margins.
Consider that the current fiscal year is expected to see more than a 20% increase in the top line, and an additional 20% jump in revenue next fiscal year as proof of this. As a result, Deutsche Bank and KeyBanc in recent weeks reiterated their Buy or equivalent ratings, and Wall Street has bid up prices about 40% from its 2021 lows because of improving sentiment.
"We believe that the combination of strategic additions to supply (during a period of tightness) as well as a superior price vs. performance offering, has and will continue to provide an attractive offering to help secure long-term customers," Deutsche Bank analysts say. As a result, they believe MPWR's share gains will continue.
Now, there is risk here that the return of production challenges could sap capacity once more and undercut this uptrend for MPWR. However, all indications are that operations have normalized and are looking up in 2022 – making Monolithic Power Systems one of the best S&P 500 stocks to buy now.
Amazon.com
- Market value: $1.6 trillion
- Dividend yield: N/A
- Analysts' consensus recommendation: 1.28 (Strong Buy)
There's a lot to like about Amazon.com (AMZN, $3,065.87). The company was revolutionary in the development of e-commerce in the 2000s and in cloud computing in the 2010s via its Amazon Web Services arm. And in 2022, it's still dynamic and going strong.
As one of the world's largest online retailers with a global brand and operations that span every spending category, Amazon is a pretty direct play on digital consumer spending trends.
And with U.S. retail e-commerce sales predicted to grow 16.1% in 2022 to $1.06 trillion, according to market research firm Insider Intelligence, it's easy to see the appeal of AMZN stock as the most logical recipient of this cash. In fact, revenue is set to expand by more than 15% this fiscal year and another 17% next year as the e-commerce king continues to reign supreme.
There has long been chatter about potential antitrust action against AMZN, most obviously because it has the enviable position to be both a platform for merchants as well as a direct seller on that platform. However, we haven't seen any serious effort to date – and based on recent price targets, Wall Street doesn't seem particularly worried that anything will come down the pike in the near future.
With a wide moat, a dominant brand and deep pockets it's hard to imagine a future without Amazon. This is probably why the analyst community is so bullish on AMZN and considers the tech giant one of the best S&P 500 stocks to buy right now.
Alexandria Real Estate
- Market value: $29.7 billion
- Dividend yield: 2.5%
- Analysts' consensus recommendation: 1.27 (Strong Buy)
Alexandria Real Estate Equities (ARE, $185.65) may be one of the lesser-known names on this list of the best S&P 500 stocks. ARE is a roughly $30-billion commercial property company that operates in major U.S. markets including New York, San Francisco, Seattle and Boston.
Structured as a real estate investment trust (REIT), ARE gets corporate tax breaks in exchange for a requirement that it deliver 90% of taxable income back to shareholders. Thanks to this business model, along with long-term lease arrangements with key clients in lucrative markets, investors can bank on generous dividends from this stock on top of upside potential for shares.
Alexandria is a specialized REIT with properties that mainly serve life science, technology and agricultural technology companies. This unique approach to real estate allows investors the reliability and income that comes from a dependency on physical properties and rent, but also the growth potential that comes with biotechnology companies or research firms.
As one example of how bullish Wall Street is on ARE right now, BofA Global Research currently ranks the stock a Buy with a 12-month price target of $250. That's roughly 35% upside from current prices, and those gains could be all the sweeter based on regular dividends that add up to a yield of 2.5%.
Constellation Energy
- Market value: $15.7 billion
- Dividend yield: 1.2%
- Analysts' consensus recommendation: 1.25 (Strong Buy)
Baltimore-based Constellation Energy (CEG, $48.09) is an energy producer for homes and businesses in the region. It operates 32,400 megawatts of generating capacity across nuclear, wind, solar, natural gas and hydroelectric power plants. It is one of the largest producers of green energy in the U.S., and is a major player in deregulated markets, operating competitive distribution where it is allowed under state laws.
CEG is interesting for a host of reasons. Perhaps the most noteworthy is the fact that this company only entered U.S. stock markets independently in the beginning of February after a spinoff from mega-utility Exelon (EXC). And following its market debut, CEG replaced Gap (GPS) in the S&P 500.
The thinking is that Constellation can do more on its own, particularly on the renewables front, as it has publicly pledged to reach 95% carbon-free electricity across its operations by 2030. This is because of heavy reliance on nuclear energy, which may not be "clean" in the eyes of some thanks to the radioactive byproducts, but is nevertheless free of CO2 emissions.
As far as financials go, Constellation Energy has a lot of question marks given its recent entry into markets and a lack of earnings history. However, with a market cap of $15 billion at its debut and EBITDA (earnings before interest, taxes, depreciation and amortization) guidance of $2.35 billion to $2.75 billion for fiscal 2022, it has a firm foundation. And as a utility stock, it is not exactly a risky tech start-up that is likely to see a lot of variance.
The spinoff seems to have been well-received based on current analyst ratings, given that CEG is among one of the most highly rated S&P 500 components right out of the gate.
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The Pros' 10 Best S&P 500 Stocks to Buy Now - Kiplinger's Personal Finance
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