Storage tanks stand the Sabine Pass LNG Export Terminal ahead of Hurricane Laura in Sabine Pass, Texas, U.S., on Tuesday, Aug. 25, 2020.
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As the year winds down, investors are looking forward to 2023 and wondering where they should place their top bets.
Analysts that cover companies are mulling the same question, prompting UBS to put together a list of its top conviction picks for 2023.
The list includes the firms “most compelling Buy-rated investment ideas for the year ahead,” strategist Keith Parker wrote in a Dec. 13 note.
“We’ve focused on stocks where we believe our analysts have a differentiated view vs. consensus, and where we have interesting or proprietary data sources (from UBS Evidence Lab or elsewhere),” he said. “We have also considered potential upside to price target and risk/reward skew as well as a stock’s exposure to key themes and factor preferences from a strategy perspective.”
UBS top picks for 2023
| Company | Ticker | UBS Target Price | Upside to Target Price | Sector | Sub Industry |
|---|---|---|---|---|---|
| Kymera Therapeutics | KYMR | $88 | 240% | Health Care | Biotechnology |
| Zebra Technologies | ZBRA | $445 | 77% | Technology | Electronic Equipment & Instruments |
| Endeavor Group Holdings | EDR | $33 | 56% | Comm Services | Movies & Entertainment |
| Cheniere Energy | LNG | $245 | 55% | Energy | Oil& Gas Storage & Transportation |
| Zillow Group | ZG | $50 | 47% | Real Estate | Real Estate Services |
| Dell Technologies | DELL | $60 | 43% | Technology | Tech Hardware Storage |
| Array Technologies | ARRY | $29 | 42% | Industrials | Electrical Components & Equiment |
| Dycom Industries | DY | $124 | 41% | Industrials | Construction & Engineering |
| Advanced Micro Devices | AMD | $95 | 39% | Technology | Semiconductors |
| Gitlab Inc | GTLB | $59 | 27% | Technology | Systems Software |
Source: UBS
The top picks from UBS span industries from health care to industrials and include a range of expected upside from analysts.
The stock which is poised for the largest gain is Kymera Therapeutics, a biotechnology firm that UBS thinks could surge 240% to its target price.
“We see significant value from KYMR’s platform in total protein degradation and see them as a leader in a disruptive field,” wrote analyst Eliana Merle. “Beyond this, we see upside potential from success in any one of KYMR’s four clinical stage programs.”
She added that UBS expects updates across all four programs in the near term as well as over 2023.
Zebra Technologies is another company where UBS sees a large upside of 77% as the trends of automation and digitization continue.
“Shares are oversold on short cycle exposure and the misperception as a one-off Covid beneficiary, in our view,” wrote Damian Karas, adding that he believes the company’s solutions offering will help supply-chain and labor challenges. “We expect a substantial margin step-up in the next few quarters and better than expected guidance for 2023 to catalyze shares.”
Other technology companies on the list include Advanced Micro Devices, Gitlab and Dell Technologies.
The one energy name that UBS sees as a top pick for next year is Cheniere. The firm views Cheniere as having solid 55% upside due to its exposure to the liquid natural gas industry, which has been under-supplied.
“Cheniere has raised its ’22 EBITDA guidance multiple times this year and continues to optimize its capacity allowing for additional cargoes to be open to the spot market at attractive margins,” said Brian Reynolds. “Given current leverage metrics and forward ’23e FCFaD yield of 14.7% – we continue to view Cheniere positively as it transitions from a de-leveraging story to a return of capital story with a healthy growth backlog (that is self-funded).”
The list also includes industrial names Array Technologies and Dycom Industries. Real estate name Zillow Group and Endeavor Group Holdings round out the stocks with the largest upside.