7 Upgraded Stocks to Buy in November

After a shaky start to October, the S&P 500 index is back at all-time highs. Cooling of U.S. trade war tensions with China and a stronger-than-expected start to third-quarter earnings season have investors once again feeling optimistic about the market heading into the end of the year. Recession fears have eased, and interest rate cuts have created a favorable environment for equity investors. Some analysts are getting more optimistic about individual stocks as well. Here are seven stocks that the Morningstar analyst team upgraded.

Analyst John Barrett upgraded Twilio and says the communication platform-as-a-service provider continues to produce impressive numbers, including seven consecutive quarters of double-digit revenue growth. Twilio passed the $1 billion annual run rate mark for the first time earlier this year. The company has more than doubled its active users since 2014, and Barrett says its user growth is an indication of the platform’s value and the potential customer cost of switching to competitors. Twilio’s recent acquisition of SendGrid should help drive growth as well. Morningstar has a “buy” rating and $132 fair value estimate for TWLO stock.

Analyst Mark Cash upgraded cybersecurity stock Zscaler and says the company was built to deliver next-generation network security and help protect rapidly-growing cloud-based traffic. Zscaler has been focusing on investing for growth, and it recently announced two new product platforms, ZB2B and ZDX. Cash says it may take a few quarters for new products to start gaining significant traction in the market. However, the new platforms create “tangential selling opportunities” that could help boost growth as demand for cloud-based solutions rises. Morningstar has a “buy” rating and $54 fair value estimate for ZS stock.

TD Ameritrade stock is down 21% in the past month after the discount broker followed its peer group in completely eliminating stock and exchange-traded fund trading commissions in September. Despite investor concerns about lost fee revenue, analyst Michael Wong upgraded TD Ameritrade. Management is guiding for a 15% drop in fee revenue in fiscal 2020. However, Wong says the stock is undervalued at current levels given it is still highly profitable, and long-term investors should treat the sell-off is a buying opportunity. Morningstar has a “buy” rating and $52 fair value estimate for AMTD stock.

Omnicom is the second-largest advertising agency in the world by revenue. Analyst Ali Mogharabi upgraded Omnicom despite mixed third-quarter earnings. While Omnicom clearly has issues to address at underperforming agencies, Mogharabi says Omnicom’s underlying organic revenue growth and margin expansion are indications of client demand. He says Omnicom should continue to grow its organic revenue through at least 2020. The company will likely also continue to invest heavily in transitioning its business more toward digital advertising and associated data analytics. Morningstar has a “buy” rating and $85 fair value estimate for OMC stock.

It takes a certain kind of investor to buy a stock that is actively undergoing bankruptcy proceedings. But analyst Travis Miller says investors that can stomach the near-term risk and volatility associated with battered California utility PG&E will ultimately be rewarded. PG&E declared bankruptcy due to liabilities associated with multiple California wildfires in 2017 and 2018. However, Miller says PG&E still has substantial equity value, even if shareholders maintain just 30% ownership. Morningstar has a “buy” rating and $13 fair value estimate for PCG stock.

Analyst Zain Akbari upgraded Kroger after the stock dropped 3.9% in the past month. Akbari says pricing pressures from Amazon.com (AMZN) and others will likely continue to weigh on grocery margins. However, Kroger’s solid vendor relationships, its unparalleled transaction data and analytics capabilities, its impressive private label product lineup and its favorable cost management relative to peers makes it a solid play in a difficult environment. Kroger’s partnerships with Microsoft Corp. (MSFT), Walgreens Boots Alliance (WBA) and others also create omnichannel development opportunities. Morningstar has a “buy” rating and $27.50 fair value estimate for KR stock.

Enterprise is the largest public master limited partnership, providing midstream energy services to the oil and gas industry. Analyst Stephen Ellis says Enterprise has outmaneuvered its peers in a difficult environment for energy companies, and its best-in-class assets have now granted it a dominant share of the natural gas liquids market. As natural gas exports ramp up in coming years, Ellis says Enterprise’s Houston, Beaumont and Mont Belvieu assets will be long-term growth drivers. Morningstar has a “buy” rating and $35.50 price target for EPD stock.

• Twilio (TWLO)
• Zscaler (ZS)
• TD Ameritrade Holding Corp. (AMTD)
• Omnicom Group (OMC)
• PG&E Corp. (PCG)
• Kroger Co. (KR)
• Enterprise Products Partners (EPD)