JPMorgan’s favorite stocks heading into November

JPMorgan updated its monthly analyst focus list, adding Alphabet (both share classes) and Alkami, while removing LegalZoom and Scholar Rock. Alphabet's inclusion follows strong Q3 results, driven by AI expansion in search and Google Cloud growth, which propelled its shares up nearly 16% in October. Alkami was added despite a Q3 revenue miss and an 18% share decline in October, based on robust adjusted EBITDA and strong operational metrics like customer implementations and annual recurring revenue growth, with these changes occurring after a strong October for major indices buoyed by tech earnings.

Analysis

JPMorgan updated its monthly analyst focus list, adding Alphabet (GOOG/GOOGL) and Alkami (ALKT) while removing LegalZoom and Scholar Rock. This follows a robust October, where major indices saw significant gains, with the Nasdaq Composite advancing 4.7% driven by strong tech earnings. The Dow also marked its sixth positive month, a first since 2018.

Alphabet's inclusion is based on exceptional third-quarter results, which beat expectations across all metrics, propelling its shares nearly 16% higher in October. JPMorgan highlighted AI-driven expansion in digital search monetization and accelerating Google Cloud growth as key catalysts, with cost reengineering offsetting elevated capital expenditure.

Alkami Technology's addition is more nuanced; shares fell 18% in October and revenue missed estimates ($113 million vs. $113.6 million). However, the company reported strong adjusted EBITDA of $16 million, exceeding forecasts. JPMorgan emphasized Alkami's record customer implementations and robust annual recurring revenue growth as critical operational strengths.

Despite positive corporate and market momentum, an ongoing government shutdown and potential impact on a December rate cut introduce macro uncertainty. Investors should balance strong company fundamentals against these broader economic risks.

Key Decisions for Investors

• Investors should evaluate Alphabet's sustained growth drivers, particularly in AI and Google Cloud, which underpin its strong Q3 performance and JPMorgan's favorable outlook.
• For Alkami, despite a recent revenue miss and share decline, investors should closely monitor its operational metrics, such as adjusted EBITDA and customer growth, to assess the long-term viability of its business model.
• Given the broader market's positive momentum, investors should remain vigilant regarding macro headwinds like the government shutdown and potential rate cut delays, which could introduce market volatility.