These five stocks have more room after the Fed rate cut, says Bank of America

Following the Federal Reserve's quarter-point rate cut and signal for further reductions, which are expected to lower borrowing costs, Bank of America highlighted several stocks with significant upside potential. These include Palantir, poised to benefit from growing AI demand; Roblox, recognized for its platform development and undervalued AI initiatives; Service Corp International, expected to achieve 8-12% EPS growth from cemetery trends and strong cash flows; Nike, undergoing a turnaround with stabilizing gross margins; and Walmart, noted for its robust top and bottom-line performance and value proposition.

Analysis

In response to the Federal Reserve's quarter-point interest rate reduction and signals of further cuts, Bank of America has identified a diversified list of equities with significant upside potential, underpinned by lower prospective borrowing costs. The analysis highlights high-growth technology names such as Roblox (RBLX) and Palantir (PLTR). For Roblox, which has already surged 134% year-to-date, the bank raised its price target to $171, citing a compelling technology roadmap and underappreciated AI initiatives that expand its total addressable market. Palantir is positioned as a key beneficiary of accelerating AI platform demand across government and commercial sectors. In contrast, the report also points to value and turnaround opportunities. Service Corp (SCI), with shares up less than 1% this year, is expected to deliver 8-12% EPS growth driven by strong cemetery revenue and cash flows. Nike (NKE), down 6% year-to-date but up 19% in the last three months, is viewed as a turnaround in progress, with catalysts including stabilizing gross margins, healthier inventory levels, and the bottoming of consensus estimates ahead of its upcoming earnings. Finally, Walmart (WMT) is reaffirmed as a buy with a price target increase to $125, based on strong top- and bottom-line performance and a resilient value proposition.

Key Decisions for Investors

• Investors should consider the diverse opportunities highlighted, which cater to different risk profiles, from high-momentum tech like Roblox and Palantir to potential value and turnaround plays in Service Corp and Nike.
• Given Roblox's significant 134% year-to-date appreciation, it may be prudent to evaluate the relative upside in underperforming names like Nike (-6% YTD) and Service Corp (<1% YTD), which Bank of America identifies as having clear near-term fundamental catalysts.
• The bullish theses are contingent on both company-specific execution, such as Nike's margin recovery and Roblox's platform development, and the materialization of the Federal Reserve's signaled rate cuts, making these key factors to monitor.
• For exposure to the AI theme, Palantir is presented as a direct play on platform adoption, while Roblox is highlighted as a company whose AI integration may not yet be fully priced in by the market.