As investors prepare their portfolios for 2025, two Wall Street banks have identified European stocks that they believe have significant growth potential despite market uncertainty. Morgan Stanley, which downgraded European stocks to neutral earlier this year, now calls it a “stock picking market” as performance on the continent begins to diverge. While many stocks are expected to underperform, the Wall Street bank said there is “substantial room for alpha generation” if investors buy the right stocks. In a report to clients on November 27, the investment bank named payments technology company Adyen, food and nutrition company Glanbia, energy engineering company Saipem and British housebuilder Barratt Redrow as its “top picks” heading into 2025. , investment firm Bernstein names several mid-cap names as its favorite stocks, including Saipem, market research firm Ipsos, French car company Trigano and engineering group Duerr. The equity research house’s top 10 stock picks have outperformed the MSCI European Small Cap Index by 5 percentage points since the end of October. Payment service provider Adyen reported revenue growth of 21% in the third quarter of 2024, and Morgan Stanley expects growth to accelerate to about 24% in 2025, making it a strong player in the global payments market. Morgan Stanley expects Adyen shares to rise 40% in the next 12 months. Ipsos Bernstein gives market research firm Ipsos 78% upside potential, driven largely by an expected rebound in its U.S. operations. The company stands out among Bernstein’s stock picks as one of the few stocks with greater U.S. exposure but lower risk from post-election tariffs. Morgan Stanley said Glanbia shares are significantly undervalued, trading at 11 times expected 2025 earnings, calling it the “cheapest” stock in the consumer staples sector. The bank highlighted Glanbia’s position as a market leader in protein nutrition and forecast annual profit growth of 10%. Shares are expected to rise 42% next year, according to Morgan Stanley estimates. Saipem Morgan Stanley and Bernstein both recommend Saipem, with Morgan Stanley giving it more than 40% upside potential. Bernstein particularly likes Saipem’s solid environmental credentials and its alignment with its “green leadership” theme. It added that the stock has delivered a 19% return since the original recommendation. Barratt Redrow Morgan Stanley pointed to the recently approved merger of the UK’s largest housebuilders, Barrat and Redrow, as a positive catalyst that should push the share price higher. The bank noted that the stock trades at a 40% discount to its 10-year median price-to-book ratio and remains attractively valued despite its year-to-date underperformance. Durr German engineering company Dürr has been Bernstein’s first choice this year. The company, which provides automation and energy efficiency services, is expected to benefit from several industry trends, including the shift toward electric vehicles and increasing demand for sustainable building materials. Bernstein believes the stock could rise 75% by 2025 after underperforming this year. Bernstein said French RV maker Trigano stood out because of its superior cash generation capabilities. Trigano shares have suffered as French stocks tumbled due to political uncertainty this year, but Bernstein believes that is about to change and expects the stock to rise 75% in 2025. Correction: This story has been updated to fix a typographical error.
