Investors are trying to make sense of big corporate earnings, seeking clues about what lies ahead as macro headwinds persist. It’s prudent for investors to choose stocks with an optimistic longer-term view in these uncertain times.
Here are five stocks picked by Wall Street’s top analysts, according to TipRanks, a service that ranks analysts based on their past performance.
Costco
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Wholesaler Costco (COST) is known for its resilient business model that has helped it navigate several economic downturns. Moreover, the membership-only warehouse club has a loyal customer base and generally enjoys renewal rates that are at or above 90%.
Costco recently reported better-than-anticipated net sales growth of 6.9% and comparable sales growth of 5.6% for the four weeks ended Jan. 29. The company delivered upbeat numbers despite continued weakness in its e-commerce sales and the shift in the timing of the Chinese New Year to earlier in the year.
Following the sales report, Baird analyst Peter Benedict reaffirmed a buy rating on Costco and a $575 price target. Benedict stated, “With a defensive/staples-heavy sales mix and loyal member base, we believe shares continue to hold fundamental appeal as a rare megacap “growth staple” – particularly in the face of a difficult consumer spending backdrop.”
Benedict’s convictions can be trusted, given his 55th position out of more than 8,300 analysts in the TipRanks database. Apart from that, he has a solid track of 71% profitable ratings, with each rating delivering 16.3% average return. (See Costco Hedge Fund Trading Activity on TipRanks)
Amazon
2022 was a challenging year for e-commerce giant Amazon (AMZN) as macro pressures hurt its retail business and the cloud computing Amazon Web Services division.
Amazon’s first-quarter sales growth outlook of 4% to 8% reflects further deceleration compared with the 9% growth in the fourth quarter. Amazon is streamlining costs as it faces slowing top-line growth, higher expenses and continued economic turmoil.
Nonetheless, several Amazon bulls, including Mizuho Securities’ Vijay Rakesh, continue to believe in the company’s long-term prospects. Rakesh sees a “modest downside” to Wall Street’s consensus expectation for the 2023 revenue growth for Amazon’s retail business. (See Amazon Website Traffic on TipRanks)
However, he sees more downside risks to the Street’s consensus estimate of a 20% cloud revenue growth in 2023 compared to his revised estimate of 16%. Rakesh noted that Amazon’s cloud business was hit by lower demand from verticals like mortgage, advertising and crypto in the fourth quarter and that revenue growth has slowed down to the mid-teens so far in the first quarter.
Consequently, Rakesh said that AMZN stock could be “volatile near-term given potential downside revision risks.” Nonetheless, he reiterated a buy rating on AMZN with a price target of $135 due to “positive long-term fundamentals.”
Rakesh stands at #84 among more than 8,300 analysts tracked by TipRanks. Moreover, 61% of his ratings have been profitable, with each generating a 19.3% average return.
Peloton
Fitness equipment maker Peloton (PTON), once a pandemic darling, fell out of favor following the reopening of the economy as people returned to gyms and competition increased. Peloton shares crashed last year due to its deteriorating sales and mounting losses.
Nevertheless, investor sentiment has improved for PTON stock, thanks to the company’s turnaround efforts under CEO Barry McCarthy. Investors cheered the company’s fiscal second-quarter results due to higher subscription revenue even as the overall sales dropped 30% year-over-year. While its loss per share narrowed from the prior-year quarter, it was worse than what Wall Street projected.
Like investors, JPMorgan analyst Doug Anmuth was also “incrementally positive” on Peloton following the latest results, citing its cost control measures, improving free cash flow loss and better-than-anticipated connected fitness subscriptions. Anmuth highlighted that the company’s restructuring to a more variable cost structure is essentially complete and it seems focused on achieving its goal of breakeven free cash flow by the end of fiscal 2023.
Anmuth reiterated a buy rating and raised the price target to $19 from $13, given the company’s focus on restoring its revenue growth. (See PTON Stock Chart on TipRanks)
Anmuth ranks 192 out of more than 8,300 analysts on TipRanks, with a success rate of 58%. Each of his ratings has delivered a 15.1% return on average.
Microsoft
Microsoft’s (MSFT) artificial intelligence-driven growth plans have triggered positive sentiment about the tech behemoth recently. The company plans to power its search engine Bing and internet browser Edge with ChatGPT-like technology.
On the downside, the company’s December quarter revenue growth and subdued guidance reflected near-term headwinds, due to continued weakness in the PC market and a slowdown in its Azure cloud business as enterprises are tightening their spending. That said, Azure’s long-term growth potential seems attractive.
Tigress Financial analyst Ivan Feinseth, who ranks 137 out of 8,328 analysts tracked by TipRanks, opines that while near-term headwinds could slow cloud growth and the “more personal computing” segment, Microsoft’s investments in AI will drive its future.
Feinseth reiterated a buy rating on Microsoft and maintained a price target of $411, saying, “Strength in its Azure Cloud platform combined with increasing AI integration across its product lines continues to drive the global digital transformation and highlights its long-term investment opportunity.”
Remarkably, 64% of Feinseth’s ratings have generated profits, with each rating bringing in a 13.4% average return. (See MSFT Insider Trading Activity on TipRanks)
Mobileye Global
Ivan Feinseth is also optimistic about Mobileye (MBLY), a rapidly growing provider of technology that powers advanced driver-assistance systems (ADAS) and self-driving systems. Chip giant Intel still owns a majority of Mobileye shares.
Feinseth noted that Mobileye continues to see solid demand for its industry-leading technology. He expects the company to “increasingly benefit” from the growing adoption of ADAS technology by original equipment manufacturers.
The company is also at an advantage due to the rising demand in the auto industry for sophisticated camera systems and sensors used in ADAS and safe-driving systems. Furthermore, Feinseth sees opportunities for the company in the autonomous mobility as a service, or AMaaS, space.
Feinseth said there is potential for Mobileye’s revenue to grow to over $17 billion by 2030, backed by the company’s “significant R&D investments, first-mover advantage, and industry-leading product portfolio, combined with significant OEM relationships.” He projects a potential total addressable market of nearly $500 billion by the end of the decade.
Given Mobileye’s numerous strengths, Feinseth raised his price target to $52 from $44 and reiterated a buy rating. (See Mobileye Blogger Opinions & Sentiment on TipRanks)