Analysts say buy these top stocks like Netflix and Microsoft into earnings

Published Sat, Apr 18 20209:16 AM EDT

(This story is for CNBC PRO subscribers only.) An underwhelming start to earnings shouldn't deter investors, Wall Street analysts say. The S & P 500 appears headed for its worst earnings season since 2009 in terms of the scope of the profit decline, but analysts told clients this week there are still a slew of buying opportunities. CNBC PRO closely examined recent Wall Street research to find top ideas as earnings season kicks off. They include Netflix , Microsoft , Okta , Clorox , and Chipotle. Netflix The streaming giant, which reports its results on April 22, is on a "virus surge" according to Bank of America. "We see Netflix benefiting from a near-perfect 1H setup with strong content, stay-at-home orders, suspended sports leagues and shuttered movie theaters seeing consumers globally turn to the streaming TV service," analyst Nat Schindler said. The firm also said any concerns about whether new subscribers stick around are overblown. "We anticipate the step-up will result in a permanent increase in penetration for Netflix's subscriber model and see its low price-point and staple nature supporting healthy fundamentals performance in a recession, even after stay-home orders are lifted," they said. Shares of the company were up 14% on the week. Clorox The household products company stock is up 16% since the bear market started on February 19 and the sky's the limit, according to JPMorgan. "We believe that COVID-19 has put CLX is in a very unique position as it is products are not only being stored but also consumed more by households and businesses including healthcare facilities in need-states and occasions that were not envisioned before," analyst Andrea Teixeira said. The firm said it sees upside long after the coronavirus crisis passes. "We believe the drivers behind our improved earnings outlook will likely linger beyond just one quarter or two which corroborates with CEO Benno Dorer's commentary during our recent call." Clorox reports its third quarter earnings on May 1. Okta The stock was upgraded this week to outperform from market perform by BMO with the firm saying that the cloud software management company is just one of several businesses poised to take advantage of the move to "work from home." "We think more people will be more consistently working remotely," the analyst said. The analyst admitted the company is not without economic challenges but said the "fundamentals remain very strong for the next few years." "We believe that catalyst for the shares will be driven by: 1) ongoing earnings reports, and 2) further product expansions," they said. The stock was up 13% on the week. Analysts are expecting the company to report earnings in early June, although the date has not been confirmed. Chipotle- Outperform rating, Evercore ISI "Today, we have an estimate of $40 in EPS in 2025 which is an acknowledgement of increased prolonged recession risk near-term. But coming into this period, Chipotle's growth outlook was stunted by: 1) quality site selection and 2) access to labor. Now, we believe these two headwinds could become tailwinds with the opportunity for accelerated share gains, lower labor costs, and improved site selection / lower real estate cost." Okta- Outperform rating, BMO "Our target price moves to $155. We believe that global secular trends for work from home will serve to increase demand for Okta's solutions. While the economic challenges could create some deal slippage in the next few quarters, we nevertheless think the fundamentals remain very strong for the next few years. We believe Okta's solution leadership will help drive greater than 30% growth through FY22." Netflix- Buy rating, Bank of America "Perfect Storm May Lift Netflix Penetration on Surging Streaming Demand. ... We see Netflix benefiting from a near-perfect 1H setup with strong content, stay-at-home orders, suspended sports leagues and shuttered movie theatres seeing consumers globally turn to the streaming TV service. We anticipate the step-up will result in a permanent increase in penetration for Netflix's subscriber model and see its low price-point and staple nature supporting healthy fundamentals performance in a recession, even after stay-home orders are lifted." Microsoft- Buy rating, Goldman Sachs "We continue to view Microsoft as well-positioned to capitalize on the ongoing secular shift to the cloud and on-premise spending as companies modernize their IT infrastructure. While the company issued a revenue warning related to More Personal Computing on 2/26, our conversations with partners point to pockets of demand strength related to work from home spending following COVID-19. The question that will remain, however, is what demand will look like for the June quarter, with many partners highlighting very limited visibility." Clorox- JPMorgan, Overweight rating "We believe that COVID-19 has put CLX is in a very unique position as it is products are not only being stored but also consumed more by households and businesses including healthcare facilities in need-states and occasions that were not envisioned before. Also, the company entered this pandemic with easy comparisons due to prior share losses in trash bags, charcoal, and water filters that have since reversed. We also expect the additional shelf space that management had talked about in the last earnings call to help the back half of FY20. We believe the drivers behind our improved earnings outlook will likely linger beyond just one quarter or two which corroborates with CEO Benno Dorer's commentary during our recent call."

Satya Nadella, Chief Executive Officer of Microsoft, gestures as he attends a session at the 50th World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 23, 2020.

Denis Balibouse | Reuters

(This story is for CNBC PRO subscribers only.)

An underwhelming start to earnings shouldn't deter investors, Wall Street analysts say. The S&P 500 appears headed for its worst earnings season since 2009 in terms of the scope of the profit decline, but analysts told clients this week there are still a slew of buying opportunities.

CNBC PRO closely examined recent Wall Street research to find top ideas as earnings season kicks off.