This earnings season, investors have to balance spiking coronavirus levels against encouraging vaccine progress as well as rising trade tensions with China.
In this unprecedented time, it makes sense to follow the stock picks of analysts with a proven track record of success.
We used TipRanks analyst forecasting service to pinpoint Wall Street's best-performing analysts. These are the analysts with the highest success rate and average return measured on a one-year basis- and factoring in the number of ratings made by each analyst.
Here are the best-performing analysts' six favorite stocks:
Apple
On July 16, five-star Canaccord Genuity analyst Michael Walkley reiterated his Apple buy rating, while significantly ramping up the price target from $310 to $444. Despite Apple rising 33% year-to-date, his new stock price forecast still indicates 14% upside from current levels.
Walkley cites the 5G upgrade cycle as a likely catalyst in 2021 as well as a continued business mix shift towards high-margin services as behind his increasingly bullish take on the stock.
Apple's ecosystem approach, including an installed base of more than 1.5 billion devices, should continue to generate strong services revenue, says Walkley. He sees the higher-margin services revenue growth ultimately outpacing total company growth while delivering strong attach rates for multiple hardware purchases. That's alongside a market share leading position in wearables with Watch and AirPods, and $83 billion in net cash to invest in long-term growth.
"Ahead of the Covid-19 shock to global economies, we were encouraged by the strong demand for the iPhone 11 lineup and believe Apple will maintain its market share leadership of premium-tier smartphones that should expand with its iPhone 12 lineup supporting 5G along with other strong features," the analyst told investors.Â
One of TipRanks' Top 100 analysts, Walkley scores a stellar 17.1% average return per recommendation.
Akebia Therapeutics
Shares in Akebia have almost doubled year-to-date, and with good reason, says HC Wainwright analyst Ed Arce. He reiterated a buy rating on the biopharma on July 15, citing a new study evaluating vadadustat for coronavirus-related acute respiratory distress syndrome.
The investigator-sponsored, placebo-controlled study is conducted under an investigational new drug application filed with the Food and Drug Administration for up to 300 adult patients with coronavirus related hypoxemia. Hypoxemia is a below-normal level of oxygen in the blood, that can signal breathing or circulation-related difficulties.
Arce believes Akebia's lead product candidate vadadustat could be efficacious in preventing lung injury in patients who experience acute respiratory distress syndrome, and protecting other organs, according to a report on July 15. However, his valuation on the company is primarily based on vadadustat's potential US approval for anemia due to chronic kidney disease.
This means that the upcoming top-line data readout in mid-2020 from the second Phase 3 pivotal program of vadadustat in non-dialysis-dependent kidney disease is the next major milestone for the stock, says the analyst. He calculates for an early 2022 launch for vadadustat with a $2.8 billion peak U.S. sales in 2030. He has a $17 stock price forecast, a 38% upside potential.
Arce is ranked 265 out of over 6,750 analysts, thanks to a 17.7% average return per rating.
UnitedHealth
Diversified healthcare giant UnitedHealth has just reported a large second-quarter earnings beat, while maintaining its conservative guidance. Oppenheimer's Michael Wiederhorn reiterated his UnitedHealth buy rating with a $353 price target, up from $343 previously.
UnitedHealth produced strong second-quarter results as medical costs declined precipitously due to the pandemic, the analyst explained. For instance, UnitedHealth reported second-quarter adjusted earnings per share of $7.12, easily beating consensus of $5.28. Looking forward, UnitedHealth stuck with its fiscal-year 2020 adjusted earnings-per-share guidance of $16.25 to $16.55.
"Since management is factoring in elevated medical costs in its 2H:20 outlook and 2021 pricing, we believe there should be upside to numbers should costs remain depressed due to the environment," Wiederhorn wrote on July 15. As a result, the analyst told investors "we would continue to be long-term buyers."
In general, Wiederhorn believes UnitedHealth is well-positioned by virtue of its diversification, strong track record, elite management team, and exposure to certain higher growth businesses. Meanwhile the company's Optum business is a nice complement to its core managed care operations and continues to account for a large share of earnings.
Ranked by TipRanks as one of the Top 100 analysts, Wiederhorn boasts a 70% success rate and 16.3% return on his recommendations.
Disney
Top Goldman Sachs analyst Brett Feldman has just initiated coverage on Disney, starting the House of Mouse off with a buy rating and $137 stock price forecast, a 13% upside potential. Disney is rapidly emerging as a global streaming leader, says Feldman, and ranks well ahead of peers on its direct-to-consumer video offering, Disney+.
According to the Goldman analyst, the market is undervaluing Disney's direct-to-consumer segment by a more than 50%. He sees Disney+ reaching a "conservative" 150 million subscribers by 2025 out of a total market of 721 million, and achieving profitability by 2021, versus a consensus of 2023.
As Disney approaches Netflix-like scale, it will approach Netflix-like economics, says Feldman. He estimates that the market is now valuing Disney's direct-to-consumer segment at a 50% to 60% discount to Neflix. "We believe such a material discount is unwarranted and expect this valuation gap to close as Disney+ ramps its customer base and achieves profitability," the analyst argued.
Moreover, Feldman expects that Disney's Parks and Studios segments will fully recover post-coronavirus, adding that synergies between these two segments are also underappreciated.
Feldman scores a 77% success rate and 17.1% average return on a one-year basis.
ServiceNow
Ahead of ServiceNow's second-quarter earnings report, five-star RBC Capital analyst Alex Zukin singled out the company as a top stock to watch. He called the cloud company one of his "favorite names" and boosted his stock price forecast from $372 to $500 on July 14.
"Our discussions with partners lead us to believe the 2Q report will be strong as NOW potentially becomes both a near and longer-term Remote Work beneficiary" the analyst commented. Â
Specifically, Zukin is modeling for above-guidance second-quarter subscriber revenue of $999.7 million, or 28% year over year, but adds that the company could score a beat close to historical levels of 1.3%, implying $1.013 billion in revenue.
In particular, he sees the IT product portfolio driving demand improvement in the quarter, with businesses seeking to optimize remote working and ensure operational resiliency. Feedback was solidly more positive than last quarter, says Zukin, and partner tone was notably more confident.
"Our research suggests ServiceNow has leveraged its strong IT incumbency, flexible product portfolio, and best-in-class sales leadership to capitalize on shifting immediate customer priorities and level-up its position as a strategic vendor to its customers" the Top 20 analyst concluded.
Zscaler
"Cloud momentum building for the ZS Freight Train into 2021" cheered Wedbush analyst Daniel Ives on July 16. He reiterated his buy rating on the cloud-based cybersecurity stock while bumping up his price target to $150 from $100. The new price target suggests 25% further upside potential lies ahead.
Based on recent checks in the field for the July quarter, the analyst is confident that Zscaler's deal flow is holding up extremely well in this coronavirus pandemic environment. The company's DNA plays right into the Remote access/work from home cloud theme serving a major need given the lockdowns globally, says Ives.
"Across the board we are seeing an uptick in deal flow for ZS, as the company's unique product suite in the sweets spot as more enterprises/governments shift workloads to the cloud" Ives told investors.
Plus larger deals are getting accelerated by C-level decision makers with enterprises needing stepped up cloud deployments as well as security architecture.
Overall, he believes ZS looks to be in the driver's seat on the cloud cyber security shift over the next decade and the current global lockdown environment will only accelerate its ability to capture it. "In our opinion, ZS is the best pure play in the cloud security arena, which we believe is still in the very early innings of taking off" the five-star analyst summed up.
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