After experiencing unusually broad market momentum since November, stocks are overdue for a lengthy pause or a correction. Stock picking will matter from here as the economic reopening determines different winners and losers.
According to a team of J.P. Morgan strategists, "it wouldn't be surprising to witness consolidation" given the current strong price momentum, high valuations as well as overweight investor positioning. That said, any consolidations or corrections shouldn't be seen as "durable inflection points this early in the business cycle and the hyper-stimulus era."
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A strategy investors can use to find exciting investment opportunities is to follow the activity of analysts with a proven track record of success. TipRanks analyst forecasting service works to pinpoint the best-performing analysts on the Street. These are the analysts with the highest success rate and average return per rating, factoring in the number of ratings published.
Here are the best-performing analysts' top stock picks right now:
Restaurant chain Denny's just got a thumbs up from Wedbush analyst Nick Setyan, who reiterated a buy rating and increased the price target from $18 to $19 after the company announced its fourth quarter results.
For Q4, the company reported an adjusted loss per share of $0.05, which was $0.01 below the consensus estimate on preannounced same-store sales growth of -32.9%.
According to Setyan, the trends quarter-to-date are "encouraging," and could potentially address concerns related to the breakfast recovery. Quarter-to-date, same-store sales growth is trending at -29%, with this including -31% in January and -25% so far in February. Notably, locations with open dining rooms and that are open 24 hours a day are trending -6% so far in February, compared to 2019.
It should be noted that roughly 31% of domestic stores are operating at 50-66% capacity, 25% are at 75% capacity or social distancing only, 15% are at 25-33% capacity and 1% have no restrictions.
"We continue to view the pace at which restrictions are lifted, the gradual increase in late-night operating hours, and sustainability of off-premise as drivers of a sales recovery. We also expect the launch of two virtual brands (Burger Den, The Melt Down) to help alleviate some of the near-term pressure around breakfast, while also expanding Denny's presence in the dinner/late-night dayparts," Setyan explained.
Looking at the Burger Den and Melt Down brands, Setyan expects flow through from sales to be at least in line with legacy UL margins. "The latter was already set to benefit from post-COVID efficiencies and from 2019's refranchising. We conservatively model 2022 co-owned UL margins of 17.6%, and more importantly, believe franchisee profitability is poised to benefit from a profitability step-up," the analyst commented.
Based on TipRanks' data, Setyan is currently tracking a 60% success rate and 14.2% average return per rating.
According to Baird analyst Colin Sebastian, Shopify is a compelling e-commerce play following its Q4 earnings release given "the enormous long-term growth and monetization opportunities as the leading e-commerce platform for merchants and brands."
As a result, the five-star analyst left his Buy rating on the stock as is. In a further bullish signal, Sebastian gave his price target a boost, with the figure moving from $1,250 to $1,600.
It should be noted that management said it doesn't plan on providing specific quarterly or annual guidance, but did convey expectations for "strong, but decelerating, revenue and GMV growth as consumer spending patterns return to more 'normalized' trends." In addition, Shopify is set to ramp up R&D investments, with 2,021 new engineers this year, and accelerate online and product marketing spend.
During the earnings call, management stated that it plans to continue investing in long-term growth initiatives, including SFN (fulfillment), International, POS, Plus and the Shop App.
"While we anticipate these ongoing investments, including significant R&D hiring, will pressure margins over the next year, we continue to view these product initiatives as the primary catalysts for longer-term merchant adoption and take rate expansion," Sebastian commented.
The analyst added, "As such, we recommend looking beyond decelerating growth rates this year and lower profit margins (significant investment year), as Shopify is poised for many years of strong growth ahead."
As Sebastian boasts a 78% success rate and 39.2% average return per rating, he is among the top 30 analysts tracked by TipRanks.
As organic revenue is poised to ramp up for the first time in three years and payments monetization is getting closer, Rosenblatt Securities analyst Mark Zgutowicz tells investors "there's a lot to be excited about for the shares." As such, the five-star analyst kept a Buy rating on the stock in addition to lifting the price target from $100 to $120.
Currently, neither W+M (Websites + Marketing) or Poynt GMV have been monetized, but Zgutowicz argues that GDDY has "take optionality in the future as it moves present and new customers from existing payment processors (e.g. Stripe, Paypal, Square) to Poynt's payment capabilities built atop Elavon," which is a global payment processor.
What's more, the analyst doesn't rule out the possibility of GoDaddy integrating Poynt into its customer support services, which would satisfy "either existing or new customer prospects depending on how competitive the quasi-bundled pricing is." He added, "Net-net, we're excited about the relatively open-ended upside here against an already ample GMV base."
On top of this, domain growth has accelerated in the last two quarters, with Zgutowicz noting that he wouldn't be surprised to see the trend continue in Q1. "In a market fraught with shortages of ecomm domain names, GoDaddy's ability to present a name that's already taken and effectively broker the deal, is a big advantage," he stated.
The analyst also anticipates additional M&A, as it would help GoDaddy extend its "market and peer outperformance for the foreseeable future."
Achieving an 85% success rate and 74.8% average return per rating, Zgutowicz is ranked #68 out of over 7,000 analysts tracked by TipRanks.
Anavex Life Sciences develops products based on the Sigma-1 receptor (S1R), which is found in many tissues, with high concentration in the nervous system.
For Ladenburg Thalmann analyst Robert LeBoyer, the stock remains an exciting play post-Q1 earnings. To this end, he reiterated a Buy rating and $20 price target.
Along with its quarterly figures, the company provided an update on its pipeline, with its Rett syndrome programs making both clinical and regulatory progress. Anavex got the go ahead from the FDA to extend patient treatment for an additional 24 weeks after the 12-week study evaluating lead asset AVAVEX 2-73 (the Phase 2 U.S. Trial) is completed, for a total of 36 weeks treatment. According to LeBoyer, the extra treatment should provide long-term safety and efficacy data.
"AVAVEX 2-73 has shown 3 years of stability for the active drug compound and in oral solution for administration," LeBoyer explained.
It should be noted that the company is planning to file an application with accelerated approval and orphan drug designation for the Rett syndrome indication.
Additionally, the Phase 2b/3 trial evaluating the candidate in Alzheimer's is set to meet the 1H2021 enrollment timeline. The company has also received a nearly $1 million grant from the Michael J. Fox Foundation for Parkinson's Research, which will be used for "PET imaging studies of ANAVEX 2-73 interaction with the Sigma1 receptor and the disease pathways it activates."
As evidence of his impressive track record, LeBoyer boasts an 80.6% average return per rating and 61% success rate.
Baird analyst Jonathan Ruykhaver is backing Cloudflare following its first investor day as a publicly traded company. With this in mind, he maintained a Buy rating as well as a $102 price target.
"Overall, we believe the event offered nice insight into Cloudflare's product portfolio, go-to-market motion, and long-term opportunity. We continue to like the opportunity for solutions like Cloudflare One and Workers and are positive on management's commentary around continuing to refine the enterprise go-to-market strategy," Ruykhaver commented.
According to Ruykhaver, Cloudflare One could potentially shake up traditional network architectures. What's more, the company has also been improving its Gateway solution.
"We continue to view Cloudflare's ability to offer these user-centric security products alongside solutions like DDoS mitigation, WAF, smart routing, and much more as disruptive and believe this portfolio positions the company for strong growth," the Baird analyst said.
Additionally, Cloudflare is only at the beginning stages when it comes to the opportunity for its serverless solution, Workers, in Ruykhaver's opinion.
Looking at the market strategy, the analyst likes "Cloudflare's bottoms-up, developer-centric go-to-market approach," but he also appreciates "management's commitment to continuing to refine the enterprise go-to-market strategy."
Expounding on this, Ruykhaver stated, "We see increased investment here as helping the company more meaningfully capture enterprise spend; while nearly doubling this cohort year-over-year, the company counted only 32 $1+ million annualized revenue customers as of 4Q20."
With a 71% success rate and 34.5% average return per rating, Ruykhaver lands the #133 spot on TipRanks' list of best-performing analysts.