Opinion - Investing

Wall Street’s top analysts see these stocks as compelling plays

Maya Sasson, Tipranks.com
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Signage is displayed on the ZoomInfo Technologies headquarters in Waltham, Massachusetts, on Wednesday, June 3, 2020.
Scott Eisen | Bloomberg | Getty Images

How are investors supposed to find stocks poised to outperform amid the latest round of market volatility?

One way is by following the activity of analysts with proven stock picking abilities. TipRanks analyst forecasting service attempts to pinpoint Wall Street's best-performing analysts, or the analysts with the highest success rate and average return per rating.

Here are the best-performing analysts' favorite stocks right now:

ZoomInfo Technologies

Thanks to a recovery for the Enterprise segment, B2B intelligence company ZoomInfo Technologies delivered a strong performance in Q4 2020. For Stephens analyst Ryan MacWilliams, this solid showing reaffirms his bullish thesis, with the analyst reiterating a Buy rating. Taking an even more optimistic stance, the five-star analyst also bumped up his price target from $60 to $70.

Coming to the details of the print, ZI's revenue beat the consensus estimate by $9.1 million, with FY21 revenue growth guidance also surpassing analysts' expectations. Notably, the company rounded out 2020 with over 850 customers contributing over $100,000 in ACV, versus 580 in the prior-year quarter.

"Additionally, it was encouraging net dollar retention recovered through 2H20 (though came in just below FY19) as Q4 2020 mid-market/enterprise retention momentum exceeded Q4 2019 levels," MacWilliams noted.

On top of this, ZoomInfo saw Engage strengthen its attach rates on new business (to 28%) and renewals (to 44%) in Q4. "We believe Engage/new integrations could improve customer retention as ZoomInfo solutions are increasingly incorporated into workflows (2 bil. automated ZoomInfo API calls in FY20; ~2x FY19 volumes)," MacWilliams commented.

It should be noted that the "sales intelligence market has likely experienced a three-four year pull-forward in market growth due to COVID (especially since ~80% of B2B buyers now prefer the new normal for remote sales)," according to MacWilliams. He also argues that investors don't fully appreciate the upsell opportunity with new products like Engage and Intent Data.

"Therefore, we believe ZI's elite key metrics and greenfield market opportunity should help them grow into their premium valuation. ZoomInfo currently trades at a 29x CY22 EV/sales multiple vs fast-growth SaaS peers at 20x. Finally, it's worth mentioning there could be a NT headwind to performance if sponsors increase their share sales post-lockup after this strong result," MacWilliams explained.

Based on data from TipRanks, MacWilliams boasts an 72% success rate and 29.6% average return per rating.

The Andersons

According to National Research analyst Ben Klieve, agriculture company The Andersons wrapped up a challenging year "on a strong note, with the setup into 2021 getting increasingly compelling." With this in mind, the analyst kept his Buy rating and $32 price target as is.

Despite COVID-related headwinds facing its Ethanol and Rail segments, the company reported adjusted EBITDA of $85 million, reflecting a slight gain year-over-year and beating the Street's $83 million call. The strong result was driven by strength in the Trade segment.

"With COVID-19 continuing to slow rail traffic and reduce ethanol demand as the backdrop, we continue to be impressed with the relative stability of the Rail and Ethanol segments. We believe the outlook for Rail is stable, while we see several sources of upside from Ethanol driven by increased transportation activity, favorable policy initiatives from a Biden administration and the emergence of the new ELEMENT facility," Klieve explained.

What's more, both the Trade and Plant Nutrient businesses "have visibility of meaningful improvement from 2020 to 2021," in Klieve's opinion.

Looking ahead, although ANDE has rallied since mid-2020, Klieve believes that shares still have more room to run based on "favorable conditions across the ag economy and several potential catalysts from the Ethanol segment."  

As evidence of his impressive track record, Klieve has achieved a 62% success rate and 28.2% average return per rating.

Casa Systems

Communications technology company Casa Systems just got a thumbs up from Northland Capital analyst Tim Savageaux, with the top analyst reiterating a Buy rating as well as his $12 price target following the Q4 earnings release.

According to Savageaux, the print "once again highlighted the diversification of CASA exposure to fiber, cable and wireless broadband access markets, with much stronger wireless revenue offsetting weaker Fixed Telco revs, as well as the company's increasing traction across fixed wireless access CPE, packet core and RAN markets in 4G/5G wireless highlighted by a major new 5G mm wave CPE win."

The analyst added, "Along with a solid base in Cable, we see significant fiber and wireless growth potential."

Looking at Casa's quarterly performance, revenue landed at $120.5 million, up 14% sequentially and 7% year-over-year. The figure also exceeded the Northland Capital analyst's $107.3 million estimate and was primarily driven by record wireless revenue of $50.4 million.  

It should be noted that given the variability across its product lines, the company's focus has shifted to gross margin and operating dollar growth.

That said, based on "the hardware heavy mix of Cable revs in CY20 as well as increase software content in wireless (packet core) and fixed (Virtual Router/Gateway), overall operating income and EBITDA guide that implies a modest increase in GMs from CY20's 50.2% could be conservative," in Savageaux's opinion.

Taking the #208 spot on TipRanks' ranking, Savageaux has delivered a 64% success rate and 21.2% average return per rating.

EverQuote

In a research note titled "Positioned for continued growth in 2021", Canaccord Genuity analyst Michael Graham lays out his bullish case for EverQuote. To this end, he maintained a Buy rating and $65 price target.

In what marked the first earnings call as CEO, Jayme Mandel and EverQuote delivered an impressive performance, with year-over-year revenue growth of 32% only slightly slowing from the previous quarter. Additionally, EBITDA and VMM exceeded management's guidance as well as Graham's estimates.

What's more, EverQuote's newer verticals are ramping up at a faster pace than its core Auto vertical, growing 55% year-over-year. This result was helped by a strong open enrollment period for the Health vertical. It should be noted that the Auto vertical still witnessed a 27% gain during the quarter.

"The strategic roadmap for the company appears to be modestly evolving around ongoing strength in the core, and we expect 2021 may bring a bigger emphasis on DTC within Health & Life, additional bundling in these two verticals to emulate success with Home & Auto bundles, and more of a branded consumer experience and increased brand advertising to fuel the model," Graham commented.

The company also has deep integrations with all but one of its carrier partners, which is up from 72% in the previous quarter, and the one hold-out is currently in the process of completing the integration. According to Graham, "these tie-ins remove friction from the user experience and deliver better performance for partner carriers, and the company plans to further invest in this area in FY21, including the facilitation of more online to offline connections on behalf of local agents and enabling online quoting and purchases of policies in the home, health, and life verticals."

"Taking this evolution together with ongoing secular tailwinds as insurance shopping goes digital, we think 2021 should be another good year for EverQuote's business and stock," Graham opined.

Earning the #100 place on TipRanks' list, Graham sports a 65% success rate and 27.2% average return per rating.

Barnes Group

Barnes Group, which manufactures precision metal components and assemblies for industrial and aerospace applications, remains a top pick for Oppenheimer analyst Christopher Glynn. The analyst left a Buy rating on the stock. On top of this, Glynn gave the price target a lift, with the figure moving from $50 to $60.

During the most recent quarter, Aero revenue increased by 11% sequentially, "modestly" higher than Street estimates. That being said, management indicated that in 2021, Aero AM revenue is set to be lower, with this incorporating a "tough Q1 comparison."

"Aero OE posted 1.6x b:b on strongest orders since Q3 2019, with Industrial b:b slightly over 1.0. Backlog rose 7% sequentially (-23% year-over-year) for Aero OE and total B, with Industrial up 9% (long-cycle weighted; backlog conversion favorable past 1Q and 2H weighted)," Glynn stated.

Going forward, the company guided for 2021 adjusted EPS of $1.65-1.90 on sales that are up high single digits. "Timing/delivery schedules in longer-cycle businesses favor sequential improvements post-Q1," Glynn added.

All of this led Glynn to argue that "shares of Barnes offer long-term value-creation opportunity, given differentiated long-term portfolio management and building track record in operating resilience and as an acquirer. Content wins in Aerospace couple with thematic organic penetration capacity for the industrial portfolio balance potential for extended Aerospace reset."

With a 67% success rate and 17.9% average return per rating, Glynn earns the #202 spot on TipRanks' list of best-performing analysts.