Earnings season is well underway, as a number of mega-cap tech names released their financial results this past week. However, there's still plenty more to come as several companies have yet to post their quarterly prints.
Against this backdrop, how are investors supposed to pinpoint stocks that are primed for more gains? One approach is to take a cue from the pros with a proven track record of success. TipRanks analyst forecasting service attempts to identify the best-performing analysts on the Street, or the analysts with the highest success rate and average return per rating. These metrics factor in the number of ratings each analyst has published.
Here are five stocks that top Wall Street analysts think can deliver more gains as earnings season continues.
After its fourth-quarter results beat expectations and shares surpassed his previous price target, Oppenheimer analyst Brian Nagel took another look at Nike's (NKE) standing in the space. He concluded that the athletic apparel and footwear company's long-term growth narrative remains strong.
To this end, the analyst left his Buy rating as is. Further demonstrating his optimism, Nagel bumped up the price target from $150 to $195, bringing the upside potential to 18%.
"We believe NKE enjoys further room to run. In our view, recent investments are only beginning to pay off and the market is underappreciating meaningfully enhanced intermediate- to longer-term EPS power of a digitally-driven NKE model," Nagel cheered.
Nike has made a significant effort to reposition itself, "whereby senior leadership committed to digitizing the company and its processes, all the while re-focusing upon superior product innovation," Nagel points out.
Expounding on this, the analyst stated, "Digital technologies, such as the NKE SNKRS App, are allowing NKE the opportunity to connect more effectively with consumers and strengthen its already-outsized brand awareness. Over the past two years, NKE digital business has more than doubled to over $9 billion. Management expects to achieve 50% digital mix of total business revenue in fiscal 2025 (up from 35%, currently)."
When it comes to demand, management told investors that for fiscal year 2022, sales growth is slated to land in the low double-digit range, with total revenue of over $50 billion. In addition, estimates have gross margins expanding by 125 to 150 basis points and SG&A dollar growth surpassing revenue gains. One basis point equals 0.01%.
Looking at the long-term picture, through 2025, yearly EPS growth could be in the mid-to-high teens range, which will likely be supported by high single-digit to low double-digit revenue gains and a gross margin rate in the high 40s by fiscal year 2025, "reflecting a significant shift in sales mix toward Nike Direct," according to Nagel.
Summing it all up, Nagel commented, "In our view, Nike represents an already dominant, legacy global brand that is now aggressively embracing the power of digital to enhance almost all facets of its business model. We look on upbeat Street forecasts and guidance as at least doable and supportive of a premium valuation."
The 13th best-performing analyst on Wall Street boasts a 77% success rate and 35.6% average return per rating.
During its fiscal third-quarter earnings call, F5 Networks' share price surged as "management sprinkled a series of strongly positive data points across the script and Q&A," Needham analyst Alex Henderson writes. As the five-star analyst sees "the good news continuing," he is staying with the bulls.
With this in mind, Henderson reiterated a Buy rating on the application delivery and security solutions provider. On top of this, he gave the price target a boost, with the figure rising from $255 to $265 (31% upside potential).
Digging a bit deeper into the details of the print, Software Products recorded a 34% year-over-year increase for the quarter, versus a 44% compare. According to management, there has been a ramping up of larger deals for NGINX and upsell of new capabilities with NGINX App Protect, API Gateway and Application Controller Products. What's more, Shape Security product demand has gotten stronger, with the company also seeing strong uptake metrics.
Henderson also highlights the fact that FFIV's share of the Kubernetes vADC market has increased from about 60% when it acquired NGINX to over 67%.
"The expansion of the functionality is drawing it into more use cases as API Gateways, in pre-deployment Coding Security, and in cross domain/multi-in-domain container application communication. The advancement of the new capabilities and the tie into Enterprise Private Clouds is nailing down its importance in multi-clouds, which account for 95%-plus of Enterprise topologies," Henderson said.
It should be noted that Henderson had previously estimated that System sales growth would moderate to 5%, but it stayed stronger than he expected during the quarter. "Systems Product Sales also posted robust 13% growth, which combined with the Software growth for 21% Product Sales growth," the analyst stated.
All of this prompted Henderson to comment, "F5 demonstrated it's a Cloud play, refuting a recent bulge-bracket Sell rating."
Earning the #57 spot on TipRanks' list, Henderson has achieved a 69% success rate and 28.7% average return per rating.
After delivering a strong top-line and gross margin performance, are more gains in store for electric vehicle maker Tesla? Mizuho Securities analyst Vijay Rakesh says yes.
In line with his optimistic approach, Rakesh lifted the price target from $820 to $825, which puts the upside potential at 28%. In addition, he left his Buy rating unchanged.
On the top-line, revenue for the quarter landed at $12 billion, coming in ahead of the $11.4 billion consensus estimate. EPS of $1.45 also beat the Street's $0.94 call. As for automotive gross margins, Tesla posted a "strong" 25.8%, compared to analysts' 23.1% projection. This reflects an increase of 700 basis points year over year.
"TSLA noted cost optimizations across production facilities are driving GMs, we believe despite lower volumes on higher-ASP Model S/X, but headwinds remain with freight expedite costs. TSLA CEO Elon Musk noted 'seems like chip supply getting better,' but was 'substituting chips and re-writing firmware' to make deliveries during the June quarter," Rakesh said. Bearing this in mind, the company is still aiming for 50% top-line and unit delivery compound annual growth rate over the next few years.
In the most recent quarter, Model S/X deliveries restarted, and Rakesh believes that the revamped models will fuel an improvement in the ASP mix and gross margins going into the second half of the year.
Rakesh added, "TSLA noted post its cost optimization and capacity ramp success in Shanghai, the Shanghai Gigafactory has become the global export hub for its vehicles. While TSLA noted it sees chip shortages continuing to constrain production, we believe they are trending towards potential improvement in the 2H21."
What's more, heading into 2022, the Mizuho analyst highlights the fact that as production in Austin and Berlin ramps, it could drive further improvements in gross margins. On top of this, he sees the new 4680 battery as a possible tailwind.
Data from TipRanks shows that the #130-ranked analyst has delivered a 65% success rate and 24.7% average return per rating.
Offering a broad product portfolio, Calix provides broadband access infrastructure to both residential and commercial customers.
Following "another strong print" for the company, Jefferies' George Notter tells investors that "first impressions look great." So, the five-star analyst reiterated his Buy rating and raised the price target from $52 to $58, suggesting 25% upside potential.
Discussing his investment thesis, Notter asks "how is the Street missing this?" The company hasn't offered up much "quantitative information about the budding recurring revenue story." So, Notter believes "most investors are inferring that the Calix Cloud business isn't (and won't be) a needle-mover any time soon."
The analyst, however, sees things differently. "We believe we're the first to construct a bottoms-up model for the Cloud business which is critical to understanding the long-term opportunity. Similarly, we believe the Street isn't aware of the potential size and duration of growth available to the company in the wake of massive new federal stimulus," he said.
It is worth noting that recurring software sales are included in the company's Systems revenue segment rather than Services. During the second quarter, the company reported a Systems margin of 54%. Although this was slightly lower than the previous quarter, it is up from 51.8% a year ago.
Expounding on this, Notter stated, "We believe that the Q2 Systems margin result was dragged down by a significant shipment of lower-margin product that was recognized this quarter. Exiting Q1, it mentioned that the shipment was caught in the Suez Canal logjam and slipped to Q2. Any additional supply chain cost pressures may also be masking the Systems gross margin result. In light of these items, we believe the organic Systems Gross Margin result is trending up – and it's making continued progress with Calix Cloud."
When it comes to third-quarter guidance, Notter notes that it "looks good, too." Management is projecting third-quarter sales of $167 million and EPS of $0.28, both at the midpoint. Meanwhile, Wall Street is calling for sales of $156.4 million and EPS of $0.24.
Currently, Notter is tracking a 67% success rate and 17.7% average return per rating.
Operating within the consumer, automotive, industrial, data center, telecommunications, aerospace and defense markets, Teradyne designs and distributes products to test semiconductor wafers and packaging processes and devices.
The company released its second-quarter earnings results on July 27, with the report garnering the praise of Rosenblatt Securities analyst Scott Graham. Putting it simply the analyst told investors, "We view this as a good print."
On the heels of the earnings release, Graham reiterated a Buy rating on the stock. Additionally, the top analyst kept the price target at $180, reflecting a Street-high and indicating 47% upside potential.
What exactly did the print feature? Non-GAAP EPS beat the consensus estimate by 9%, with the figure clocking in at $1.91. This represents an increase of 44% on a year-over-year basis. It should be noted that Teradyne guided for EPS of $1.72 at the midpoint.
Meanwhile, sales for the quarter were $1.09 billion, rising 29% year-over-year and surpassing Wall Street's $1.06 billion estimate.
According to Graham, "the quarter was paced by strong Semiconductor Test and better-than-expected System Test revenues." Looking at the results for these two segments, Semiconductor Test sales surged 27% year-over-year, while System Test sales were up 46% year-over-year. The analyst added, "IA sales were superlative, as expected."
When it comes to gross margins, the figure grew 340 basis points year-over-year to 59.6%, which exceeded Graham's 59% call. On top of this, non-GAAP operating margin and drop-down margin beat the analyst's expectations.
As for guidance, in the third quarter, Teradyne expects non-GAAP EPS to land within the range of $1.29 to $1.55, which would reflect a gain of 9% to 31% year-over-year. Graham had forecasted EPS of $1.37. On the top-line, sales could be between $880 million-$960 million, versus the analyst's $942 million estimate.
According to TipRanks, Graham sports a 69% success rate and 14.6% average return per rating.