These resilient stocks are fighting through the market turmoil and analysts love them

Published Sat, May 21 20229:02 AM EDT

Investor anxiety is running high, but Wall Street analysts said this week that there are several stocks that have tremendous potential to battle the market turbulence. These scrappy companies have just the right combination of characteristics as investors search for ways to protect their portfolio, analysts say. CNBC Pro combed through the top Wall Street research to find the most resilient stocks to buy right now. They include Home Depot, Shake Shack , RealReal, Logitech and ServiceNow. Shake Shack The fast-food burger chain was upgraded to buy from hold by Northcoast Research earlier this week. Despite some cost headwinds, the recovery looks promising, according to analyst Jim Sanderson. Traffic trends look "resilient," he added, noting the company has plenty of pricing power to help "offset rising food costs and improving store margins by next fall." The company also continues to pursue significant expansion and its brand is coveted by real estate developers, the firm said. "With forward multiples near industry averages but a growth strategy that is double peers, we see significant upside driven by growth potential and the opportunity to improve store operations, margins, and unit economics," Sanderson added. In addition, the analyst believes Shake Shack's growth is still in its infancy. The company also has significant capital to expand at a time when a large number of restaurants have not re-opened, Sanderson said. "Combined, we believe Shake Shack is trading at an entry point that is attractive and compelling convincing us to upgrade the firm," he wrote. Shares are down nearly 42% this year. ServiceNow Wells Fargo analyst Michael Turrin recently initiated coverage of ServiceNow, giving the cloud computing platform a buy rating. ServiceNow continues to fire on all cylinders, Turrin wrote, and it stands to gain from a number of trends that the firm says should benefit businesses across the globe. They include the "rise of automation, cloud infrastructure, edge computing, application modernization, and remote work," Turrin said in his note to clients. The company also has a plethora of new and developing products, and Turrin calls ServiceNow a leader in IT services. The analyst admitted the stock isn't cheap, but he also said ServiceNow's "balanced financial profile" and "meaningful cash flow generation" are just too attractive too ignore. Meanwhile, shares of the company are down about 33% this year. Although headwinds are possible, the firm said the stock is "likely to prove more resilient" than investors believe. "Furthermore, given the broad-based sell-off, we continue to focus on the highest quality franchises and are tending toward those businesses with strong platform positioning and balanced growth profiles," Turrin added. RealReal "Ready to wear demand is back," Needham analyst Anna Andreeva said in a recent note to clients. Shares of the company are down more than 70% this year, but she said investors shouldn't panic. "Stock has lagged with the group/market, yet REAL is executing with some of the fastest top line growth in our space," Andreeva said of the luxury consignment online brick-and-mortar store. The analyst also sees margins sequentially improving as the year continues, especially as supply chains begin to ease. "We are bullish on the circular economy's growth potential, and we see REAL as the only luxury marketplace operating at scale," she wrote. The firm said it's bullish on RealReal's "self-help initiatives" like retail store expansion and improved marketing and visibility. "Luxury remains resilient despite the environment and we think that REAL is in a good spot benefiting from higher pricing in the primary market by pricing higher/consumer trades down," Andreeva added. Logitech - UBS, Buy rating "Yes, after some recession risks in FY 23E impacting sales, we expect Logitech sales to be resilient driven by hybrid working trends supporting the installed base of PC peripherals, new gamers joining the market, and video conferencing trends replacing classical telephony medium term. … We think Logitech has very strong management execution, has built a leading consumer brand recognition supported by marketing spend & good quality products over the past decade, & has a best-in-class FCF ROIC of > 80% & overall cash conversion." Shake Shack - Northcoast, Buy rating "Assuming traffic trends remain resilient we believe Shake Shack has ample room to increase menu prices by several points later this year, helping to offset rising food costs & improving store margins by next fall. ... .With forward multiples near industry averages but a growth strategy that is double peers, we see significant upside driven by growth potential & the opportunity to improve store operations, margins, & unit economics. ... .Combined, we believe Shake Shack is trading at an entry point that is attractive & compelling convincing us to upgrade the firm." Home Depot - Baird, Outperform rating "Resilient Model, Estimates Seem Biased Higher. ... Remain buyers of HD. Better-than-expected 1Q results and increased FY22 guidance reinforce our view that HD's P & L will likely prove more durable than the market currently expects. Importantly, we sense a healthy dose of prudent conservatism in the FY22 outlook and believe normal revenue seasonality lends an upward bias to our raised estimates." ServiceNow - Wells Fargo, Overweight rating "Likely to prove more resilient. … Benefiting from a number of secular trends that are transforming businesses globally—the rise of automation, cloud infrastructure, edge computing, application modernization, remote work, among others. ... Balanced financial profile with meaningful cash flow generation. ... Furthermore, given the broad-based sell-off, we continue to focus on the highest quality franchises and are tending toward those businesses with strong platform positioning and balanced growth profiles" RealReal - Needham, Buy rating "Ready to wear demand is back. … Stock has lagged with the group/market, yet REAL is executing with some of the fastest top line growth in our space. ... We are bullish on the circular economy's growth potential, and we see REAL as the only luxury marketplace operating at scale. REAL is making progress removing friction from supply, plus we expect self-help initiatives to drive sales and profitability higher.... Luxury remains resilient despite the environment and we think that REAL is in a good spot benefiting from higher pricing in the primary market by pricing higher/consumer trades down."