Wall Street’s top analysts are bullish on these stocks amid an uncertain economy
Stocks broke a three-week losing streak on Friday, but uncertainty looms over the horizon as the Federal Reserve prepares for its September meeting.
The prospect of a sizable interest rate hike is just around the corner, and such a move by the central bank can shake up markets. It's key for investors to keep a long-term view in mind. They must search for stocks that can survive a downturn and bounce back with healthy returns.
Here are five stocks picked by Wall Street's top professionals, according to TipRanks, a platform that ranks analysts based on their track record.
Ambarella
Semiconductor chipmaker Ambarella (AMBA) specializes in the design and manufacture of fabless chipmaking for various human and computer vision applications. The company's low-power CVflow processors support intelligent cameras for security and automotive applications.
The company has been navigating elevated expenses and worldwide supply chain constraints impressively, making Needham analyst Quinn Bolton bullish on the stock's prospects. (See Ambarella Stock Analysis & Ratings on TipRanks)
The analyst was upbeat about the commencement of Ambarella's CV5 processor production, which was achieved earlier than expected. That means that significant revenues are expected ahead of time, in the first half of fiscal 2024 (February-July of calendar year 2023). Moreover, the sampling of the CV3 prototype has also been garnering rave reviews.
Interestingly, Bolton sees a drop in shares in the near term, after management mentioned a reduction in inventory and delays in orders in the coming quarters. However, he is not too worried about it as he believes that lead times will improve with the reduction in inventory.
"These factors enable a better environment for the CV5 ramp and auto industry. We would be buyers on share weakness as we believe AMBA's best days are coming, and it begins with the CV5 ramp," said Bolton while reiterating a buy rating on the stock with a price target of $110.
Bolton is ranked at No.4 among almost 8,000 analysts rated on TipRanks. Of his ratings, 65% have been profitable, generating an average return of 40.2% per rating.
Credo Technology
Another of Bolton's favorite stocks to buy these days in Credo Technology (CRDO), a fabless semiconductor company and a peer of Ambarella. One of the main goals of the company is to improve bandwidth issues with its secure, high-speed connectivity solutions as the industry's bandwidth performance requirements increase.
The company's extensive analog and DSP design capabilities give it a competitive edge in the market by allowing it to "optimize the split between analog and digital processing in its designs and use 'N-1' process technology to provide high-performance designs at lower power and lower cost," the analyst noted. (See Credo Technology Group Holding Ltd Stock Chart, Price History & Graphs on TipRanks)
"Leveraging its competitive advantage, we expect Credo to meaningfully outgrow its data center TAM over the next three years and be one of the fastest revenue growth stories in semiconductors over this period," said Bolton, setting the price target for CRDO at $15.
The analyst thinks it is the perfect time to scoop up shares of Credo as the company's enterprise value-to-sales multiple is likely to move up.
Oracle
Monness Crespi Hardt analyst Brian White is most excited about Oracle's (ORCL) acquisition of Cerner, a health-care IT solutions provider.
Ahead of its first-quarter fiscal 2023 results on Sept.12, White is confident that the exposure to the emerging digital modernization trend will be an excellent growth catalyst, once the recessionary pressures subside. (See Oracle Insider Trading Activity on TipRanks)
Despite some foreign exchange headwinds, the analyst expects the company to meet his expectations of earnings of $1.09 per share on $11.48 billion in revenue.
It should be mentioned that Oracle runs a risk of not being able to integrate Cerner's business in a financially optimal way, given the current circumstances. However, there shouldn't be much to worry about for long-term investors who can look beyond the turmoil.
"The 2Q:CY22 results across the software and cloud markets had a more cautious tone with some companies outperforming others; however, economic headwinds have yet to result in apocalyptic trends across the board," said White, reiterating a buy rating on the stock with a price target of $113.
White holds the 436th rank among almost 8,000 analysts tracked on TipRanks. Further, 58% of his ratings have been successful, and they have garnered an average return of 11.2% per rating.
Microsoft
Tech giant Microsoft (MSFT) is among the world's top three most valuable companies, and it only makes sense that it is among the favorite defensive stocks of analysts. Recently, Tigress Financial Partners analyst Ivan Feinseth reiterated a buy rating and price target of $411 on MSFT stock, motivated by several strong points.
Microsoft's Azure cloud platform plays a pivotal role in global digital transformation, which, according to Feinseth, "highlights its long-term investment opportunity." This platform gives the company a competitive edge is expected to continue to be Microsoft's main revenue and profitability driver. (See Microsoft Blogger Opinions & Sentiment on TipRanks)
Additionally, enterprise digitization is pacing up rapidly, giving rise to the constant need for higher investment in technological solutions to drive the efficiency and competitiveness of enterprises. The analyst believes that this will continue to accelerate Business Performance trends for MSFT.
Moreover, Microsoft can boost its dominance in gaming if its acquisition of leading game developer Activision Blizzard materializes. The acquisition will also open up the opportunity for the company to expand into the metaverse with more resources than before.
Feinseth is also upbeat about Microsoft's strong financial health. "MSFT's strong balance sheet and cash flow will continue to fund ongoing growth initiatives and business-expanding strategic acquisitions and enhance shareholder returns through further dividend increases and share repurchases," said the analyst.
Feinseth is ranked at No. 234 among the analysts on TipRanks. His ratings have been profitable 59% of the time, and they have resulted in average returns of 11.7% each.
Chewy
Pet product retailer Chewy (CHWY) recently reported mixed quarterly results amid macroeconomic challenges that have weighed on discretionary demand. Nonetheless, Wells Fargo analyst Brian Fitzgerald has decided that some meat is still on the bone.
Despite weaker-than-expected revenues, the company's profits were remarkably high during the quarter. This was the result of the resilience of non-discretionary demand, which was a tailwind for the company's supply chain initiatives and longer-term strategic initiatives in health care and insurance. Fitzgerald thinks "investors will be rewarded for waiting out macro turmoil." (See Chewy Hedge Fund Trading Activity on TipRanks)
The analyst has faith in the continued growth-driving prospects of Chewy's freight services unit. "Improved inventory placement continued to benefit delivery speed/cost, CHWY opened a second import-routing facility, and Chewy Freight Services' middle-mile volume tripled sequentially," said Fitzgerald.
Moreover, the company's CarePlus insurance and wellness plans have expanded into 31 states and are expected to serve all the states in the U.S. by the end of the year. With management noting strong initial customer response, this could be a solid revenue driver.
Granted, the macroeconomic uncertainties led the analyst to reduce his price target on Chewy to $50 from $55. However, he maintained his buy rating, looking beyond the clouds.
Fitzgerald is ranked at No. 212 among nearly 8,000 analysts followed by TipRanks. In all, 53% of his ratings have been successful in generating an average profit per rating of 15.8%.