Top Wall Street analysts pick these 3 stocks for attractive returns
The U.S. stock market witnessed a strong run in the first quarter of 2024, but uncertainty looms as investors await interest rate cuts and anticipate the upcoming U.S. elections.
Wall Street analysts are ignoring the short-term noise and remain focused on companies that have strong fundamentals and can generate attractive returns in the long run.
Bearing that in mind, here are three stocks favored by the Street's top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Micron Technology
This week's first stock pick is memory chipmaker Micron Technology (MU), which impressed investors with its strong quarterly performance. The company also offered solid guidance, thanks to demand stemming from the artificial intelligence boom.
Following the beat-and-raise quarter, Needham analyst Quinn Bolton reiterated a buy rating on MU stock and increased the price target to $120 from $100. The analyst stated that the company's high-bandwidth memory (HBM) trends are significantly boosting revenue estimates.
Bolton noted that Micron's HBM3E memory solution generated revenue in the fiscal second quarter and has already sold out for calendar year 2024.
He highlighted management's commentary about generating several hundred million dollars of revenue from HBM3E in fiscal 2024 and driving fiscal 2025 revenue to record highs. Additionally, the analyst expects Micron's gross margins to increase through fiscal 2024 and into fiscal 2025, driven by favorable pricing and product mix.
Bolton expects the company to gain from the rebound in the memory cycle in 2024 and stated, "Long-term, we view MU as a key beneficiary of strong data center demand (AI/ML), automotive semi content, graphics and industrial automation."
Bolton ranks No. 17 among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 66% of the time, with each delivering an average return of 30.7%. (See Micron Technical Analysis on TipRanks)
Lululemon
Next up is athletic apparel maker Lululemon (LULU). The company recently reported better-than-expected results for the fourth quarter of fiscal 2023. However, shares fell as investors were disappointed with the company's guidance, which reflected soft sales in the U.S. due to the impact of macro pressures on consumer spending.
Following the print, Guggenheim analyst Robert Drbul slightly lowered his fiscal 2024 earnings per share estimates to reflect the macro backdrop in the U.S. and higher marketing investments. The analyst also reduced the price target for LULU stock to $525 from $550 but reiterated a buy rating on the stock, calling it his firm's "favorite growth story in 2024."
Despite a slower start to the first quarter in the U.S., Drbul noted that management continues to be optimistic about the potential to grow LULU's domestic business this year and gain market share.
The analyst also highlighted the continued robust momentum in LULU's international business in the fourth quarter. He is optimistic about Lululemon achieving its goal of quadrupling its international revenue by the end of fiscal year 2026 compared to fiscal year 2021 levels. He thinks this would drive higher overall revenue and operating margins, justifying the stock's premium multiple.
"We remain BUY rated as we believe LULU stands to benefit from favorable secular tailwinds (health, wellness, casualization, and fitness, including at-home)," said Drbul.
Drbul ranks No. 574 among more than 8,700 analysts tracked by TipRanks. His ratings have been successful 58% of the time, with each delivering an average return of 8%. (See Lululemon Stock Buybacks on TipRanks)
Broadcom
This week's list includes another tech giant: semiconductor company Broadcom (AVGO). The company is widely viewed as one of the key beneficiaries of the generative AI wave. At a recent investor meeting, the company discussed its innovations, which will help to achieve its target of generating $10 billion in AI chip sales in 2024.
Following the event, Susquehanna analyst Christopher Rolland reiterated a buy rating on AVGO stock with a price target of $1,650. Among the key takeaways from the event, the analyst highlighted how the company is poised to meet its annual AI sales target, backed by its solid portfolio across AI accelerators and networking products.
In contrast to industry expectations that the InfiniBand networking communication standard would dominate the market, Rolland noted, Broadcom's management continues to be confident about Ethernet over InfiniBand. The company is optimistic about the ability of its Ethernet products to compete in AI applications.
Rolland also highlighted how Broadcom's customized chips drive cost efficiencies in consumer AI applications. The company works with its customers to co-design the architecture of their AI accelerators, which helps enhance performance efficiencies and hardware optimization.
Commenting on Broadcom's strategic acquisitions, including Symantec and VMware, Rolland said, "Broadcom is one of the best integrators in the business, continuing to prove that economies of scale are a viable driver of earnings power for those that can execute in the semiconductor industry."
Rolland holds the 15th position among more than 8,700 analysts tracked by TipRanks. His ratings have been profitable 69% of the time, with each delivering an average return of 25.7%. (See Broadcom Stock Charts on TipRanks)