Starbucks Irish Cream Cold Brew holiday drink.
Between the Federal Reserve’s rate hike, fresh economic data and a spate of gains from tech giants, it’s been a busy week for investors.
Because the market can be so volatile, it’s important to maintain a long-term perspective and not base decisions on sudden stock movements.
Check out these five stocks that Wall Street’s top pros have highlighted for their long-term prospects, according to TipRanks, a service that ranks analysts based on their performance.
Premium coffee chain Starbucks (SEX) is a great candidate for a strong recovery thanks to its brand strength and solid finances.
Ahead of the release of third-quarter fiscal 2022 results, which are scheduled for Aug. 2, Evercore ISI analyst David Palmer appeared bullish on the company. The analyst believes that the recent increase in subway traffic in China may have had a positive impact on same-store sales growth in the country. (See Starbucks dividend date and history on TipRanks)
Palmer also hopes Starbucks will make important changes to its aging cash facilities, machines and technology, which will boost the chain’s transaction growth opportunities in FY23. “We see upside to consensus-estimated transaction growth in North America for FY23,” Palmer said. “We also envision these changes boosting partner morale and ultimately minimizing the risk of unionization.”
With those observations, the analyst, ranked 657th out of nearly 8,000 analysts rated on TipRanks, reiterated a buy rating and $95 target price on Starbucks. The analyst was successful with 60% of its reviews, each generating an average return of 5.9%.
Another company on Palmer’s shopping list is Domino’s Pizza (DPZ). Like most other companies involved in the food and quick service restaurant industry, Domino’s has been a victim of high input costs, lower consumer spending and labor shortages.
However, its efficient supply chain management, strong brand name, offerings at fair prices, and technological innovation capabilities are helping the company scale its business despite the headwinds. (See Domino’s stock chart on TipRanks)
Palmer is optimistic about the pizza chain’s efforts to internalize delivery order management and ease delivery restrictions to increase work capacity. “To that end, the company is committed to sharing best practices in labor scheduling, pushing more orders toward labor-efficient mobile ordering and pickup (the $7.99 value helps), and likely testing technology to make it easier for drivers.” ‘Opt-in’ as a driver,” said the analyst.
Palmer also sees a good opportunity for market share gains in the carryout segment as “stagflation forces grow.” Additionally, the company’s digital offering, featuring a large pizza for $7.99 with the option of mix-and-match, is another factor that can sustain same-store sales growth.
blocks (Q) is a provider of payment processing solutions. The company has grappled with choppy waters for the past two years, and its experience in 2022 adds to the challenge. Block faces a significant drop in sales in a stagflationary environment amid increased competition and reduced consumer spending.
Nonetheless, the strong momentum in its cash app offering is helping the company stay afloat. Deutsche Bank analyst Bryan Keane is forecasting significant profitability for Block’s second quarter of 2022, with results expected to be released on Aug. 4. The analyst cites “improving attachment rates for new products and positive pricing changes” as two of the factors driving the cash app business.
“We remain constructive on Cash App and believe the segment has the potential to surprise on the upside in Q2 ’22, above our estimate of 18% organic gross profit growth rate (expense velocity will be expected in an economic remain stable during the weakening),” he told Keane.
The analyst also believes that synergies from acquired buy-now-pay-later pioneer Afterpay should be good for earnings growth. (See Block Hedge Fund Trading Activity on TipRanks)
Keane reiterated a Buy rating on SQ stock with a price target of $155. The analyst, whose ratings have delivered an average return of 8.7%, is currently ranked 601st out of nearly 8,000 analysts in the TipRanks database. He was successful with 59% of his ratings.
Keane is also keenly interested in the prospects of another financial technology services company: Fiserv (FISV). The company is showing encouraging growth trends despite macro headwinds hurting its operating margin.
In its most recent second-quarter earnings results, the company raised its revenue and earnings per share (EPS) growth outlook for fiscal 22, although it factored in the possibility of a recession. It was an impressive move that solidified Keane’s belief in the stock. (See Fiserv Insider Trading Activity on TipRanks)
In addition, the analyst pointed out that new business, expansion of old agreements and a strong international presence, particularly in Latin America, will significantly increase the company’s revenues.
The analyst raised his outlook for Fiserv’s FY22, FY23 and FY24 EPS growth. He also upgraded his outlook for the company’s revenue growth in FY23. Keane reiterated a Buy rating on the stock with a $135 price target.
Top analysts rely on the software company Datadog (DOG). The company uses its real-time data monitoring platform to help companies seamlessly analyze their entire stack. The company may not be immune to macroeconomic headwinds, but given the solid environment for IT spending, it will most likely recover quickly and efficiently.
Ahead of the quarterly results, due to be released on Aug. 4, Monness Crespi Hardt analyst Brian White maintained his stance on Datadog with a buy rating, despite lowering the 12-month price target from $160 to $130 due to the macro pullbacks lowered. (See Datadog Risk Factors on TipRanks)
White believes that accelerating digital transformation has created a long-term growth trend in the cloud that will continue to fuel long-term demand for Datadog’s solutions. “Given Datadog’s rapid growth, strong secular tailwinds in the observability market, and the company’s cloud-native platform, we believe the stock will have a premium valuation relative to other next-gen software vendors,” said White.
The analyst also said that Datadog has immense long-term potential to become profitable as the business matures.
White’s reviews have given him a 57% success rate and an average return of 9.9% on each. The analyst is ranked 524th out of nearly 8,000 analysts followed on TipRanks.