A Peloton exercise bike is seen after the opening bell for the company’s initial public offering at the Nasdaq Market location in New York City, New York, United States, September 26, 2019.
Shannon Stapleton | Reuters
Investors are scrambling to understand big company earnings and looking for clues as to what lies ahead as macro headwinds continue. It is prudent that investors choose stocks with an optimistic longer-term view during these uncertain times.
Here are five stocks picked by Wall Street’s top analysts, according to TipRanks, a service that ranks analysts based on their past performance.
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wholesaler Costco (COSTS) is known for its resilient business model, which has helped it weather multiple economic downturns. Additionally, the members-only Warehouse Club has a loyal customer base and generally enjoys renewal rates of 90% or more.
Costco recently reported better-than-expected net sales growth of 6.9% and comparable sales growth of 5.6% for the four weeks ended Jan. 29. The company delivered positive numbers despite continued weakness in its e-commerce sales and the postponement of the Chinese New Year to earlier in the year.
After the sell report, Baird analyst Peter Benedict again confirmed a buy recommendation for Costco and a price target of USD 575. Benedict stated, “With a defensive/staple-heavy revenue mix and a loyal member base, we believe equities remain fundamental as a rare megacap ‘growth staple’ — especially given a difficult environment for consumer spending.”
Benedict’s beliefs can be trusted considering he is ranked 55th out of more than 8,300 analysts in the TipRanks database. That being said, he has a solid track record of 71% profitable reviews, with each review delivering an average return of 16.3%. (See Costco Hedge Fund Trading Activity on TipRanks)
2022 was a challenging year for the e-commerce giant Amazon (AMZN) as macroeconomic pressures hit Amazon Web Services’ retail business and cloud computing division.
Amazon’s first-quarter revenue growth guidance of 4% to 8% reflects a further slowdown from the 9% growth seen in the fourth quarter. Amazon is rationalizing costs as it faces slowing sales growth, higher spending, and ongoing economic turmoil.
Still, several Amazon bulls, including Mizuho Securities’ Vijay Rakesh, remain optimistic about the company’s long-term prospects. Rakesh sees a “modest downside” to Wall Street’s consensus expectation for Amazon’s retail business revenue growth in 2023. (See Amazon Website Traffic on TipRanks)
However, he sees more downside risks to Street’s consensus estimate of 20% cloud revenue growth in 2023 compared to its revised estimate of 16%. Rakesh noted that Amazon’s cloud business was hit in the fourth quarter by lower demand from industries like mortgages, advertising, and crypto, and that Q1 revenue growth has slowed to the mid-teens so far.
As a result, Rakesh said that AMZN stock “could be volatile in the near term given potential downside revision risks.” Nonetheless, he reiterated a buy rating on AMZN with a price target of $135 due to “positive long-term fundamentals”.
Rakesh is ranked 84th among more than 8,300 analysts tracked by TipRanks. Additionally, 61% of its reviews were profitable, with each generating an average return of 19.3%.
Manufacturer of fitness equipment peloton (PTON), once a darling of the pandemic, fell out of favor after the economy reopened as people returned to the gyms and competition increased. Peloton shares plummeted last year on deteriorating sales and mounting losses.
Still, investor sentiment for PTON stock has improved thanks to the company’s turnaround efforts under CEO Barry McCarthy. Investors cheered the company’s second-quarter results on higher subscription revenue, even as overall revenue fell 30% year over year. Loss per share, while narrowing from the year-ago quarter, was worse than Wall Street had forecast.
Joining the investors, JPMorgan analyst Doug Anmuth was “increasingly positive” on Peloton following the latest results, citing cost-control measures, improving free cash flow and better-than-expected connected fitness subscriptions. Anmuth stressed that the company’s restructuring to a more variable cost structure is essentially complete and appears focused on achieving its goal of break-even free cash flow by the end of fiscal 2023.
Anmuth reiterated its Buy rating and raised its price target to $19 from $13 as the company focuses on restoring revenue growth. (See PTON stock chart on TipRanks)
Anmuth is ranked #192 on TipRanks by more than 8,300 analysts with a 58% success rate. Each of his reviews has returned an average of 15.1%.
Microsoft’s (MSFT) Growth plans powered by artificial intelligence have sparked positive sentiment towards the tech giant lately. The company plans to add ChatGPT-like technology to its Bing search engine and Edge web browser.
On the other hand, the company’s December-quarter revenue growth and muted guidance reflected near-term headwinds stemming from continued weakness in the PC market and a slowdown in Azure cloud business as companies rein in spending. However, Azure’s long-term growth potential looks attractive.
Ivan Feinseth, a financial analyst at Tigress, ranked 137th out of 8,328 analysts tracked by TipRanks, says Microsoft’s investments in AI will propel its future while short-term headwinds could slow cloud growth and the personal computing segment .
Feinseth reiterated his buy rating on Microsoft while maintaining a price target of $411. He said, “The strength of its Azure cloud platform, combined with increasing AI integration across its product lines, continues to drive global digital transformation and underscores its long-term investment opportunity.”
Notably, 64% of Feinseth’s ratings generated returns, with each rating yielding an average return of 13.4%. (See MSFT Insider Trading Activity on TipRanks)
Ivan Feinseth is also optimistic Mobileye (MBLY), a fast-growing technology provider for advanced driver assistance systems (ADAS) and self-driving systems. chip giant intel still holds the majority of Mobileye shares.
Feinseth noted that Mobileye continues to see solid demand for its industry-leading technology. He expects that the company will “increasingly benefit from increased adoption of ADAS technology by OEMs.”
The company also has an advantage due to the increasing demand in the automotive industry for sophisticated camera systems and sensors for driver assistance systems and driving safety systems. In addition, Feinseth sees opportunities for the company in the area of autonomous mobility as a service or AMaaS.
Feinseth said Mobileye’s revenue could grow to over $17 billion by 2030, supported by the company’s “significant R&D investments, first-mover advantage and industry-leading product portfolio, combined with significant OEM relationships.” He forecasts a potential total addressable market of nearly $500 billion by the end of the decade.
Given Mobileye’s numerous strengths, Feinseth raised its price target to $52 from $44 and reiterated its buy rating. (See Mobileye Blogger Opinions and Opinions on TipRanks)