Inflation worries and concerns about the timing of Federal Reserve interest rate cuts have rattled the market, but if you know where to look, there are attractive stocks available.
Wall Street analysts ignore the short-term noise and focus on picking stocks with strong fundamentals and long-term growth potential
Here are three stocks that are favored by the Street's top analysts, according to TipRanks, a platform that ranks analysts based on past performance.
Chipotle Mexican Grill
We'll start with a fast-casual restaurant chain Chipotle Mexican Grill (CMG). The company recently reported better-than-expected fourth-quarter results as customer traffic at its restaurants maintained momentum despite ongoing macroeconomic pressures.
In response to the positive results, Baird analyst David Tarantino reiterated his Buy rating on CMG shares and increased the price target to $2,850 from $2,650. The analyst noted the company's robust transaction momentum in the fourth quarter, driven by factors such as better execution at the unit level, improved menu promotion and strong marketing efforts.
The analyst believes these factors can continue to drive good sales for CMG in 2024 and beyond, with management focused on growing average unit volume to more than $4 million in the long term, up from $3 million US dollars in 2023.
Tarantino noted that CMG aims to increase unit growth to about 10% per year through 2025. He believes this pace of unit growth coupled with mid-single-digit sales would help the company “maintain tight sales growth characteristics.” many more years.”
Tarantino ranks No. 321 among more than 8,700 analysts tracked by TipRanks. Its ratings were profitable 65% of the time and delivered an average return of 10.8% each time. (See CMG financial reports on TipRanks)
Metaplatforms
Next up is the social media giant Metaplatforms (META). The company's earnings per share more than tripled in the fourth quarter of 2023, boosting investor sentiment towards the stock. Additionally, Meta announced its first dividend, supported by excellent performance and strong cash flow.
Impressed by Meta's results, Monness analyst Brian White reiterated his buy rating on the stock and significantly increased the price target from $370 to $540. The analyst highlighted accelerated revenue growth, solid operating margin, dividend payout and $50 billion share repurchase plan.
As regulatory headwinds continue, White is bullish on Meta, believing the company is “well-positioned to capitalize on the digital advertising trend, innovate with AI, and leverage a leaner cost structure.”
The analyst noted that the company is now much more efficient and its leaner cost structure and efficiency measures are expected to continue this year. However, the company is committed to investing in innovative products and services while expanding its platform with generative artificial intelligence capabilities, White added.
The analyst warned that macroeconomic uncertainties and geopolitical tensions could impact advertising spending in the coming quarters. Still, he believes Meta deserves to trade at a premium to the market and technology sector in the long term, given its impressive revenue growth and operating margin. A
White ranks 28th among more than 8,700 analysts tracked by TipRanks. Its ratings were profitable 68% of the time and delivered an average return of 21.5% each time. (See meta hedge fund trading activity on TipRanks)
Costco wholesale
Membership warehouse chain Costco wholesale (COST) is this week's third choice. Earlier this month, the company reported a 4.5% increase in sales for the January retail month, which ended February 4. Total comparable sales growth was 2.7%, with e-commerce sales increasing 21%.
Baird analyst Peter Benedict noted that calendar-adjusted core sales of nearly 6.7% in January showed improvement from December's 5.1% growth, despite steep multi-year comparisons. He added that competitions accelerated across all regions – the US, Canada and other international markets – and product categories thanks to a surge in transactions.
The analyst also highlighted the acceleration in e-commerce sales and impressive traffic trends. Overall, Benedict believes Costco's premium valuation is justified based on several strengths, including its robust membership model and strong balance sheet.
He reiterated his Buy rating on Costco shares and increased his price target from $700 to $775. He said: “Valuation is high, but increasing competitive dynamics, easing of comps and possible increase in membership fee give estimates an upward bias in the coming quarters.”
Benedict is ranked #71 among more than 8,700 analysts tracked by TipRanks. Its ratings were profitable 70% of the time and delivered an average return of 14.6% each time. (See COST stock analysis on TipRanks)