The debate over when the Federal Reserve will start cutting interest rates and the ongoing enthusiasm for artificial intelligence are the two key factors influencing the US stock market. At the same time, concerns about the trajectory of the economy continue to weigh on investor sentiment.
Against this uncertain backdrop, Wall Street analysts are focused on identifying stocks with solid fundamentals and strong long-term growth prospects. Investors can look at the recommendations of top analysts to gain useful insights before making an investment decision.
In this climate, the following three stocks are favored by Wall Street's top professionals, according to TipRanks, a platform that ranks analysts based on their past performance.
Delta Airlines
We start with Delta Airlines (DAL), America's second-largest airline. DAL serves more than 290 destinations on six continents with 4,000 daily flights. Following the company's presentation at TD Cowen's recent Toronto Corporate Access Day, analyst Helane Becker reiterated his Buy rating on DAL with a price target of $55.
Delta is TD Cowen's best idea for 2024, Becker said, adding: “Delta has a differentiated product that they continue to invest in, but what stands out is their strategic plan.”
Becker believes that management's focus on DAL's strategic plan over the past 15 years is producing the desired results and making the stock attractive. Delta's stable management team is a key differentiator from its competitors, she said.
Becker highlighted several strengths, including Delta's extensive network, strategic partnerships with other airlines and operational reliability, reflected in the company's improved Net Promoter Scores over the past decade.
The analyst also noted Delta's commentary on continued strong demand among premium customers (annual income of more than $100,000). In addition, the airline is experiencing a solid recovery in business travel, with volumes growing by more than double digits year-over-year. Delta is also strengthening its financial position by continuing to reduce debt.
Becker ranks 276th among more than 8,800 analysts tracked by TipRanks. Her ratings have been profitable 63% of the time, generating an average return of 11.2%. (See Delta Air Lines stock charts on TipRanks)
Microsoft
Our next choice is the software giant Microsoft (MSFT). The company, which has invested billions of dollars in ChatGPT developer OpenAI, is considered one of the main beneficiaries of the generative AI (artificial intelligence) wave.
Recently, Tigress Financial analyst Ivan Feinseth reiterated his buy rating on MSFT shares and raised his price target from $475 to $550. The analyst believes that Microsoft is “increasingly positioned to lead the AI revolution by continuing to integrate generative AI capabilities across its entire software stack and product portfolio.”
Feinseth noted that Microsoft's 17% revenue growth in the fiscal third quarter ended March 31 was due to the accelerated adoption of the company's AI-powered offerings and AI cloud integration. The company's cloud business delivered robust performance thanks to demand for the Azure platform.
Feinseth also highlighted Microsoft's growing strength in gaming and its efforts to expand into the metaverse. In particular, Microsoft's gaming business is expected to benefit from the $75 billion acquisition of Activision Blizzard and the launch of the new Xbox gaming console.
Finally, Feinseth mentioned Microsoft's strong financial position, which contributes to higher shareholder returns and enables investments in the company's AI ambitions.
Feinseth is ranked 242nd among more than 8,800 analysts tracked by TipRanks. His ratings have been successful 60% of the time, generating an average return of 12.2%. (See Microsoft Technical Analysis on TipRanks)
Zscaler
The third stock this week is Zscaler (ZS), a leader in cloud-based cybersecurity. The company's Zscaler Zero Trust Exchange platform securely connects users, devices, and applications by protecting them from cyberattacks and data loss.
Following the Zenith Live 2024 event, Baird analyst Shrenik Kothari reiterated a buy rating on Zscaler shares with a price target of $260. Discussing the key takeaways from the event, the analyst said that Zscaler is trying to capitalize on additional market opportunities by expanding its platform.
Kothari specifically mentioned the launch of the Zscaler Identity Protection feature, which uses advanced machine learning to strengthen identity security in cloud environments. He also mentioned the Cloud Browser Isolation offering, which protects user devices, and the DLP 2.0 solution, which has AI-driven capabilities to ensure the security of sensitive data.
These new features on Zscaler's platform have increased the total addressable market by more than $24 billion to $96 billion. Kothari also highlighted the company's shift in go-to-market strategy from a transactional focus to customer-centric selling. As part of the new sales approach, Zscaler is focused on acquiring more customers with an ARR (annual recurring revenue) of over $10 million.
“Impressive customer success stories, particularly in finance, healthcare and manufacturing, underscore Zscaler’s comprehensive security,” said Kothari.
Kothari is ranked 381st among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 66% of the time, generating an average return of 20.6%. (See Zscaler financial reports on TipRanks)