Levi Strauss & Co. CEO Chip Bergh rings the opening bell on the New York Stock Exchange (NYSE) during the company’s IPO in New York, the United States, March 21, 2019.
Luca Jackson | Reuters
More than two weeks into the third quarter, the economic environment and near-term outlook remain strained and gloomy.
However, bear markets are followed by bull markets. As the recovery begins, many investors will regret sitting on the sidelines rather than buying the right stocks sooner.
To that end, top Wall Street pros have singled out four stocks with long-term potential, according to TipRanks, which ranks analysts based on their performance.
Levi Strauss & Co.
Levi Strauss & Co (LEVI) Second-quarter results earlier this month gave us a glimpse of how it’s dealing with macroeconomic pressures. The results were better than expected, and the company even reiterated its guidance for 2022.
Strong operational skills help the retailer meet the challenges efficiently. After the Q2 print, Guggenheim analyst Robert Drbul dived into Levi’s performance and came out with an upgraded Buy rating and a price target of $33. (See Levi Strauss & Co dividend date and history on TipRanks)
“We continue to believe that the Levi’s brand remains strong and the company’s capital allocation principles relative to strategic priorities will continue to generate market share gains,” said Drbul, who is ranked 607th among nearly 8,000 analysts tracked on TipRanks. Drbul’s reviews were successful 58% of the time, scoring an average of 6.9% per review.
The analyst also noted that Levi actually benefited from retail price increases, which reflected in its revenue and gross margins. Additionally, the company’s low-range stores (the Signature store at Walmart and the Denizen and Red Tab stores at Target) are also poised to benefit from a shift in consumer buying trends as a result of inflation.
Palo Alto Networks
Palo Alto Network (PANW) is a big name in the cybersecurity world and was one of the companies that managed to hold its own strongly despite the broader market headwinds. Its efficiency measures have helped the company manage higher costs due to supply chain issues and remain profitable.
BTIG analyst Gray Powell, who also happens to be ranked #793 among nearly 8,000 analysts tracked on TipRanks, is very confident about the traction of Palo Alto’s core firewall, which accounts for more than 75% of total revenue . (See Palo Alto Networks stock chart on TipRanks)
In an investor call with Palo Alto management, Powell noted that the company did not release a mid-quarter update. When asked if the security industry was facing a slowdown due to the overall market woes, Palo Alto management said the company hadn’t seen any slowdown in demand as of mid-May.
“With the mix shifting towards the Next Generation Security (NGS) segment and improved performance in connected services in the traditional firewall business, we believe PANW can sustain revenue growth in excess of 20% and increase margins over the longer term,” said Powell, who sees several upsides to sharing performance over the next 12 to 18 months.
Notably, Powell was successful with 55% of his reviews, each of which returned an average of 9.1%.
SentinelOne
Another of Gray Powell’s favorite stocks is autonomous cybersecurity platform SentinelOne (S). Although SentinelOne was part of the broader market sell-off triggered by numerous macroeconomic pressures, SentinelOne stressed that the company was not facing a significant slowdown in demand.
In a fireside chat, SentinelOne management indicated that the company is prepared to face headwinds as security is a very permanent part of the IT budget (due to the growing need for stronger and constantly evolving security solutions). Additionally, SentinelOne believes it is in the longest-lived space in security, which is a bonus. (See SentinelOne Hedge Fund Trading Activity on TipRanks).
Powell believes that SentinelOne has several long-term growth opportunities ahead and is expected to grow significantly and consistently over the next five or more years.
“We believe S’s key target market for enterprise endpoint security is unique in that it is witnessing simultaneous rising demand trends and a shift away from legacy solutions,” said Powell.
The analyst is also optimistic about SentinelOne’s strategic expansion into adjacent markets, which will help expand the overall addressable market.
Citizens Financial Group
The banking sector has taken the spotlight as the Federal Reserve hikes interest rates. In this environment, the commercial banking service provider Citizens Financial Group (CFG) is benefiting from higher interest rates in the form of rising net interest income, despite declining fee income (due to geopolitical tensions) and a possible slowdown in credit demand.
Ahead of the release of the company’s second quarter results on July 19, RBC Capital Markets analyst Gerard Cassidy commented on the company’s developments and fundamentals and reiterated his buy recommendation.
However, factoring in near-term headwinds — including Citizens’ mortgage-sensitive and capital markets businesses — the analyst has lowered its price target to $55 from $58. (See Citizens Financial Insider Trading Activity on TipRanks)
Nonetheless, Cassidy found that core deposits from citizens had increased during previous monetary policy update cycles. Also, these deposits appear to be stickier than expected during such cycles. In addition, deposit costs are expected to remain low for longer, leading to above-average profitability in the early stages of this year’s monetary tightening cycle.
Additionally, despite investor concerns about how an economic downturn could affect Citizens’ credit quality, Cassidy remains optimistic that current credit quality strength will continue. “We recognize that CFG and the industry have been ‘outperforming’ on credit and the second half of 2022 may be showing signs of a normalization in credit trends which we believe will be manageable for the company ‘ said the analyst.
Cassidy currently holds the #28 position among nearly 8,000 Wall Street analysts tracked on TipRanks. He was successful with his reviews 66% of the time, and each of his reviews returned an average of 22.2%.