The Spotify logo hangs on the facade of the New York Stock Exchange with a US and Swiss flag as the company lists its shares with a direct listing in New York on April 3, 2018.
Luca Jackson | Reuters
After a week of corporate earnings and economic updates, it’s still difficult to determine whether a recession can be avoided this year.
Investing in such a stressful environment can be difficult. To help with that process, here are five stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
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Apple
Before apples (AAPL) With its December quarter results to be released on February 2, investors are quite aware of the challenges the company faced during the period. From production disruptions at the iPhone manufacturing facility in Zhengzhou, China, to higher costs, Apple’s first quarter of fiscal 2023 weathered it all. Needless to say, the company expects growth to slow from the previous quarter.
Nonetheless, Monness Crespi Hardt analyst Brian White expects results to be in line with or slightly above Street’s expectations. The analyst believes gains in Services, iPad and Wearables, Home & Accessories sales could be a saving grace.
Looking ahead, White sees pent-up demand for iPhones coming into play in the coming quarters once Apple gets over production woes. (See Apple Stock Investors opinion on TipRanks)
The analyst believes Apple’s expensive valuation of around 27 times its earnings estimate for calendar year 2023 is justified.
“This price-to-earnings target is above Apple’s historical average over the past several years; however, we believe that successfully building a strong services business has given the market more confidence in the company’s long-term business model,” said White, reiterating a Buy rating and price target of $174.
White ranks 67th among nearly 8,300 analysts tracked on TipRanks. Its ratings have been profitable 63% of the time, and each rating has generated an average return of 17.7%.
Spotify
Audio Streaming Subscription Service Spotify (JOB) is also one of Brian White’s recent favorites.
“Spotify is in a favorable long-term trend, improving its platform, entering a large digital advertising market and expanding its audio offerings,” White said, reiterating a buy rating and price target of $115.
While acknowledging some challenges facing Spotify this year, the analyst remains bullish on its margin improvement plans and several favorable industry developments. While it may be difficult to attract new premium subscribers, Spotify should benefit from ad-supported monthly active users (MAUs) this year while it faces continued pressure from an environment of lower digital advertising spend. (See Spotify stock chart on TipRanks)
White is particularly optimistic about the dwindling monopoly of mobile app stores after the European Union passed the Digital Markets Act last year. The law will come into force from May 2023. One of the benefits for Spotify will be the ability to promote its cheaper subscription offerings. Now it can make the offers available outside of Apple’s iPhone app. (This was a challenge since Apple previously allowed its subscriptions to be advertised only through the iPhone app.)
CVS Health Corp.
CVS Health (CV), which operates a large pharmacy retail chain, has been on the list of Tigress Financial Partners analyst Ivan Feinseth for the past few weeks. The analyst reiterated a Buy rating and a price target of $130 on the stock.
The company’s “consumer-centric integrated model,” as well as its increasing focus on primary care, should help make healthcare more affordable and accessible for customers, according to Feinseth. CAs part of this focus, VS bought the healthcare provider Caravan Health. Additionally, “the upcoming acquisition of Signify Health complements its capabilities in home health services and provider delivery.”
The analyst also believes that the ongoing expansion of CVS’ new store format, MinuteClinics and HealthHUBs, will increase customer loyalty and thus continue to be a key growth catalyst. (See CVS Health Blogger Opinions and Opinions on TipRanks)
Feinseth is also confident that CVS’ merger with managed healthcare company Aetna in 2018 created a healthcare mammoth. It is now well positioned to benefit from the changing dynamics of the healthcare market as consumers gain more control over their healthcare service spending.
Given his 208th position among nearly 8,300 analysts in the TipRanks database, Feinseth’s convictions can be trusted. That being said, its track record of 62% profitable ratings, with each rating delivering an average return of 11.8%, is also worth considering.
shake hut
Operator of a fast food hamburger chain shake hut (SHAKE) has performed well both domestically and abroad thanks to its fast-casual business concept. BTIG analyst Peter Saleh has a unique take on the company.
“Shake Shack is the standout concept within the category of better burgers and rare restaurant chain that has a reputation and brand awareness that exceeds its actual size and sales base,” said Saleh, who reiterated a Buy rating on the stock with a $60 target price. (See Shake Shack Hedge Fund Trading Activity on TipRanks)
On the other hand, the analyst notes that expanding services outside of New York has weakened Shake Shack’s margin profile, generating low unit returns and exposing the company to greater revenue volatility. However, margins appear to have bottomed out and the analyst expects profitability to pick up momentum over the next 12 to 18 months. A combination of higher menu prices and deflation in raw material costs should push restaurant margins to mid-teens levels.
In its preliminary fourth-quarter results, Shake Shack’s management mentioned that it plans to tighten spending on general and administrative expenses this year amid macroeconomic uncertainty. This “should be reassuring for investors given the elevated G&A growth (over 30%) over the past two years.”
Saleh has a 64% success rate and each of his reviews has returned an average of 11.7%. The analyst is also ranked 431st among more than 8,000 analysts on TipRanks.
TD Synnex
Despite the challenges of the past year, business process service providers TD Synnex (SNX) has benefited from a stable IT spending environment amid the consistently high digital transformation across industries. The company recently released its fourth-quarter results last week, which showed earnings beating consensus estimates and a dividend hike.
Following the results, Barrington Research analyst Vincent Colicchio commented on the findings, noting that the rapid growth in advanced solutions and high-growth technologies are major positives. Although the analyst trimmed its fiscal 2023 earnings guidance due to an expected increase in interest expense, he remained upbeat on SNX’s efforts to deliver cost synergies through the current fiscal year-end. (See TD Synnex Dividend Date & History on TipRanks)
Looking ahead, the analyst sees a largely bullish growth trend, albeit with a few hiccups. “The key growth drivers in the first half of fiscal 2023 should be advanced solutions and high-growth technologies, and the second half should be PCs and peripherals and high-growth technologies. We expect Hyve Solutions’ revenue growth to slow in fiscal 2023 and to recover slightly in fiscal 2024 versus growth in fiscal 2022,” noted Colicchio, reiterating his buy rating and raising the price target over the next 12 months to $130 from $98 $.
Importantly, Colicchio ranks 297th out of almost 8,300 analysts on TipRanks with a 61% success rate. Each of his reviews has returned an average of 13%.