In this illustration from January 20, 2022, the Netflix logo is seen on a TV remote control.
Ruvic cube | Reuters
As earnings season progresses, investors are gaining insight into how companies are dealing with a range of macroeconomic stresses.
Analysts can pick apart these quarterly reports and help investors identify companies that can withstand short-term challenges and deliver attractive long-term returns.
To that end, here are five stocks that are favored by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on past performance.
Netflix
Streaming giant Netflix (NFLX) recently beat third-quarter earnings per share as its crackdown on password sharing helped attract more subscribers to its platform.
Evercore analyst Mark Mahaney said the company’s third-quarter numbers included several key positives, including 8.76 million new subscribers, a stronger-than-expected fourth-quarter 2023 subscriber growth forecast and share buybacks in value of $2.5 billion. He also cited an increase in 2023 free cash flow guidance to about $6.5 billion from the previous forecast of at least $5 billion, as well as a price increase for the basic and premium plans.
“We continue to believe that NFLX’s ad-supported offering and password sharing initiatives represent important growth trajectory initiatives.” [GCI] “Catalysts that will lead to a significant re-acceleration of revenue and EPS growth,” Mahaney said.
The analyst believes the company is pursuing these GCI catalysts from a position of strength, as it is a global streaming leader based on multiple metrics including revenue, subscriber base and viewing hours.
Mahaney reiterated his Buy rating on NFLX stock with a $500 price target. Interestingly, Mahaney ranks 48th among more than 8,500 analysts tracked by TipRanks. Its ratings were profitable 55% of the time and delivered an average return of 25.4% each. (See Netflix technical analysis on TipRanks)
Nvidia
Next comes the semiconductor giant Nvidia (NVDA). The stock has soared this year thanks to demand for NVDA chips for developing generative artificial intelligence (AI) models and applications.
In a recently updated investor presentation, the company revealed roadmaps for its graphics processing units, central processing units and data center networking chipsets.
JPMorgan analyst Harlan Sur, ranked 88th out of more than 8,500 analysts on TipRanks, noted that NVDA’s product roadmaps point to two big changes. First, Nvidia has accelerated its product launch schedule from a 2-year cycle to a 1-year cycle, which is expected to help the company keep pace with the growing complexity of large language processing workloads.
Regarding the second major shift, Sur said that the roadmaps envisaged “greater market segmentation (cloud/hyperscale/enterprise) by expanding the number of product SKUs.” [stock keeping units] that are optimized for a wide range of AI workloads (training/inference).”
The analyst believes that with these notable developments, the company is taking a multi-pronged approach to strengthen its data center market and technology. He reiterated a Buy rating on the stock with a price target of $600, citing growing demand for NVDA’s accelerated computing and networking silicon platforms and software solutions for developing generative AI and large language models.
Sur’s ratings were successful 64% of the time, with each rating delivering an average return of 18.2%. (See Nvidia insider trading activity on TipRanks).
Instacart
Food delivery platform Instacart (DARE) celebrated its eagerly awaited stock market debut in September. Baird analyst Colin Sebastian recently issued a Buy rating on CART stock with a $31 price target.
Sebastian justified his bullish stance by saying, “Despite a number of well-financed online and traditional retail competitors, Instacart has an enviable combination of scale, retail integrations, industry expertise and proprietary technology.”
The analyst emphasized that the core of Instacart’s business model is an asset-light partnership strategy. He also believes Instacart’s data and technology expertise are its key competitive advantages. He believes most grocery retailers may not be able to build similar internal e-commerce capabilities.
Most importantly, Sebastian considers Instacart’s advertising business to be one of the most successful retail media launches after the e-commerce giant Amazon (AMZN). He noted that consumer products advertisers promote their products by leveraging Instacart’s performance ad formats, which help reach target customers with relevant product ideas.
Sebastian is ranked 340th among more than 8,500 analysts on TipRanks. His reviews were successful 52% of the time, with each review delivering an average return of 10.7%. (See Instacart Options activity on TipRanks).
SLB
Oilfield service company SLB (SLB), formerly Schlumberger, recently reported better-than-expected adjusted earnings for the third quarter. SLB said the oil and gas industry continues to benefit from a multi-year growth cycle that has shifted to international and offshore markets where the company claims to have a dominant position.
Goldman Sachs analyst Neil Mehta claims that while there are no clear near-term catalysts for SLB stock, the long-term growth story remains intact due to robust customer spending. The analyst highlighted that Saudi Aramco is expected to spend about $245 billion by 2030, growing at about 5% to 6% annually. Additionally, additional spending (at a moderate growth rate) is expected from the ADNOC of the UAE, Qatar and other players in the region.
Given that 80% of SLB’s revenue comes from international and offshore markets, Mehta is confident that the company is well positioned to capitalize on the long-term momentum in the Middle East.
“SLB remains the preferred route to engage in the international and offshore theme, with additional growth drivers in expanding its digital presence with customers, which we believe drives margin expansion of around 40-45%,” said Mehta.
Mehta called SLB a structural winner, especially on declines, and reiterated a Buy rating on the stock with a price target of $65. He ranks 155th among more than 8,500 analysts tracked by TipRanks. Its ratings were profitable 65% of the time and delivered an average return of 12.5% each time. (See SLB stock charts on TipRanks)
Tesla
Our final name this week is electric vehicle manufacturer Tesla (TSLA). The company missed third-quarter profit and revenue forecasts as macroeconomic pressures, a competitive electric vehicle market and aggressive price cuts hurt its performance.
Mizuho analyst Vijay Rakesh noted that despite the sequential decline in the company’s gross and operating margins in the third quarter due to lower prices and Cybertruck research and development costs, the company continues to operate at the upper end of legacy automakers’ margins and well above rivals’ margins Electric vehicle manufacturer lies.
The analyst lowered his price target on TSLA stock to $310 from $330 to account for near-term headwinds such as margin pressure, macroeconomic weakness and Cybertruck ramp challenges. Still, he reiterated his buy rating, pointing out that the stock still trades at a discount to disruptors like Nvidia while generating great profitability.
“We believe TSLA prioritizes market share, technology and cost leadership and is better positioned than its peers to weather turbulence in the broader automotive market,” Rakesh said.
Rakesh is ranked #82 among more than 8,500 analysts tracked by TipRanks. Its ratings were profitable 57% of the time and delivered an average return of 18.6% each. (See Tesla financial reports on TipRanks)