NVIDIA President and CEO Jen-Hsun Huang
Robert Galbraith | Reuters
The risk of a recession is keeping investors busy, especially as the US Federal Reserve is determined to hike interest rates.
In these trying times, investors are wise to find stocks that are well-positioned for a potential economic downturn.
To help with that process, here are five stocks picked by Wall Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
NVIDIA
chip giant NVIDIA (NVDA) has come under pressure from the collapse of the PC gaming market. Revenue and earnings fell year-over-year in the fiscal fourth quarter, but the company beat Wall Street expectations on the year-over-year increase in data center revenue.
Investors cheered Nvidia’s first-quarter revenue guidance and CEO Jensen Huang’s comment on how well positioned the company is to capitalize on increased interest in generative artificial intelligence (AI).
Jefferies analyst Mark Lipacis expects Nvidia’s data center revenue to reaccelerate year over year beyond the first quarter, growing 28% in 2023 and 30% in 2024, helped by higher AI spending. (See Nvidia stock chart on TipRanks)
Lipacis said: “Unlike INTC/AMD, who noted cloud inventories building up, NVDA discussed a positive H100 ramp (crossing A100 as early as Q2 post-launch) accelerating DC [data center] JJ pivots past C1Q23, alluding to better visibility and more optimism for the year due to increased activity around AI infrastructure, LLMs [large language models]and generative AI.”
The analyst regards Nvidia as a “top pick” after the latest results and reiterated his buy recommendation. He raised the price target for NVDA shares from $275 to $300.
Lipacis is #2 among more than 8,300 analysts on TipRanks. Its ratings were profitable 73% of the time, with each rating delivering a 27.6% return on average.
Ross stores
Ross stores (rust) delivered positive results for the fourth quarter of fiscal 2022 as the off-price retailer’s good-value offerings continued to attract customers. However, the company issued a conservative guidance for fiscal 2023 due to the impact of high inflation on its low- to middle-income customers.
Following the results, Guggenheim analyst Robert Drbul, ranked 306th among analysts on TipRanks, lowered his estimate of fiscal 2023 earnings per share for Ross Stores to reflect the impact of ongoing macroeconomic headwinds.
Still, he expects Ross Stores’ earnings to return to double-digit growth in fiscal 2023, driven by higher operating margin, accelerated new store openings and the company’s share buyback program.
Drbul reiterated a buy rating on Ross Stores and a price target of $125, citing “the favorable environment for the company given a greater supply of branded items in the marketplace, a stronger value proposition and a broader assortment compared to pandemic levels.”
Drbul has provided profitable ratings 63% of the time, and its ratings have generated an average return of 9.1%. (See Ross Stores Hedge Fund Trading Activity on TipRanks)
office stamps
Next on our list is another consumer discretionary company – office stamps (KTB), which owns the iconic Wrangler and Lee brands. The apparel company’s shares rebounded on the day it reported solid fourth-quarter results and provided a strong outlook for 2023.
Williams Trading analyst Sam Poser noted that demand for Wrangler and Lee continues to grow, driven by the company’s brand strengthening initiatives. Additionally, he believes Kontoor’s outlook for fiscal 2023 “is likely to prove conservative.” He expects the company’s revenue growth in China to turn positive in the second quarter and sequentially accelerate thereafter.
Poser raised its earnings per share estimates for fiscal years 2023 and 2024, reiterated its buy rating on Kontoor Brands, and raised its price target to $60 from $53. (See Kontoor Brands insider trading activity on TipRanks)
“The combination of better-than-expected Q4 22 results led by a 20% increase in US DTC [direct-to-consumer] Revenues, continued improvements in the positioning of both Wrangler & Lee brands, and reasonable forecasts indicate continued improvements in KTB’s consumer-centric capabilities and its overall operations,” said Poser.
Poser ranks 134th among analysts tracked by TipRanks. Additionally, 55% of its reviews were successful, yielding an average return of 17.7%.
fisherv
fisherv (FISV), a provider of technology solutions for payments and financial services, is also on our list for this week. Last month, the company reported its fourth-quarter results, assuring investors that it is well positioned to deliver double-digit adjusted earnings per share growth for the 38th consecutive year, helped by recent customer additions, solid recurring revenue and productivity efforts.
Ivan Feinseth, financial analyst at Tigress, noted that Fiserv continues to experience strong business momentum thanks to the performance of its payment product portfolio and the strength of Clover, the company’s cloud-based point-of-sale and business management platform. (See Fiserv Financial Statements on TipRanks)
“FISV’s diversified product portfolio and industry-leading technology position it at the forefront of the ongoing secular shift toward electronic payments and the increasing use of connected devices to deliver payment processing services and financial data access,” said Feinseth. The analyst reiterated a Buy rating on FISV stocks and boosted the price target to $154 from $152.
Feinseth ranks 176th out of more than 8,300 analysts tracked on the site. Additionally, 62% of its ratings were profitable, with its ratings generating an average return of 12.3%.
working day
working day (WTAG), a provider of cloud-based financial and human resources applications, issued a cautious fiscal 2024 outlook that overshadowed better-than-expected results for the fourth quarter of fiscal 2023.
Mark Marcon, an analyst at Baird, noted that Workday continues to gain market share in enterprise human capital management and financial management solutions, although the forthcoming pace of growth will be “slightly restrained by macroeconomic uncertainties.”
Marcon also noted that Workday added seven new Fortune 500 and 11 new Global 2000 customers in the fiscal fourth quarter, despite lengthened enterprise sell cycles due to macro pressures. The analyst said that new co-CEO Carl Eschenbach “will be quick to put his stamp on WDAY” and that the company is expected to accelerate subscription revenue growth back to 20% levels once the macroeconomic backdrop normalizes .
“While our near-term expectations are more muted, we believe valuation remains attractive relative to long-term potential given WDAY’s high net earnings retention (over 100%), high GAAP gross margins and strong FCF [free cash flow] and strong growth potential as financials move to the cloud,” said Marcon.
The analyst slightly lowered his target price on Workday shares to $220 from $223 to reflect near-term pressures. He reiterated his Buy recommendation given the company’s long-term growth potential.
Marcon is ranked 444th among analysts followed on TipRanks. Its ratings were profitable 60% of the time, generating an average return of 13.5%. (See Opinions and Opinions from Workday Blogger on TipRanks)