Lisa Su, CEO, AMD
Scott Mill | CNBC
It’s been a wild week for stocks, and investors still have plenty of data to weigh to gauge which companies can emerge as winners from the downturn.
The US Federal Reserve hiked interest rates by another 0.75 percentage point last week. Investors weighed in on the central bank’s next steps in its policy tightening campaign while also evaluating a strong October jobs report.
The murky picture in the market is another reason for investors to keep a long-term perspective when picking stocks.
To that end, here are five stocks picked by Wall Street’s top pros, according to TipRanks, a service that ranks analysts based on their past performance.
Providers of learning platforms chegg (CHGG) is making great strides amid macroeconomic challenges. The company reported better revenue and earnings growth in the third quarter and also raised its full-year guidance. This caused the stock price to rise nearly 22% the following day.
Barrington Research analyst Alexander Paris seemed even more optimistic about Chegg after analyzing the earnings report and commentary. The analyst calculated the valuation of the company as attractive compared to its EdTech and vertical SaaS peers and thus reiterated his buy recommendation for the share. He also raised the price target to $30 from $25.
In particular, the fall semester is now well underway, prompting management to raise its expectations for revenue and adjusted earnings before interest, taxes, depreciation and amortization for the year. (See Chegg Financial Statements on TipRanks)
Paris also expressed optimism about Chegg’s strategy to increase its TAM (Total Addressable Market) as well as the percentage of Chegg Study Pack subscribers. These increase the average revenue per user (ARPU) and profitability of the company.
Overall, 57% of Paris ratings generated gains. In addition, each review has returned an average of 14.6%. The analyst is also ranked 207th out of more than 8,000 analysts tracked on TipRanks.
Huron Advisory Group
Next on our list of top analysts’ favorite stocks is Huron Advisory Group (HURN), an operations and financial consulting firm. The company is benefiting from demand for its digital services, which led to a robust third quarter.
The company raised its full-year revenue guidance and gained the confidence of Barrington Research analyst Kevin Steinke. The analyst raised his near-term revenue and Adjusted EBITDA estimates, consequently raising the price target to $89 from $80. Steinke also gives Huron a buy rating — a rating he has maintained for the company for the past four years.
The analyst is bullish on Huron’s expectations for adjusted EBITDA to increase into the mid-teens through 2025. “This is expected to drive annualized adjusted EPS growth into the high teens through 2025,” Steinke said. (See Huron Consulting stock chart on TipRanks)
The analyst also highlighted the company’s ability to return cash to shareholders. The company aims to return 25% to 50% of annual free cash flow to shareholders through buybacks.
Steinke is ranked 415th out of more than 8,000 analysts on TipRanks. The analyst has had 54% winning reviews over the past year, with each review returning an average of 11.5%.
KAR Auction Services
KAR Auction Services (WHAT) provides a platform for auctioning used cars and offers scrap auction services in North America and the United Kingdom. The company has felt the pain of supply-side challenges related to the vehicles auctioned on its platform.
Though the company didn’t provide quarterly guidance, management did mention that it’s getting to the bottom of supply issues. Management expects the recovery to be slow and gradual due to the various headwinds that continue to weigh on the business. (See Kar Auction Services Bloggers Opinions and Opinions on TipRanks)
Barrington Research analyst Gary Prestopino echoed this sentiment. He also believes that growth in new vehicle production, higher interest rates and a slowing economy “should put pressure on new and used vehicle prices.”
Still, the analyst is optimistic about KAR’s proactive cost-cutting efforts, which are ahead of schedule and keeping the company afloat in the market.
The analyst reiterated a Buy rating on the stock with a $25 price target. “We believe that as the market recovers on a unit volume basis, KAR will demonstrate significant leverage and Adjusted EBITDA growth based on a lower cost structure and an optimized auction platform,” said Prestopino, who is ranked among over 8,000 analysts on TipRanks 56 ranked.
The analyst also has a track record of 56% profitable ratings over the past year, with each rating generating an average 31.5% return.
Designers of high-precision analog and mixed-signal integrated circuits (IC). cirrus logic (CRUS) beats the semiconductor industry blues with solid execution and design. The company was a favorite of Susquehanna analyst Christopher Rolland, who recently reiterated his buy rating on the stock with a price target of $95.
Cirrus was also among tech names to report quarterly results that came in significantly better than expected. Additionally, the guidance provided was upbeat. Higher smartphone volumes and new product ramps drove results. (See Cirrus Logic Risk Factors on TipRanks)
The company’s close association with Apple (AAPL), the largest customer, is not as bad as skeptics claim. Rolland sees the relationship between the two companies tighten over time, bringing outsized growth to Cirrus. In addition, Rolland believes that Cirrus is a potential purchase target for Apple, which also depends on Cirrus’ IC products.
Nonetheless, even Rolland has been cautious in the short term, saying a shipment move-in could be coming soon. “However, in our experience, multiple quarters of better-than-expected sales at Cirrus often indicate potential delivery declines,” said Rolland, who expects a steeper sequential decline in deliveries in March next year.
Rolland ranks 66th out of more than 8,000 analysts followed on TipRanks and has a 66% pass rate on his reviews. Additionally, each of its reviews has generated an average return of 19.3% over the past year.
modern micro devices
Leading semiconductor company modern micro devices (AMD) is another stock on Christopher Rolland’s buy list. That’s despite the company facing headwinds from a PC inventory correction and a slowdown in demand. The analyst believes 2023 “is shaping up to be a ‘throw away year’ for AMD as it works through major PC industry issues.”
The analyst reiterated his buy rating on the stock with a price target of $80, despite the company’s dismal third quarter and even lackluster fourth-quarter guidance. (See Advanced Micro Devices Stock Investors on TipRanks)
Rolland expects AMD to continue gaining market share, albeit at a slower pace than in recent years.
Additionally, AMD’s new revenue stream from Xilinx is “highly strategic and profitable,” Rolland said. The acquisition of Xilinx gives AMD an opportunity to accelerate its mix shift into servers, which will be positive for margins.