Despite recent market tumult, top Wall Street analysts see upside in these stocks
26 Sep 2021
Tesla CEO Elon Musk gestures as he visits the construction site of Tesla’s Gigafactory in Gruenheide near Berlin, Germany, August 13, 2021.
Patrick Pleul | Reuters
Though the market has been volatile, analysts are spotting opportunities for upside among select companies.
Tipranks is able to cut through the market noise by aggregating data to show which financial analysts are consistently making the right calls, and provides that information on an easy-to-digest platform.
From electric vehicles to video streaming, some of the top performing analysts in U.S. capital markets recently spelled out their hypotheses on these five stocks.
Let’s take a look and see what some of the best analysts have to say.
Due to the Covid-19 pandemic, investors had high hopes for video streaming service and content producer Netflix (NFLX), but high growth one quarter can often mean a difficult comparison for the next quarter. While the firm has experienced a deceleration in subscriber growth throughout 2021, Scott Devitt of Stifel Nicolaus believes the worst is behind it. (See Netflix hedge fund activity on TipRanks)
Devitt rated the stock a Buy and raised his price target to $650 from $580.
The bullish analyst forecasts newly acquired subscriber numbers to ramp up during the second half of the fiscal year. Additionally, he believes that Netflix’s internationally inclined direction will help expand its total addressable market overseas.
The company is slated to spend about $17 billion on content for the year, and is experiencing high levels of user engagement. Furthermore, Devitt anticipates that Netflix is “nearing a period of sustained free cash flow generation, which should enable a long runway of self-funded content creation, reduce the need for external financing, and allow the company to return capital to shareholders.”
While the stock has been affected by larger market forces in recent weeks, Devitt does not view the decline in share price as a reflection of the company’s core business trends. He does, however, see the slight decline as a discount, and wrote that it provides an attractive entry point for long-term investors.
Out of more than 7,000 analysts on TipRanks, Devitt is rated as No. 52. His ratings have resulted in a 68% success rate, and have returned an average of 32.7%.
The Covid-19 pandemic brought with it many business-related trends, and with people stuck at home, the do-it-yourself boom took off. While this has waned slightly, retail firms like AutoZone (AZO) are still printing positive earnings results. The auto parts company recently beat Wall Street consensus estimates on earnings-per-share by more than 20% and is forecasted to have “more gas in the tank” for 2022.
Zachary Fadem of Wells Fargo rated the stock a Buy, and raised his price target to $1,825 from $1,750.
The five-star analyst brushed off DIY slowdown worries and highlighted the firm’s potential upsides. He wrote that AZO is slated to open about 20 more mega hubs throughout the 2022 fiscal year, and that it has been properly managing its inventory. (See AutoZone risk factors on TipRanks)
AutoZone has been betting on commercial business investments to expand growth, and the analyst feels that the strong quarterly results reflect success in these initiatives. Additionally, Fadem identified the positive of recovering labor metrics, which he attributes to the conclusion of “enhanced unemployment benefits.”
Bullish on the company, the analyst said that the share price remains attractive and that shareholders could be rewarded by future company growth, which will also be bolstered by its nascent online sales segment.
On TipRanks, Fadem is rated as No. 36 out of more than 7,000 expert analysts. Fadem’s ratings have been successful 77% of the time, and they have averaged returns of 29.9% per each one.
For software-as-a-service firms, cloud computing is now the name of the game. Companies that have successfully adapted to this new reality are flourishing, and Adobe (ADBE) is no outlier. Called a “pioneering trailblazer of digital creative and marketing tools and services” by Brian Schwartz of Oppenheimer & Co., the company has scaled to its current advantageous and profitable position in its market.
Schwartz rated the stock a Buy, and raised his price target to $680 from $600.
The bullish analyst called Adobe a “verifiable cloud platform success story” and declared his optimism on its outlook. This positivity came after Adobe’s recent encouraging earnings results, which exceeded Wall Street consensus estimates on several key metrics. (See Adobe’s insider trading activity on TipRanks)
While further upside, supported by high levels of profitability, is expected by Schwartz, he did warn short-term investors of a possible healthy pullback. This correction would come after the stock climbed about 29% year-to-date (as of his writing). He asserted that “the fundamental outlook for Adobe is positive.”
In regard to its most robust platforms, the Digital Experience cloud-based products are ramping up with natural growth, and acquired enterprise management company Workfront is integrating successfully.
Of the more than 7,000 professional financial analysts on TipRanks, Schwartz ranks as No. 3. His ratings have been successful 81% of the time, and collectively they have averaged a return of 35.4%.
The market for electric vehicles (EV) is still a marginal portion of the overall auto industry, but this is sure to change in the coming years. Calling it a “front and center” winning stock play in EVs, Daniel Ives of Wedbush argued that Tesla (TSLA) has yet to hit its major global stride, with much more capacity for production on the way this year. (See Tesla blogger sentiment on TipRanks)
Ives reiterated a Buy rating on the stock, and assigned a price target of $1,000 per share.
Although the bullish analyst admitted that Chinese regulatory challenges exist and have been weighing on the stock price for the last couple of quarters, he anticipates them dissipating by the end of the year. He added that until the Berlin Gigafactory is operational, the fact that Europe has its Tesla vehicles shipped in from China is an unsustainable “logistical nightmare.”
This issue, however, will be overcome once Berlin begins producing Tesla vehicles. Additionally, the company’s capacity to meet demand will be supported again, once the other manufacturing plant under construction in Austin, Texas goes online.
Another difficulty has been the global semiconductor chip shortage, which has been a drag on the larger auto industry for most of 2021.
While competition is heating up quickly, Ives expects Tesla to remain in a dominant position in relation to other EV firms. He foresees the EV and autonomous vehicle market to grow from 3% today to 10% by 2025, with Tesla benefitting far more than other companies from this shift.
Ives maintains a ranking of No. 33 out of over 7,000 total analysts on TipRanks. His ratings have succeeded 75% of the time, and have brought in an average of 35.7% on each one.
Although mobility in general was hampered during the most severe days of the Covid-19 pandemic, Uber Technologies (UBER) managed to leverage its ridesharing drivers as food delivery vehicles and maintain relevance. The company has dealt with several high-profile headwinds over the last quarter or two, but Doug Anmuth of JPMorgan sees them waning, with upside on the horizon.
Anmuth maintained his Buy rating on the stock, and declared a price target of $72.
The analyst explained that the factors dragging on the share price are dissipating, and should clear up by fourth quarter of this fiscal year. These include regulatory obstacles, a low supply of drivers, and worries surrounding its ability to finally produce a profit.
He dispelled the concerns by stating that in several countries, ride volumes have exceeded pre-pandemic levels and that the supply of drivers has been improving. Additionally, the incentives Uber had been offering to new drivers have been reduced, signaling a lowered sense of recruitment urgency for the firm.
In regard to Uber Eats, Anmuth wrote that the rapidly expanding food delivery platform has been experiencing high levels of user retention. Furthermore, a significant number of users are converted directly from the ridesharing app, which is indicative of a strong platform ecosystem.
Anmuth believes that Uber’s management declared third-quarter guidance on the conservative side, so the analyst expects a beat in this metric, come its next earnings print. (See Uber stock charts on TipRanks)
Aggregated by TipRanks, Anmuth ranks as No. 75 out of more than 7,000 other analysts. His success in rating stocks correctly is 68%, and has brought in an average return of 25.4%.