A delivery person for Doordash rides his bike in the rain during the coronavirus disease (COVID-19) pandemic in the Manhattan borough of New York City, New York, U.S., November 13, 2020.
Carlo Allegri | Reuters
The U.S. economy is in the process of reopening, but going forward, the long-term picture is anything but clear. Investors are watching the Federal Reserve closely, with concerns growing that the central bank might adjust its accommodative monetary policy.
So, it may make sense to follow the advice of analysts with stellar stock picking abilities. Using TipRanks’ analyst forecasting service, we were able to pinpoint Wall Street’s best-performing analysts. These are the analysts with the highest success rate and average return per rating, factoring in the number of ratings published by each analyst.
Here are five stocks that Wall Street’s best-performing analysts say to keep buying:
Food delivery player DoorDash just received Wells Fargo analyst Brian Fitzgerald’s stamp of approval. In response to a strong Q1 performance, the top analyst upgraded the rating from Hold to Buy. In a further bullish signal, he bumped up the price target from $165 to $170 (21% upside potential).
Explaining his bullish thesis, Fitzgerald said, “We think DASH’s beat and raise is large enough to offset the rotation to ‘value’ that has afflicted ‘growth’ stocks year-to-date. Having de-rated to ~8x FY22 revenue, valuation is now sustainable in the context of our core restaurant business gross order value (GOV) CAGR of 15% through 2028, and likely cheap for investors willing to underwrite additional GOV growth from new verticals (23% CAGR all-in through 2028).”
In the first quarter, marketplace GOV gained 222% year-over-year, compared to the Street’s 191% call.
It should be noted that the bear case for DoorDash hinged on a year-over-year contraction in GOV, according to Fitzgerald. However, the analyst argues that this “has become dubious,” and that there are multiple reasons to suggest the stock has bottomed.
First and foremost, “against extreme base effects,” management’s guidance for Q2 GOV implies 57% year-over-year growth. On top of this, the company increased its forecast for full-year GOV, suggesting that DoorDash will grow by double-digits year-over-year in the second half.
Additionally, Fitzgerald highlights the fact that “DASH has the best KPIs in Meal Delivery, good disclosures, and an effective communication effort,” leading him to believe that many “sidelined investors to initiate new long positions post results.”
To back up his impressive #16 ranking on TipRanks’ list, Fitzgerald boasts a 73% success rate and 34.9% average return per rating.
InMode is a medical technology company that produces minimally invasive aesthetic medical products.
For Needham analyst Mike Matson, the growth outlook for the aesthetics market prompted him to initiate coverage with a Buy rating and to set a $94 price target. This target puts the upside potential at 22%.
According to Matson’s estimates, the global aesthetics market is valued at roughly $86 billion, with it growing at a 10% CAGR. Looking at aesthetic procedures overall, the analyst believes the space is “experiencing a combination of increased demand and supply.”
Expounding on this, Matson commented, “We believe that an aging population, increasing obesity, the growth of social media and video conferencing, growing availability of non-invasive and minimally invasive procedures, and increasing interest from men are all driving growing demand for aesthetic procedures. Similarly, we believe that physicians are increasingly interested in offering aesthetic and other lifestyle procedures that are paid out-of-pocket.”
The Needham analyst also points out that InMode is focused primarily on minimally invasive procedures, which are quicker and less painful to recover from.
“Most current aesthetic procedures are either non-invasive or invasive while INMD’s products bridge the wide gap between these two categories. INMD‘s products utilize radiofrequency (RF) energy which penetrates deep into subdermal fat and provides adipose tissue remodeling. INMD’s procedures require small to no incisions, are done on an outpatient basis, do not usually require general anesthesia, and are typically less expensive than more invasive procedures,” Matson said.
What’s more, the company’s gross margin was 85.3% in 2020, easily exceeding its peers’ 65%-75%, with INMD also boasting higher operating margins than its competitors. These high operating margins allow for strong operating cash flow, says Matson.
All of the above led Matson to conclude that INMD’s 2021 revenue guidance of $270 million to $280 million, which would imply 31% to 36% growth, is “conservative.”
On average, Matson’s calls generate returns of 15.5%, with the top medical technology analyst also sporting a 66% success rate.
Following Verra Mobility‘s first-quarter earnings release, BTIG analyst Mark Palmer tells investors that the key takeaway for him was the progress on addressing some of the concerns associated with the smart mobility company. With this in mind, the five-star analyst reiterated a Buy rating and $19 price target, which suggests 27% upside potential.
“While the Q1 2021 report that Verra Mobility (VRRM) released after today’s market close featured adjusted EBITDA and adjusted earnings per share beats versus consensus estimates, we believe the biggest positives emerging from the report related to the progress made during and after the quarter toward removing various overhangs on the stock,” Palmer said.
According to management, the company has made progress on the collection of outstanding receivables from its New York City school zone safety camera projects, which had reached $121 million through March 31. So far, 66% of these receivables have already been submitted for registration and once registered, VRRM should start receiving payments on these invoices.
It should be noted that shareholders of Redflex Holdings, a traffic enforcement camera and systems company that VRRM is set to acquire, accepted a higher bid after certain shareholders held out. “With an Australian court having signed off on the deal, management said the final hurdle would be approval from the General Authority for Competition in Saudi Arabia,” Palmer said.
A meaningful improvement in rental car volumes is also driving Palmer’s optimism. “They noted that those rental car companies, in March, had posted a 33% sequential increase in volume, the highest month over-month volume improvement they had reported since June 2020. Demand through the first part of Q2 2021 had given them additional reason for optimism, they said, noting that VRRM’s internal dashboards had shown continuous improvement in business trends,” the analyst explained.
That said, management did point out that rental car volumes are still 40% lower than what was seen before the pandemic, which implies “ample room for improvement,” in Palmer’s opinion.
“We continue to view the stock as representing an attractive reopening play given the potential for its U.S. cashless tolling revenues to rebound with the widespread availability of vaccines,” Palmer said.
Among the top 200 analysts tracked by TipRanks, Palmer has delivered a 65% success rate and 19.4% average return per rating.
Oppenheimer analyst Ittai Kidron came away from Alteryx’s 2021 Analyst Day optimistic about the product direction as well as management’s ability to continue strengthening sales execution. As such, he maintained a Buy rating on the data analytics and analytics software name. Additionally, the analyst left the $125 price target as is, with this target implying 66% upside potential.
Specifically, Kidron highlights the company’s inspire announcements, which were “evolutionary and confirmed the important shift to the cloud.” Alteryx is launching Designer Cloud, which is its single tenant, managed service that’s currently in beta trials. “There’s still a lot to be revealed about Designer Cloud (pricing, feature set, user/data scale, etc.), but it’s a positive and needed evolution for the company,” the analyst stated.
In addition, the company unveiled its Alteryx ML offering, designed to create and validate ML models while monitoring for drift. According to Kidron, this product will enable Alteryx to deliver “an end-to-end solution, connecting data to insights/actions.”
That said, while the analyst is “comfortable with this move towards a unified analytics and data science platform,” he warns that “Alteryx is expanding into a crowded space (AWS, DataRobot, etc.) that could prove difficult to displace.”
When it comes to Global Tax Management (GTM), Alteryx is ramping up its efforts, which include the expansion of its sales force, focus on customer success and support, as well as channel, partner and community investment.
“We’re comfortable with the aggressive investment, given the large market (~$49 billion TAM) and opportunity to gain share and consolidate a fragmented competitive landscape (400-plus analytics companies),” Kidron said.
So, what is the bottom line on Alteryx? Kidron argues that investors should “view FY21 as a transition period, yet believe management’s taking the right approach to reaccelerate growth and deliver more consistent results.”
Kidron more than earns his #23 ranking given his 69% success rate and 35.1% average return per rating.
Following the fireside chat with MaxLinear‘s chief financial officer Steve Litchfield, Needham analyst Quinn Bolton remains bullish on the company’s long-term growth prospects. As a result, the five-star analyst kept his Buy rating and $50 price target (45% upside potential) unchanged.
Looking at supply constraints, a majority of which are back-end, they have continued to moderate the company’s near-term outlook for shipments. Having said that, management believes these constraints should ease in the fourth quarter of 2021, with it committed to hitting its target of 60% NG gross margin by then.
Demand, on the other hand, has been holding up better than originally expected. This has provided MaxLinear with “solid visibility” into CY22, according to Bolton. The analyst added, “Given MaxLinear’s mature markets and longstanding relationships, the company is not overly concerned with threat of double ordering.”
It should also be noted that its microwave backhaul segment is experiencing a recovery. What’s behind this rebound? Bolton points to 5G rollouts as well as the ramping of its transceiver IC.
Expounding on the opportunity, Bolton said, “Management expects growth in its microwave products will continue throughout 2021 as the company has had design wins for 18 months that are finally starting to ramp. Further, MaxLinear continues to develop new SoC solutions for this market.”
Most noteworthy, though, for Bolton is the 5G “massive multiple input multiple output” or MIMO opportunity. “MaxLinear has publicly announced three design wins for its 5G transceiver but we believe the engagement pipeline is larger than these announced wins. Further, MaxLinear is already working with customers with its 8×8 massive MIMO solution, which is expected to ramp in 2022,” the analyst commented.
Bolton is one of the four best-performing analysts on Wall Street, with his 71% success rate and 40.2% average return per rating supporting his stellar ranking.