Top Wall Street analysts are banking on these stocks for solid returns
With markets facing pressure at least in the short term, investors should try to build a portfolio of stocks that can weather the storm and offer long-term growth potential.
Here are five stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
Domino’s Pizza
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Domino’s Pizza (DPZ) reported mixed results for the second quarter, with the company blaming a decline in its market-basket pricing to stores and lower order volumes for the shortfall in its revenue compared to analysts’ expectations.
Nonetheless, BTIG analyst Peter Saleh reiterated a buy rating on Domino’s with a price target of $465 and said that the stock remains his top pick. (See Domino’s Financial Statements on TipRanks)
In particular, Saleh expects the company’s Uber Eats partnership, changes in the rewards program, and the launch of its pepperoni Stuffed Cheesy Bread to boost the top line in the fourth quarter and into 2024.
The analyst noted that the pizza chain’s entire menu will become available to Uber Eats customers at regular menu prices, without any deals or coupons. Interestingly, the company is targeting the higher-income customers on Uber Eats and reserving the discounts and other benefits for its own ordering channels.
“We expect the improvement in delivery sales, coupled with declining commodities, to translate to healthier unit economics and accelerated domestic development next year and beyond,” said Saleh.
Saleh ranks No. 331 out of more than 8,500 analysts tracked on TipRanks. Also, 64% percent of his ratings have been profitable, with an average return of 12.9%.
Meta Platforms
Next up is Meta Platforms (META). The social media platform recently delivered upbeat second-quarter results and issued better-than-anticipated guidance for the third quarter, signaling improved conditions in the digital ad market.
Following the print, Monness analyst Brian White raised his price target for Meta to $370 from $275 and maintained a buy rating, saying that the company’s second-quarter results reflected strong execution and its massive cost-improvement measures.
The analyst noted that management’s commentary during the earnings call reflected positive vibes, backed by an improving digital ad market and a compelling product roadmap. He highlighted the momentum in Meta’s short-video feature Reels, which is growing at a more than $10 billion annual revenue run rate across apps. He also mentioned the better-than-expected traction in Threads and the company’s significant investments in artificial intelligence.
White cautioned investors about regulatory risks and internal headwinds. However, he said that in the long run, “Meta will benefit from the digital ad trend, innovate with AI, and participate in the build-out of the metaverse.”
White holds the 27th position among more than 8,500 analysts on TipRanks. His ratings have been profitable 67% of the time, with each rating delivering an average return of 20.7%. (See Meta Platforms Stock Chart on TipRanks)
Spotify
White is also bullish on audio streaming company Spotify (SPOT). While Spotify’s second-quarter revenue and Q3 2023 guidance missed analysts’ expectations, the analyst contended that results were “respectable” with meaningful year-over-year growth of 27% in monthly active users (MAU) to 551 million.
Commenting on Spotify’s decision to increase the price of its subscription offerings, White noted that the price hikes will impact most subscribers beginning September, thus having a small impact on the third quarter but contributing meaningfully to the fourth-quarter performance.
While the analyst acknowledges an intense competitive backdrop, he said that “Spotify is riding a favorable long-term trend, enhancing its platform, tapping into a large digital ad market, expanding its audio offerings, and improving its cost structure.”
White raised his 2024 estimates and reiterated a buy rating while increasing the price target for SPOT stock to $175 from $160. (See Spotify Blogger Opinions & Sentiment on TipRanks)
Microsoft
Another tech giant in the week’s list is Microsoft (MSFT), which has been making headlines this year due to its generative AI advancements. The company’s fiscal fourth-quarter results topped Wall Street’s estimates. That said, the revenue outlook for the first quarter of fiscal 2024 fell short of expectations.
Nonetheless, Goldman Sachs analyst Kash Rangan, who ranks 459th among more than 8,500 analysts tracked on TipRanks, remains bullish on MSFT stock. (See Microsoft Hedge Fund Trading Activity on TipRanks)
The analyst thinks that in the short term, there might be concerns about when the company’s ramped-up capital investments will pay off. However, he observed that historically, whenever Microsoft increased its capital expenditure in the cloud market, Azure growth rate shot up meaningfully and margins rebounded, driving the stock price higher.
With a strong presence across all layers of the cloud stack, Rangan said that Microsoft is well positioned to capture opportunities in several long-term secular trends, including public cloud and SaaS adoption, digital transformation, generative AI and machine learning, analytics and DevOps.
In line with his bullish stance, Rangan reiterated a buy rating with a price target of $400. He has a success rate of 59% and each of his ratings has returned 10% on average.
General Motors
We now drive toward legacy automaker General Motors (GM), which impressed investors with robust growth in its second-quarter revenue and earnings. Additionally, the company raised its full-year outlook for the second time this year.
Recently, Tigress Financial Partners analyst Ivan Feinseth reaffirmed a buy rating on the stock with a price target of $86, noting the company’s strong execution and the ramp-up of new electric vehicle launches and production.
The analyst highlighted that the company continues to witness robust demand for its full-size SUVs and pickups, which is driving its revenue and cash flow higher and funding the transition and expansion of its EV production.
Feinseth called GM’s Ultium platform and supply chain for EV battery production its significant competitive advantage. The analyst is also positive about the company’s recent initiatives to expand its charging network.
“In addition to the ramp-up of EV production, GM’s ramp-up of high-value software and services as it plans to double company revenue to $275-315 billion by 2030 should drive significant increases in Return on Capital (ROC) and Economic Profit,” the analyst said.
Feinseth holds the 215th position among more than 8,500 analysts on TipRanks. His ratings have been successful 61% of the time, with each rating delivering an average return of 12.9%. (See General Motors Insider Trading Activity on TipRanks)
