Wall Avenue's prime analysts are betting on shares like Apple and Snap this earnings season
Evan Spiegel, CEO and Co-Founder of Snap Inc.
Adam Galica | CNBC
Now that the winning season is picking up pace, it's time to reevaluate your portfolio. However, in such an unpredictable environment, investors need to be extra smart when making critical investment decisions.
"Markets are now hoping for a smooth election, a big stimulus, an end to the pandemic and a return to 2019 that will be back to normal early next year," said Brad McMillan, chief investment officer, Commonwealth Financial Network. This makes the market particularly prone to disappointment. In fact, the S&P 500 pulled back this week as stimulus hopes faded and corona fears re-emerged.
To find compelling investment opportunities, it pays to follow the latest stock recommendations from analysts with a proven track record. TipRanks' forecasting service for analysts seeks to identify the top performing analysts on Wall Street. These are the analysts with the highest success rate and average return, measured on an annual basis – taking into account the number of reviews given by each analyst.
Here are the five most popular stocks of analysts right now:
For RBC Capital's five-star analyst Alex Zukin, Microsoft remains one of his favorite short-term profit calls. On October 12, he repeated his MSFT buy recommendation and increased his price forecast from USD 230 to USD 250 (13% upside potential).
In a report titled "The King Is Back," Zukin says checks indicate that business trends are normalizing, which when combined with conservative guidelines should help estimates.
"Our reviews at Microsoft have decreased significantly. Feedback from partners leads us to believe that the company has likely met or exceeded internal expectations," commented the analyst. The main drivers of success are still Azure and O365 / Teams – with a strong activity in large businesses for Azure.
As a result, Zukin now sees a path for MSFT to have another year of 10% + revenue growth. Specifically, it models a ~ 3% upside potential for total revenue, resulting in Q1 21 revenue of $ 36.8 billion (+ 11% YoY) versus a consensus of $ 35.8 billion (+ 8% yoy) Annual comparison) leads.
"The multi-year growth engines of O365 and Azure continue to show fundamental strength, and margin expansion in the commercial cloud continues as we scale and execute," concludes Zukin.
With a success rate of 78% and an average return of 33% per rating, this is one of the top 10 analysts recorded by TipRanks.
On October 13th, Apple hosted its highly anticipated "Hi, Speed" virtual event. For Needham analyst Laura Martin, the event confirmed her optimistic outlook for the iPhone manufacturer. It repeated its buy recommendation on October 14 with a share price forecast of USD 140 (16% upside potential).
Interestingly, AAPL highlighted its HomePod Mini before it came down to the new iPhone 12s. "Given AAPL's hyper-produced videos, we believe the order of the presentations signals that AAPL is committed to turning individual iPhone owners into 'iOS homes'," says Martin.
If successful, this new strategy could add value faster than in the past. For example, when you purchase an in-home product like a HomePod Mini, all family members are encouraged to join iOS, which reduces AAPL's customer acquisition costs. And most AAPL services now have discounted family plans, which increases the cost of each family plan member leaving the AAPL ecosystem.
"We believe that the linchpin of AAPL in maximizing the value per home will be supported by the introduction of 4 new (iPhone) models designed to find the greatest value per person in the home based on age and income level." the analyst explains. In addition, affordable iPhone options are attracting new consumers to the AAPL ecosystem.
With a Top 100 ranking at TipRanks, Martin currently achieves an average return of 24.4% per rating.
Raymond James' top analyst Matthew McClintock has just upgraded AutoZone from Buy to Buy Strong. In another bullish signal, he raised his price forecast from $ 1,500 to $ 1,565 (34% upside potential).
According to McClintock, the auto parts giant deserves a premium rating compared to historical averages. This is due to AZO's improvement in parts / ecommerce fulfillment availability which it believes should result in oversized market share gains.
"EPS expectations for the next few years are higher than ever, but the stock has been flat since the beginning of the year and is trading at a discount to history," the analyst told investors.
Fortunately, management recently made rare forward comments for the first time in at least five years, which McClintock describes as positive for both the forward quarter (Q1 21) and the forward year (FY21). For example, CEO Bill Rhodes commented on the latest earnings call, "Given our performance after being out of work, we believe our sales will continue to grow for some time."
Net-Net "AZO is the proven, industry-leading, consistent and long-term retail history where investors have few opportunities to buy at a discount throughout their careers," the analyst concluded on October 13, adding, "AZO is now our top choice. "
Snap will report its third quarter results on October 20th after the market closes. Before this deadline, Stifel-Nicolaus analyst John Egbert repeated his SNAP buy recommendation and at the same time raised the share price forecast from USD 27 to USD 32. Shares have risen sharply so far this year, but Egbert's price target points to further upside potential of 17%.
"We expect DAUs (daily active users) to be in the upper end of Snap's forecast range in the third quarter, supported by steady gains in North America / Europe and a flexion in the rest of the world," the analyst wrote on October 14.
In fact, Egbert argues that Snap's revenue growth has likely accelerated significantly from the second quarter (+ 17% YoY). Positive signals from advertisers and third-party agencies since August suggest that the revenue growth rate of Snap's investment plans for the third quarter (+ 20% YoY) could prove conservative, as could consensus expectations (+ 23% YoY).
Egbert believes that Snap should be a major beneficiary of the growing demand from direct response advertisers during the holiday shopping season. And "audience growth, product innovation, and the company's long lifespan for above-market ad growth should result in robust growth in FY 21 and beyond."
TipRanks shows the analyst has an excellent average return of 23.4% per rating.
HCA Healthcare just got the thumbs up from Frank Morgan at RBC Capital. This five-star analyst has set a price target of $ 168 on healthcare stock, an upside of 27%.
"We believe that HCA shares should outperform the peer group given their strong position as the largest integrated healthcare system in the country with unmatched size and infrastructure," the analyst said on October 11th.
According to Morgan, HCA has learned to deal effectively with a pandemic. The teams have developed clinical expertise in the care of coronavirus positive patients while safely caring for non-coronavirus patients. The company can steer its business up and down depending on the needs of the community.
He has now updated his estimates to reflect HCA's strong pre-release results for the third quarter of 20. Third quarter 20E adj EBITDA is now forecast to be $ 2.03 billion, up from $ 1.99 billion previously. These results demonstrate the success of the management's recovery strategy, the analyst says, with continuous improvement in volume trends, impressive sharpness and strong cost management.
Additionally, HCA's capital allocation options are now much more flexible, including potential buybacks, with their plan to prepay the CARES Act funds of $ 6 billion.
Morgan ranks 221 out of 7,016 analysts surveyed by TipRanks.