Wall Street’s top analysts support these stocks in the face of increasing market abundance
EBay Inc. signage will be displayed at the entrance to the company’s headquarters in San Jose, California.
David Paul Morris | Bloomberg | Getty Images
Is the market preparing to retreat? A correction for stocks may be in sight, say strategists at Bank of America, but that’s not necessarily a bad thing.
“We expect a buyable correction of 5% to 10% in the first quarter as the big unknowns coincide with excessive positioning, record supply of stocks and such a good earnings revision,” commented the team of strategists at Bank of America.
Jefferies’ Desh Peramunetilleke confirms this view and writes in a recently published research report that while stocks are not due for “sustained settlement”, investors should take advantage of any weakness if the market experiences a pullback.
Against this background, how should investors identify compelling investment opportunities? By paying close attention to the activities of analysts who are consistently getting it right. The TipRanks Analyst Forecasting Service seeks to identify the top performing analysts on Wall Street or the professionals with the highest success rate and average return per rating.
Here are analysts’ best stock picks right now:
Network solutions provider Cisco Systems has seen some weakness following the release of Q2 2021 results. The bullish thesis of Oppenheimer analyst Ittai Kidron remains largely intact. To this end, the five-star analyst reiterated a buy rating and a price target of USD 50.
Kidron calls Wall Street expectations “subdued,” telling investors the pressures contained more positive than negative results. Primarily, the security segment grew 9.9% year over year, with the cloud security business showing double-digit growth. In addition, the order trends improved from the previous quarter “in all regions and customer segments, which indicates a gradually declining COVID-19 headwind”.
However, Cisco’s revenue forecast for the third quarter of fiscal 2021 fell short due to supply chain issues, “lumpy” cloud revenue, and negative corporate orders. Despite these obstacles, Kidron remains optimistic about the long-term growth narrative.
“While the recovery angle is difficult to pinpoint, we remain positive, viewing the headwinds as temporary, and taking into account Cisco’s software / subscription traction, a strong BS, a robust capital allocation program, cost reduction initiatives and a compelling valuation,” commented Kidron
The analyst added, “We would use any withdrawals to add positions.”
With a success rate of 78% and an average return of 44.7% per rating, Kidron ranks 17th on TipRanks’ list of top performing analysts.
Wells Fargo analyst Brian Fitzgerald highlights Lyft as a top performer in its coverage universe, arguing that the “setup for further profit is constructive”. In line with his optimistic stance, the analyst raised his target price from USD 56 to USD 70 and repeated his buy recommendation.
Following the ridesharing centre’s earnings call for the fourth quarter of 2020, Fitzgerald believes the narrative centers on the idea that the stock is “easy to own”. Looking at the management team, who are themselves shareholders, the analyst believes they are “owner-friendly and have a deep focus on shareholder value creation, free cash flow / clearance and cost discipline”.
In particular, profitability could be a quarter earlier than expected in the third quarter of 2021. “Management reiterated EBITDA profitability in the fourth quarter and also suggested the third quarter as an opportunity when volume goes through (and takes advantage of) the 20 cost reduction initiatives,” noted Fitzgerald.
The analyst added, “For these reasons, we expect LYFT to appeal to both fundamental and momentum-driven investors, so fourth quarter 2020 results will be a catalyst for the stock.”
That being said, Fitzgerald has some concerns about the future. He cites Lyft’s “push into B2B provisioning” as a potential “distraction” and “a bad time in terms of declining demand as the economy reopens.” In addition, the analyst sees the investment of 10 to 20 million US dollars in the acquisition of drivers to meet the growing demand as “slightly negative”.
The positives outweigh the negatives for Fitzgerald, however. “The stock is buoyant and appears to be well-positioned for a post-COVID economic rebound in FY21. LYFT is relatively cheap in our view with an EV of ~ 5x FY21 consensus earnings and appears positioned to sell below on- Demand the fastest to accelerate. ” Shares because it’s the only TaaS-only company, “he explained.
With Fitzgerald having an 83% success rate and an average return of 46.5% per rating, the analyst is the sixth best analyst on the street.
For Roth Capital top analyst Darren Aftahi, Carparts.com is a top pick for 2021, so he kept a buy rating on the stock and raised the price target from $ 18 to $ 25.
Recently, the auto parts and accessories retailer announced that its Grand Prairie, Texas (DC) distribution center, which went online in the fourth quarter, had shipped more than 100,000 packages. This is an increase of around 10,000 in early November.
According to Aftahi, the facilities will expand the company’s capacity by around 30%. The number of employees is increasing to meet demand, “which could be a good sign for FY21 results”. In addition, management stated that the DC power will be used for traditional gas-powered auto parts as well as for powering hybrid and electric vehicles. This is important as this space “could present itself as a new growth category”.
“We believe that comments on early demand in the latest DC could indicate that DC is ahead of schedule earlier than expected and having a more significant impact on the income statement. We believe fully capitalizing on sales remains the next step The DC is fully functional, but overall the hiring and fulfillment ramp leaves us optimistic about the potential positive impact on our forecasts, “commented Aftahi.
Additionally, Aftahi believes the next wave of government business reviews could reflect “a positive FY21 demand shock in the face of tougher competitive conditions”.
With all of this in mind, the fact that Carparts.com trades at a significant discount to its peers makes the analysts even more positive.
With an average return of 69.9% per rating, Aftahi ranks 32nd among over 7,000 analysts recorded by TipRanks.
Stifel analyst Scott Devitt urged customers “take a look here” and just gave eBay a thumbs up. In response to the fourth quarter results and forecast for the first quarter, the five-star analyst not only repeated a buy rating, but also raised the price target from $ 70 to $ 80.
Looking at the details of the print, FX-adjusted gross merchandise volume rose 18% year over year to $ 26.6 billion for the quarter, beating Devitt’s $ 25 billion call. Total revenue was $ 2.87 billion, a 28% growth, beating the analyst’s estimate of $ 2.72 billion. This strong performance resulted from the integration of payments and advertised listings. On top of that, the e-commerce giant gained 2 million buyers in the fourth quarter, which now hits 185 million.
For the first quarter, management was targeting volume growth of just 20% and revenue growth of 35 to 37% versus the consensus estimate of 19%. Additionally, non-GAAP EPS is expected to range between $ 1.03 and $ 1.08, slightly exceeding Devitt’s previous forecast of $ 0.80.
All of this led Devitt to state, “From our perspective, improvements in the core market, which focus on improving the buyer / seller experience and developing new industries, will be underrated by the market as investors cautiously begin to be cautious about difficult comps as of Q2 Bypass Although a slowdown is expected, aftermarket stock trading will only be at 8.2x 2022E EV / EBITDA (adjusted for warrant and classifieds sales) and 13.0x 2022E non-GAAP EPS below marketplaces and traditional omni-channel – Retail traded. “
What else has a positive effect on eBay? Devitt underscores the fact that the company has a history of shareholder-friendly capital allocation.
Devitt more than deserves its 42nd place thanks to its success rate of 74% and average return of 38.1% per review.
National fidelity information
Fidelity National Information serves the financial services industry, providing technology solutions, processing services, and information-based services. Since Daniel Perlin of RBC Capital sees a possible recovery in the second half of 21, he is sticking to his buy recommendation and price target of USD 168.
After the company released its fourth quarter figures, Perlin told customers that the results, along with forward-looking projections, highlighted “the short-term pressures of the pandemic, particularly given the lower earnings mix of FIS dealers” the current environment . “However, he argues that this trend will be reversed as challenging comps are lapped and the economy continues to reopen.
It should be noted that, in Perlin’s view, the company’s dealer mix “can create confusion and variability that remained evident in print”.
The analyst put it this way: “In particular, key industries with strong growth during the pandemic (accounting for ~ 65% of total FY20 volume) tend to have lower returns on sales, while industries with significant COVID headwinds (35% of volume) generate higher returns on earnings As a result, H2 / 21 should be poised for a recovery as many of the discretionary categories return to growth (supported by simpler comps) and non-discretionary categories could remain elevated.
In addition, management noted that the order backlog grew 8% organically, with new sales of $ 3.5 billion in 2020. “We believe that a combination of backlog, pipeline strength and ability to drive product innovation provides a way for banking to accelerate revision growth in 2021,” said Perlin.
Among the top 50 analysts on the TipRanks list, Perlin achieved a success rate of 80% and an average return of 31.9% per rating.