Top Wall Street analysts like Costco & Amazon for the long term
A Peloton exercise bike is seen after the ringing of the opening bell for the company’s IPO at the Nasdaq Market site in New York City, New York, U.S., September 26, 2019.
Shannon Stapleton | Reuters
Investors are trying to make sense of big corporate earnings and look for clues about what lies ahead as macro headwinds continue. In these uncertain times, it is wise for investors to pick stocks with an optimistic long-term view.
Here are five stocks picked by Wall Street’s top analysts, according to TipRanks, a service that ranks analysts based on their past performance.
Wholesaler Costco ( COST ) is known for its resilient business model that has helped it navigate several economic downturns. Additionally, the membership-only warehouse club has a loyal customer base and generally enjoys renewal rates at or above 90%.
Costco recently reported better-than-expected net sales growth of 6.9% and comparable sales growth of 5.6% for the four weeks ended January 29. from the Chinese New Year to earlier in the year.
Following the sales report, Baird analyst Peter Benedict reaffirmed a buy rating on Costco and a price target of $575. Benedict said: “With a defensive/heavy sell mix and loyal member base, we believe shares continue to hold fundamental appeal as a rare megacap ‘growth stack’ – particularly in light of a difficult consumer spending backdrop.”
Benedict’s beliefs can be trusted, given his 55th ranking out of more than 8,300 analysts in the TipRanks database. Additionally, he has a solid track record of 71% profitable ratings, with each rating yielding an average return of 16.3%. (See Costco Hedge Fund Trading Activity on TipRanks)
2022 was a challenging year for e-commerce giant Amazon ( AMZN ) as macro pressure hurt its retail business and cloud computing Amazon Web Services division.
Amazon’s first-quarter growth outlook of 4% to 8% reflects further deceleration from the 9% growth in the fourth quarter. Amazon is streamlining costs as it faces slowing top-line growth, higher expenses and continued economic turmoil.
Nevertheless, several Amazon bulls, including Mizuho Securities’ Vijay Rakesh, still believe in the company’s long-term prospects. Rakesh sees “modest downside” to Wall Street’s consensus expectation for 2023 revenue growth for Amazon’s retail business. (See Amazon Website Traffic on TipRanks)
However, he sees more downside risks to the Street’s consensus estimate of 20% cloud revenue growth in 2023 compared to his revised estimate of 16%. Rakesh noted that Amazon’s cloud business was hit in the fourth quarter by lower demand from verticals such as mortgages, advertising and crypto and that revenue growth has slowed to the mid-teens so far in the first quarter.
As a result, Rakesh said that AMZN stock “could be volatile in the near term given potential downside revision risks.” Nevertheless, he reiterated a buy rating on AMZN with a price target of $135 due to “positive long-term fundamentals.”
Rakesh is ranked #84 among over 8,300 analysts tracked by TipRanks. In addition, 61% of its ratings were profitable, with each yielding an average return of 19.3%.
Fitness equipment maker Peloton (PTON), once a pandemic darling, fell out of favor after the economy reopened as people returned to gyms and competition increased. Peloton shares collapsed last year due to its weakening sales and mounting losses.
Nevertheless, investor sentiment for PTON stock has improved, thanks to the company’s turnaround efforts under CEO Barry McCarthy. Investors cheered the company’s fiscal second-quarter results due to higher subscription revenue, even as overall sales fell 30% year over year. While its per-share loss narrowed from the previous quarter, it was worse than Wall Street had predicted.
Like investors, JPMorgan analyst Doug Anmuth was also “incrementally bullish” on Peloton following the latest results, citing its cost controls, improving free cash flow loss and better-than-expected connected fitness subscriptions. Anmuth emphasized that the company’s restructuring to a more variable cost structure is essentially complete and appears to be focused on achieving its goal of break-even cash flow by the end of fiscal 2023.
Anmuth reiterated a buy rating and raised the price target from $13 to $19, given the company’s focus on restoring its revenue growth. (See PTON stock chart on TipRanks)
Anmuth ranks 192 out of more than 8,300 analysts on TipRanks, with a success rate of 58%. Each of his ratings produced an average return of 15.1%.
Microsoft’s ( MSFT ) artificial intelligence-driven growth plans have recently sparked positive sentiment about the tech behemoth. The company plans to power its search engine Bing and Internet browser Edge with ChatGPT-like technology.
On the downside, the company’s December-quarter revenue growth and muted guidance reflected near-term headwinds, due to continued weakness in the PC market and a slowdown in its Azure cloud business as enterprises tighten spending. That said, Azure’s long-term growth potential looks attractive.
Tigress Financial analyst Ivan Feinseth, who is ranked 137 out of 8,328 analysts tracked by TipRanks, believes that while short-term headwinds may slow cloud growth and the “more personal computing” segment, Microsoft’s investments in AI will drive its future.
Feinseth reiterated a buy rating on Microsoft and maintained a $411 price target, saying: “Strength in its Azure Cloud platform combined with increasing AI integration across its product lines continues to drive global digital transformation and highlights its long-term investment opportunity.”
Remarkably, 64% of Feinseth’s ratings generated profit, with each rating yielding an average return of 13.4%. (See MSFT Insider Trading Activity on TipRanks)
Ivan Feinseth is also bullish on Mobileye ( MBLY ), a fast-growing provider of technology that powers advanced driver assistance systems (ADAS) and self-driving systems. Chipreus Intel still owns a majority of Mobileye shares.
Feinseth noted that Mobileye continues to see good demand for its industry-leading technology. He expects the company to “increasingly benefit” from the growing adoption of ADAS technology by original equipment manufacturers.
The company also has an advantage due to the increasing demand in the automotive industry for sophisticated camera systems and sensors used in ADAS and safe driving systems. Furthermore, Feinseth sees opportunities for the company in the autonomous mobility as a service, or AMaaS, space.
Feinseth said there is potential for Mobileye’s revenue to grow to more than $17 billion by 2030, backed by the company’s “significant R&D investments, first-mover advantage and industry-leading product portfolio, combined with significant OEM relationships. ” He projects a potential total addressable market of nearly $500 billion by the end of the decade.
Given Mobileye’s many strengths, Feinseth raised his price target from $44 to $52 and reiterated a buy rating. (See Mobileye Blogger Opinions and Sentiment on TipRanks)