Market experts continue to look for opportunities to pick promising stocks trading at attractive levels as recession fears linger. Here are five stocks chosen by Wall Street's top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
First on the list is innovative tech giant Apple (AAPL). The company's performance in the December quarter was significantly hit by iPhone-related supply chain disruptions in China, currency headwinds and macro challenges. Nonetheless, several analysts, including Evercore ISI analyst Amit Daryanani, remain bullish on the stock.
In a recent research note, Daryanani addressed investor concerns about his bullishness on Apple, despite its premium valuation compared to big tech peers. The analyst contended that in the current macro environment, Apple's premium valuation is "not only justified but could further expand," given its superior efficiency metrics like return on invested capital (5-year average ROIC of 39% compared to the peer group average of 21%), solid free cash flow and capital return.
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Further, Daryanani stated that "AAPL has typically operated with a higher degree of consistency and importantly lower volatility." He explained that the company was "more rational" in its hiring during the pandemic, unlike several tech companies that aggressively increased their headcount. Consequently, Apple avoided excessive stock-based compensation costs or layoffs.
Daryanani reiterated a buy rating on Apple with a price target of $190. The analyst holds the 236th position among more than 8,000 analysts on TipRanks. Additionally, 60% of his ratings have been profitable, with an average return of 11.4%. (See Apple Blogger Opinions & Sentiment on TipRanks)
Next up is Cloudflare (NET), a cloud-based content distribution network and security provider. The company has an extensive global network that reaches more than 285 cities in over 100 countries and powers websites, APIs (application programming interface), and mobile applications.
TD Cowen analyst Shaul Eyal thinks that the market is "underappreciating" Cloudflare's ability to leverage the breadth of its global presence to "efficiently deliver new applications, including advanced security, with limited incremental cost."
Eyal, who ranks 11 out of more than 8,300 analysts tracked on TipRanks, expects Cloudflare's revenue to grow more than 38% this year, driven by new business and expansion within the company's existing customer base. (See Cloudflare Hedge Fund Trading Activity on TipRanks)
Eyal noted that over 40% of the company's revenue is generated internationally, and the company is "disrupting" several market segments, including infrastructure, telecommunications, security, and edge computing. Currently, these segments represent a total addressable market of over $115 billion, which is expected to grow to $135 billion by 2024.
Eyal reaffirmed a buy rating on Cloudflare with a price target of $75. Remarkably, Eyal has a success rate of 67% and each of his ratings has returned 24.1%, on average.
This week, sneaker and athletic apparel retailer Foot Locker (FL) delivered upbeat results for the fourth quarter of fiscal 2022. The company revealed its revitalized partnership with Nike and long-term growth strategy, which includes several initiatives like transforming its real-estate footprint by opening new format stores, shifting to off-mall locations, and closing underperforming stores.
Through its long-term growth plan, under the leadership of Mary Dillon, Foot Locker is targeting sales growth of 5% to 6% and adjusted earnings per share growth in the low-to-mid twenties range for fiscal 2024 through 2026.
Guggenheim analyst Robert Drbul expects Foot Locker to benefit from CEO Dillon's "extensive knowledge and deep understanding of off-mall and big-box retailing." That said, he thinks that the company's strategic plan needs time to materialize as Dillon is still building her team.
Drbul reiterated a buy rating on Foot Locker stock with a price target of $60, noting that "2023 will be a reset year as Foot Locker navigates its revitalized Nike (NKE) relationship, repositions its Champs banner, optimizes its fleet, absorbs exit costs, increases its tech investments, and continues to drive cost savings."
Drbul is ranked No. 440 among more than 8,000 analysts followed on TipRanks. His ratings have been profitable 61% of the time, with each rating delivering an average return of 7.5%. (See Foot Locker Stock Chart on TipRanks)
Cisco (CSCO) offers a broad range of products and solutions across networking, security, collaboration, and the cloud. Tigress Financial analyst Ivan Feinseth recently reiterated a buy rating on Cisco with a price target of $73, saying that the company continues to gain from the rising need for faster, secure networks and cloud hosting infrastructure.
Feinseth noted that the company built up a large order backlog during the pandemic when corporate customers continued to upgrade their networks, fueled by "increasing demand for information access and supporting larger networks."
"The recovery and growth of IT spending in 2023 and beyond, along with CSCO's ongoing shift to services and software-driven subscription revenue, will continue to drive accelerating Business Performance trends," said Feinseth. (See Cisco Insider Trading Activity on TipRanks)
The analyst also explained that Cisco's solid balance sheet and cash flow continue to support its growth efforts, strategic acquisitions, and enhanced shareholder returns. Feinseth holds the 164th position among more than 8,000 analysts on TipRanks. Additionally, 62% of his ratings have been profitable, with an average return of 11.8%.
Feinseth is also bullish about Acushnet (GOLF), a company that sells golf products and owns leading brands like Titleist and FootJoy. The analyst recently upgraded GOLF stock to buy from hold and increased the price target to $62 from $50.
Feinseth expects Acushnet's impressive brand equity and market-leading products, coupled with new launches, to drive further gains in the stock. Feinseth emphasized that the company's 2022 results were boosted by double-digit sales growth in the Titleist golf club, Titleist gear and FootJoy golf wear segments.
The analyst noted that Acushnet's 2022 performance benefited from a wide range of innovative products, including new TSR models that rapidly became "the most-played model on the PGA tour." (See Acushnet Financial Statements on TipRanks)
"GOLF is well-positioned to gain from the ongoing post-pandemic growth in golf, including rounds played and growth in player population, especially from younger and new golf players," said Feinseth.