The third-quarter earnings season has come with plenty of stunning beats — and a few notable disappointments. Investors now face a daunting question: Which companies will carry their success into subsequent quarters?
For instance, Tesla has been leading the pack on the green tidal wave of electric vehicles, and has yet to pull back on its surge to prominence. Also, video gaming saw a massive rebound during the pandemic, but can developers like Take-Two Interactive continue to reap revenues? As another example, sports are back, but FuboTV is now betting on sportsbook gaming to accelerate its business. Additionally, the societal shift toward cloud services has created a significant demand for cloud infrastructure and services companies like Calix, but will the firm maintain its relevance? Finally, the highly competitive semiconductor developer industry is a tight race, but it appears Advanced Micro Devices is setting itself up for some well-designed few quarters.
Some of Wall Street's top performing analysts recently published their bullish hypotheses on these five names, according to TipRanks, which tracks the best-performing stock pickers. Let's take a look at what they have to say.
The green tidal wave continues to crash over investors, as Tesla (TSLA) has pushed ahead yet again, this time inking a $4.2 billion deal with rental company Hertz (HTZZ) for 100,000 vehicles. The agreement will certainly provide Tesla with a consistent stream of revenue until the end of 2022, but the deal also marks the shift toward a more mainstream adoption of electric vehicles in the U.S. (See Tesla Hedge Fund Trading Activity on TipRanks)
In his report, Daniel Ives of Wedbush Securities explained that Tesla is "leading the charge" in the domestic EV industry, with several competing firms, like General Motors and Ford, in pursuit of further electric innovation.
Ives reiterated his Buy rating and $1,100 price target on the stock.
The five-star analyst noted that while demand had previously reached high levels in China and Europe, Tesla is now experiencing a multi-month backlog for its U.S. sales of several models. Ives expects supply to ramp up immediately following the activation of the Austin and Berlin gigafactories, whereby the company could produce 2 million vehicles per year.
Additionally, the global chip shortage has kept constraints on Tesla's supply chain, feeding into the extended wait times for vehicles.
Ives wrote that the Hertz order is the "biggest electric deal ever placed," and that it "speaks to where demand is heading in the EV transformation hitting the auto sector globally."
Out of more than 7,000 analysts on its website, TipRanks has placed Ives at No. 20. His strong performance has resulted in success 78% of the time, and returned him an average of 37.8% per trade.
Take-Two Interactive Software
The last year-and-a-half has been good to video game developers. Bolstered by government-mandated lockdowns, sales boomed, and valuations climbed. One of those developers, Take-Two Interactive Software (TTWO), has shifted from its former focus on video game development to investing heavily in sales and marketing. Meanwhile, the firm has a robust pipeline in the works and has a strong ability to surprise investors.
Andrew Uerkwitz of Jefferies delivered his hypothesis on the company, writing that he anticipates TTWO releasing up to nine major non-sports game titles over the next three years, which would represent a significant increase from its previous one to two titles per year. If the firm can execute on this level, it would expand growth and fill a gap left by GTA VI (Grand Theft Auto 6, the latest edition of a popular video game), which is not expected to be released until 2026. (See Take-Two News Sentiment on TipRanks)
Uerkwitz rated the stock a Buy, and provided a price target of $231 per share.
Take-Two, which according to the analyst has "some of the highest quality content amongst the U.S. publishers," is trading at a "reasonable" valuation. While impossible to project precisely how its new game titles may succeed, Uerkwitz argues the possibility that the sheer amount of games released, alone, will be enough to drive short-term to medium-term gains.
Uerkwitz outright recommends buying the stock, noting that once the pipeline comes into a clear perspective, a higher price target is expected to be published.
Financial data aggregator TipRanks has rated Uerkwitz as No. 111 out of over 7,000 analysts. His success rate stands at 65%, and his ratings have averaged a return of 27.9% each.
The streaming wars rage on, and FuboTV (FUBO) has been making strides to expand beyond television entertainment. The live sports and streaming service has largely focused on its content slate, but is now expecting an approval in regard to launching a sportsbook business.
Additionally, in an attempt to garner increased subscriptions, the company has been fostering deals with connected-tv OEMs. This has had the positive byproduct of lowering marketing costs. (See FuboTV Website Traffic on TipRanks)
Darren Aftahi of Roth Capital Partners forecasts upside in the stock, rating it a Buy and assigning it a price target of $45.
Aftahi explained that the sooner Fubo's sportsbook is launched, the better, as the fourth quarter typically involves seasonal increased holiday ad spending. Clues have begun to appear regarding the launch, with FUBO announcing partnerships with NASCAR, as well as teams within the NBA and NFL. A potential sportsbook and gaming segment has not yet been baked into Aftahi's valuation projections and would only act as a bonus.
Once launched, it will be imperative for Fubo to demonstrate it can capture audiences in an "immensely competitive online gaming market." If this can be done, the addition could "act as a positive incremental growth catalyst" driving subscriber numbers throughout FY2022.
In anticipation of FuboTV's upcoming earnings release, Aftahi noted that average revenues per user could be impacted, as most of this quarter's subscribers joined late in the period. This is due in part to the timing of the football season, although he does not foresee this weighing on Fubo's average advertising revenue per user, which is expected to improve quarter-over-quarter.
On TipRanks, Aftahi is rated as No. 78 out of more than 7,000 total financial analysts. His ratings have been correct 53% of the time, and his stock picks have averaged a 49.2% return.
From the start of the Covid-19 pandemic until now, cloud services went from being considered an innovation to becoming a staple. Companies like Calix (CALX), which over the past year has seen its valuation nearly double, are remaining relevant to their telecommunications customers through the emphasized "criticality of broadband services," according to George Notter of Jefferies.
Undeterred by Calix's impressive year-over-year run, Notter remained bullish on the stock and rated it a Buy. He also provided a price target of $74.
Notter opined that Calix Cloud, which offers a suite of data analytics tools for marketing, customer support, and network operations, still has room to grow. Long-term gains are forecasted by Notter, and the current level of penetration only marks the beginning of that process. (See Calix Risk Factors on TipRanks)
The firm recently reported encouraging third-quarter earnings results, although its top line was held back by supply side constraints. These challenges also mitigated upside seen from the increased offerings in Calix Cloud. Notter noted, however, that the company is managing its component supply relatively well and is currently weathering the storm.
In his report, Notter wrote that the company's CFO mentioned that Calix will "start the fourth quarter of 2021 in the strongest financial position in our history with robust bookings, [and] clear customer and product focus." These comments were accompanied by remarks about high sales revenues and expanding international business.
Notter maintains a position of No. 469 out of more than 7,000 professional financial analysts. He has been successful 67% of the time, and has returned an average of 17.1% on his stock picks.
Advanced Micro Devices
While other industries have floundered in the face of a global semiconductor shortage, Advanced Micro Devices (AMD) is basking in the sustained high demand. The computer processor designer recently reported impressive earnings, beating Wall Street consensus estimates on sales, earnings per share, and gross margins. Looking beyond the third quarter, analysts are taking notice of AMD's bright future. (See AMD Stock Analysis on TipRanks)
One of those analysts, Hans Mosesmann of Rosenblatt Securities, wrote that AMD's "David vs. Goliath" story is just now being taken seriously by investors. He added that the company has been disrupting the existing semiconductor industry, and its competitors, namely Intel (INTC), are fighting an uphill battle.
Mosesmann solidified his bullish stance on the stock by rating it a Buy, and raising his price target to $180 from $150.
The analyst explained that AMD is experiencing high levels of momentum in all of its products. Meanwhile, its business is seeing "stronger than expected demand, share gains, and better than expected execution on supply related constraints." Describing the stock as a "top three Buy pick," Mosesmann indicated his long-term confidence in AMD.
Furthermore, he expects years of growth for AMD's market share in data centers, communication infrastructure, and industrial and automotive applications.
Out of over 7,000 analysts, Mosesmann ranks as No. 38 by TipRanks. The site has calculated his success rate to be 73%, and his average return per rating to be 31%.