Top Wall Street analysts believe in the long-term potential of these stocks

An Amazon delivery truck at the Amazon facility in Poway, California, Nov. 16, 2022.

Sandy Huffaker | Reuters

Investors are confronting several headwinds, including macro uncertainty, a spike in energy prices and the unanticipated crisis in the Middle East.

Investors seeking a sense of direction can turn to analysts who identify companies that have lucrative long-term prospects and the ability to navigate near-term pressures.

To that end, here are five stocks favored by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.

Amazon

We begin this week’s list with e-commerce and cloud computing giant Amazon (AMZN). While the stock has outperformed the broader market year to date, it has declined from the highs seen in mid-September.

JPMorgan analyst Doug Anmuth noted the recent sell-off in AMZN stock and highlighted certain investor concerns. These issues include the state of the U.S. consumer and retail market, rising competition, higher fuel costs and the Federal Trade Commission’s lawsuit. Also on investors’ mind is Amazon Web Services’ growth, with multiple third-party data sources indicating a slowdown in September.

Addressing each of these concerns, Anmuth said that Amazon remains his best idea, with the pullback offering a good opportunity to buy the shares. In particular, the analyst is optimistic about AWS due to moderating spending optimizations by clients, new workload deployment and easing year-over-year comparisons into the back half of the third quarter and the fourth quarter. He also expects AWS to gain from generative artificial intelligence.

Speaking about the challenging retail backdrop, Anmuth said, “We believe AMZN’s growth is supported by key company-specific initiatives including same-day/1-day delivery (SD1D), greater Prime member spending, & strong 3P [third-party] selection.”

In terms of competition, the analyst contends that while TikTok, Temu and Shein are expanding their global footprint, they pose a competitive risk to Amazon mostly at the low end, while the company is focused across a broad range of consumers.

Anmuth reiterated a buy rating on AMZN shares with a price target of $180. He ranks No. 84 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 61% of the time, with each delivering an average return of 16.6%. (See Amazon’s Stock Charts on TipRanks)

Meta Platforms

Anmuth is also bullish on social media company Meta Platforms (META) and reaffirmed a buy rating on the stock. However, the analyst lowered his price target to $400 from $425, as he revised his model to account for higher expenses and made adjustments to revenue and earnings growth estimates for 2024 and 2025 due to forex headwinds.

The analyst highlighted that Meta is investing in the significant growth prospects in two big tech waves – AI and metaverse, while continuing to remain disciplined. (See META Insider Trading Activity on TipRanks)

“AI is clearly paying off in terms of incremental engagement from AI-generated content and Advantage+, and as discussed at Meta Connect, Llama 2 should drive AI experiences across the Family of Apps and devices, while Quest 3 is the most powerful headset Meta has ever shipped,” said Anmuth. Llama 2 is Meta’s new large language model.

The analyst expects Meta’s advertising business to continue to outperform, with AI investments bearing results and Reels anticipated to turn revenue-accretive soon. Overall, Anmuth is convinced that Meta’s valuation remains compelling, with the stock trading at 15 times his revised 2025 GAAP EPS estimate of $20.29.

Intel

We now move to semiconductor stock Intel (INTC), which recently announced its decision to operate its Programmable Systems Business (PSG) as a standalone business, with the intention of positioning it for an initial public offering in the next two to three years.

Needham analyst Quinn Bolton thinks that a standalone PSG business has several benefits, including autonomy and flexibility that would boost its growth rate. Operating PSG as a separate business would also enable the unit to more aggressively expand into the mid-range and low-end field programmable gate arrays segments with its Agilex 5 and Agilex 3 offerings.

Additionally, Bolton said that this move would help Intel drive a renewed focus on the aerospace and defense sectors, as well as industrial and automotive sectors, which carry high margins and have long product lifecycles. It would also help Intel enhance shareholder value and monetize non-core assets.

“We believe the separation of PSG will further allow management to focus on its core IDM 2.0 strategy,” the analyst said, while reiterating a buy rating on the stock with a price target of $40.

Bolton holds the No.1 position among more than 8,500 analysts on TipRanks. His ratings have been successful 69% of the time, with each rating delivering an average return of 38.3%. (See Intel Hedge Fund Trading Activity on TipRanks).

Micron Technology

Another semiconductor stock in this week’s list is Micron Technology (MU). The company recently reported better-than-feared fiscal fourth-quarter results, even as revenue declined 40% year over year. The company’s revenue outlook for the first quarter of fiscal 2024 exceeded expectations but its quarterly loss estimate was wider than anticipated.

Following the print, Deutsche Bank analyst Sidney Ho, who holds the 66th position among more than 8,500 analysts on TipRanks, reiterated a buy rating on MU stock with a price target of $85.

The analyst highlighted that the company’s fiscal fourth quarter revenue exceeded his expectations, fueled by the unanticipated strength in NAND shipments through strategic buys, which helped offset a slightly weaker average selling price.

Micron’s management suggested that the company’s overall gross margin won’t turn positive until the second half of fiscal 2024, even as pricing trends seem to be on an upward trajectory. However, the analyst finds management’s gross margin outlook to be conservative.

The analyst expects upward revisions to gross margin estimates. Ho said, “Given that the industry is in the very early stages of a cyclical upturn driven by supply discipline across the industry, we remain confident that positive pricing trends will be a strong tailwind over the next several quarters.”

Ho’s ratings have been profitable 63% of the time, with each delivering a return of 21.5%, on average. (See Micron Blogger Opinions & Sentiment on TipRanks)  

Costco Wholesale

Membership warehouse chain Costco (COST) recently reported strong fiscal fourth-quarter earnings, despite macro pressures affecting the purchase of big-ticket items.

Baird analyst Peter Benedict explained that the earnings beat was driven by below-the-line items, with higher interest income more than offsetting an increased tax rate.

“Steady traffic gains and an engaged membership base underscore COST’s strong positioning amid a slowing consumer spending environment,” said Benedict.

The analyst highlighted other positives from the report, including higher digital traffic driven by the company’s omnichannel initiatives and encouraging early holiday shopping commentary.

Further, the analyst thinks that the prospects for a membership fee hike and/or a special dividend continue to build. He added that the company’s solid balance sheet provides enough capital deployment flexibility, including the possibility of another special dividend.

Benedict thinks that COST stock deserves a premium valuation (about 35 times the next 12 months’ EPS) due to its defensive growth profile. The analyst reiterated a buy rating on the stock and a price target of $600.

Benedict ranks No. 123 among more than 8,500 analysts tracked on TipRanks. Moreover, 65% of his ratings have been profitable, with each generating an average return of 12.2%. (See COST’s Technical Analysis on TipRanks)

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Interest rates take center stage with banks set to report quarterly results

A combination file photo shows Wells Fargo, Citibank, Morgan Stanley, JPMorgan Chase, Bank of America and Goldman Sachs.

Reuters

Bank stocks remain under pressure due to high interest rates as financial firms like Club holdings Wells Fargo (WFC) and Morgan Stanley (MS) get ready to kick off earnings season.

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Top Wall Street analysts expect these dividend stocks to boost portfolio returns

A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil September 24, 2018.

Sergio Moraes | Reuters

Dividend-paying stocks are looking even more attractive as investors grapple with a spike in bond yields and a tumultuous stock market.

With that in mind, here are five attractive dividend stocks, according to Wall Street’s top experts on TipRanks, a platform that ranks analysts based on their past performance.

Exxon Mobil

First on this week’s list is dividend aristocrat Exxon Mobil (XOM). The energy giant offers a yield of 3.4%. The company’s dividend hike of 3.4% last year marked the 40th consecutive year of annual dividend growth. Exxon’s dividends are backed by solid earnings and cash flows.

In the second quarter, the company distributed $8 billion to shareholders through share repurchases of $4.3 billion and dividends of $3.7 billion. It generated free cash flow of $5 billion in the June quarter.

Mizuho analyst Nitin Kumar reiterated a buy rating on Exxon with a price target of $139 after attending the company’s Product Solutions Spotlight event. The analyst said that the company is on track to meet its target of boosting its product solutions earnings by $10 billion by 2027 compared to $6 billion reported in 2019.

“With 1H23 annualized earnings at $11.5 billion, the company is halfway through that target, with most of the benefit to date from cost reductions,” noted Kumar.

He expects key strategic projects that have recently commenced, like Beaumont crude expansion and chemical expansions at Baytown, and major projects planned for 2024 to 2027, such as the Singapore Resid upgrade project, to help Exxon deliver most of the targeted improvement in earnings by 2027.

Kumar ranks No.67 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, with each delivering a return of 19.8%, on average. (See Exxon Insider Trading Activity on TipRanks)

Coterra Energy

Kumar is also bullish on Coterra Energy (CTRA), an oil and gas exploration and production company with major operations in the Permian Basin, Marcellus Shale and Anadarko Basin. Earlier this year, the company increased its annual base dividend by 33% to 80 cents per share.

The company’s shareholder return strategy is to distribute 50% of its free cash flow via base dividends, share repurchases and variable dividends. CTRA realigned its return strategy for 2023 to give importance to buybacks over variable dividends. In the first six months of 2023, it paid $303 million through dividends and made share repurchases worth $325 million, with the total shareholder return representing 94% of free cash flow.

Last month, Kumar hosted investor meetings with CTRA’s management and said the key takeaway was that the company is confident about delivering solid returns on investment in most commodity price scenarios. In particular, management highlighted the flexibility and optionality of CTRA’s asset base and capital allocation strategy.

“In our opinion, the common thread between their choices is the potential to outperform the three-year (2023-25) plan that calls for ~5%+ oil growth for ~$2.0-2.1bn of total capex – either through less capex or more volumes – but without a degradation of capital efficiencies,” said Kumar.

Calling CTRA his top pick, Kumar reiterated a buy rating on the stock with a price target of $42. (See Coterra Financial Statements on TipRanks)

Brookfield Infrastructure Partners

Next on this week’s dividend list is Brookfield Infrastructure (BIP), which operates assets in the utilities, transport, midstream, and data sectors. BIP paid a quarterly dividend of $0.3825 per unit on Sept. 29, which reflects a 6% year-over-year increase in its distribution. The company offers a dividend yield of 5.5%.

At an investor day event held last month, management discussed its goal to deliver more than 12% growth in funds from its operations per unit as part of its 1- to 3-year outlook.

RBC Capital analyst Robert Kwan, who ranks 194th out of over 8,500 analysts tracked on TipRanks, noted that the company’s targeted FFO/unit growth is expected to be partially driven by its significant organic capital backlog, mainly in the data center business.

The analyst also thinks that given the capital constraints in the current backdrop due to a slowdown in fundraising activity, an entity like Brookfield has the potential to enhance returns by investing capital above its 12% to 15% equity internal rate of return (IRR) target range.

“We believe that the unit price weakness is an attractive entry point based on a 5% current distribution yield with potential for double-digit underlying FFO/unit growth,” said Kwan.

Kwan reaffirmed a buy rating on BIP stock with a price target of $45. His ratings have been profitable 64% of the time, with each delivering an average return of 10.8%. (See BIP Stock Chart on TipRanks)

Shelby Tucker, is bullish on utility stock American Electric Power (AEP). On Oct. 2, the company named Charles E. Zebula as its new chief financial officer and reaffirmed its 2023 operating earnings outlook of $5.19 to $5.39 per share and long-term operating earnings growth rate of 6% to 7%.

AEP paid a quarterly dividend of 83 cents per share on Sept. 8, its 453rd consecutive quarterly cash dividend. It offers a dividend yield of 4.6%.

Recently, Tucker lowered the price target for AEP to $90 from $103 to reflect a high interest environment but reiterated a buy rating. The analyst said that the stock remains one of the firm’s top picks in 2023 and one of the best-in-class utilities.

The analyst thinks that AEP’s $40 billion regulated capital spending plan, focusing on transmission deployment, offers strong resiliency against a challenging macro backdrop and cost inflation. Tucker also expects the company to benefit from the incentives under the Inflation Reduction Act.

“We believe AEP deserves a slight premium on valuations from rapid decarbonization of its generation fleet and robust investments in regulated renewable,” the analyst said.

Tucker holds the 367th position among more than 8,500 analysts on TipRanks. Moreover, 61% of his ratings have been profitable, with each generating an average return of 8.1%. (See AEP Blogger Opinions & Sentiment on TipRanks)

Darden Restaurants

Darden Restaurants (DRI), the owner of Olive Garden and other popular brands, delivered better-than-anticipated fiscal first-quarter results, despite the pullback in consumer spending affecting the company’s fine dining segment.   

The company paid $159 million in dividends and deployed about $143 million toward share repurchases in the fiscal first quarter. With a quarterly dividend of $1.31 per share (annualized dividend of $5.24), DRI stock’s dividend yield is 3.7%.

Following the results, JPMorgan analyst John Ivankoe reiterated a buy rating on DRI stock but lowered the price target to $174 from $176.

The analyst noted that the company’s same-store sales growth of 5% surpassed his estimate of 4.4%, with its Olive Garden and LongHorn Steakhouse chains offsetting the softness in fine dining. Also, DRI’s same-store sales growth outperformed the industry average of 0.9%.       

“Finally, the 10%+ TSR [total shareholder return] (EPS + annual dividend yield) remains intact for F24/25,” said Ivankoe.

Ivankoe holds the 854th position among more than 8,500 analysts tracked on TipRanks. Moreover, 60% of his ratings have been profitable, with each generating an average return of 7.1%. (See DRI Hedge Fund Trading Activity on TipRanks)

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