Investors seem to be caught amid the chaos caused by the recent banking crisis, persistent macro headwinds and a potential recession. Looking at stocks with appealing long-term potential could help in these times.
Here are five stocks chosen by Wall Street's top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
At the recently held GTC event, chip giant Nvidia (NVDA) discussed its partnerships with leading businesses to advance new artificial intelligence (AI), simulation, and collaboration capabilities across various industries.
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Based on the event, Mizuho analyst Vijay Rakesh inferred that demand for Nvidia's AI solutions strengthened in the past month, driven by the continued momentum for OpenAI's ChatGPT and large language models (LLMs) processing. Rakesh highlighted Nvidia's two new products – L4 tensor core GPU and H100 NVL, which are "focused on improving throughput and power as well as expanding inference."
Rakesh expects Nvidia's DGX Cloud AI supercomputing service to drive additional sales. He also mentioned a "key win" for Nvidia in the auto space, with leading new energy vehicle company BYD expanding the use of the Nvidia Drive Orin platform to a wider range of vehicles. This, along with collaborations with other EV makers, represents a $14 billion automotive design win pipeline for Nvidia.
Calling Nvidia his top pick, Rakesh reiterated a buy rating and raised his price target to $290 from $230. He sees Nvidia as a "leader in fast-emerging generative AI training and inference as well as dominating gaming and broader AI/accelerated compute, despite near-term investor concerns over consumer and data center slowdown into 2023E."
Rakesh holds the 94th position among more than 8,000 analysts followed on TipRanks. His ratings have been profitable 58% of the time, with each rating delivering an average return of 17.3%. (See Nvidia Stock Chart on TipRanks)
From semiconductors, we jump to athletic apparel and footwear maker Nike (NKE). The company recently reported better-than-expected results for its fiscal third quarter (ended Feb. 28). However, Nike's gross margin contracted significantly due to higher markdowns, which were made to liquidate elevated inventory levels. The margin was also affected by increased input costs and a rise in freight expenses.
Baird analyst Jonathan Komp, who ranks 290th out of more than 8,300 analysts followed on TipRanks, noted that, while Nike's inventory was up 16% year over year in the quarter third quarter, it declined about 5% sequentially. He highlighted that the company is now targeting "steeper" liquidation in the fiscal fourth quarter.
Komp also noted management's commentary about the recovery in greater China. The analyst sees strong margin expansion in the next fiscal year helped by an expected recovery from the "transitory impacts" on gross margin and expansion of the direct-to-consumer mix.
Komp reiterated a buy rating on Nike and increased his price target to $138 from $130. "NKE remains attractive given positive brand momentum and competitive positioning, high operating margin (low earnings sensitivity), and reasonable valuation (NTM P/E premium vs. S&P +82% compared to +71% five-year average)," the analyst wrote.
Komp has a success rate of 54%, and each of his ratings has returned 14.1% on average. (See Nike Insider Trading Activity on TipRanks)
Another athletic play on our list is Lululemon (LULU). This week, the company impressed investors with upbeat results for the fourth quarter of fiscal 2022 (ended January 29, 2023) and solid guidance. However, the quarter's margins were impacted by markdowns.
Nonetheless, management expects inventory growth to continue to moderate in the first quarter of fiscal 2023 and to deliver robust gross margin expansion fueled by lower airfreight. (See Lululemon Hedge Fund Trading Activity on TipRanks)
Following the print, Guggenheim analyst Robert Drbul increased his price target for Lululemon stock to $440 from $400 and reiterated a buy rating, saying the company remains his "favorite growth story in 2023." The analyst thinks demand for Lululemon's merchandise remains solid, noting that concerns about competitive pressures from emerging athletic brands seem "overestimated."
The analyst expects Lululemon to benefit from China reopening. He anticipates the significant growth potential in the region to help the company achieve its target to quadruple international revenues by 2026. He also highlighted limited seasonality in Lululemon's offerings, "virtually no wholesale exposure," and a strong e-commerce business.
"We also see ample runway for growth in men's, digital, and international, while LULU continues to deliver strong growth in its "core" (women's, stores, and North America)," said Drbul. The analyst ranks 439th among more than 8,000 analysts followed on TipRanks. Additionally, 61% of his ratings have been profitable, with an average return of 7.4%.
Casino operator Wynn Resorts (WYNN) has "healthily outperformed" the gaming sector and broader market so far in 2023, noted Deutsche Bank analyst Carlo Santarelli. The analyst remains bullish on the stock and raised his price target to $134 from $128, as he continues to see a "meaningful upside."
The drivers behind Santarelli's bullish view include an "inexpensive" valuation, continued sequential increase in Macao visitation and stronger-than-anticipated Macao margins due to expense reductions and a favorable gaming floor revenue mix. (See Wynn Blogger Opinions & Sentiment on TipRanks)
Santarelli is also optimistic about the prospects of the company's UAE project — an integrated resort that will be located on the man-made Al Marjan Island in Ras Al Khaimah, UAE. The analyst expects the company to provide more details about this project in the coming months, driving investors' attention to the new growth opportunity.
Santarelli raised his estimates for Wynn, citing "Macau QTD trends, continued strength in Las Vegas, and steady performance at Encore Boston Harbor." Santarelli holds the 27th position among more than 8,000 analysts on TipRanks. He has a success rate of 64%, with each of his ratings generating an average return of 20.6%.
Dave & Buster's Entertainment
Restaurant and entertainment chain Dave & Buster's (PLAY) delivered strong fiscal 2022 fourth-quarter (ended Jan. 29) results, driven by robust comparable walk-in sales growth and the continued recovery in the special events business.
Management stated that quarter-to-date comparable store sales for the fiscal 2023 first quarter were in the flat to very low-single-digit negative range. Jefferies analyst Andy Barish feels that this trend reflects "some noise" due to the post-Omicron demand surge seen in the prior-year quarter and a spring break shift.
Nonetheless, Barish noted that the underlying momentum experienced in January has continued and sales trends are higher compared to the pre-pandemic period. The analyst expects strength over the near term, as "consumer appetite for experiences" looks solid, driven by modest pricing compared to the industry average, promotional offers and other factors.
Barish reiterated a buy rating on Dave & Buster's with a price target of $60, concluding, "PLAY remains among best positioned to drive upside and accel growth the next few years, even in a recession."
Barish is ranked No. 465 among more than 8,000 analysts followed on TipRanks. His ratings have been profitable 58% of the time, with each rating delivering an average return of 9%. (See PLAY Financial Statements on TipRanks)