As the earnings season rolls on, many companies are hinting at a challenging year ahead.
Meanwhile, it can be intimidating to invest in such a stressful environment. To ease the process, here are five stocks chosen by Wall Street's top analysts, according to TipRanks, a platform that ranks analysts based on their past performances.
After languishing in the stock market last year due to numerous factors affecting the tech sector, Alphabet (GOOGL) will report its seasonally weakest quarter of the year on Thursday. From relatively low digital ad spending and regulatory crackdowns on digital ads to increasing costs and interest rates, Google endured it all. Needless to say, the company expects sequential growth deceleration in the fourth quarter.
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Nonetheless, Monness, Crespi, Hardt, & Co. analyst Brian White expects the results to be in line with his expectations. The analyst anticipates a 10% sequential sales increase, implying a quarter-over-quarter deceleration in growth. This is notably lower growth than what is usually expected of a typical Alphabet fourth-quarter report (17% on average in the past four December quarters).
However, although Google Advertising revenue growth was significantly hurt by the slowdown in digital ad spending, White notes that "Alphabet proved more resilient than Meta and Snap that were disproportionately impacted by Apple's privacy initiatives, most notably App Tracking Transparency, along with other factors."
The analyst expects year-over-year digital ad spending comps to improve in the second half of the year. Also, White's estimates suggest that Google Ad revenues should return to growth in the second quarter of 2023. (See Alphabet Blogger Opinions & Sentiment on TipRanks)
White reiterated a buy rating on the stock with a price target of $135. The analyst holds the 66th position among almost 8,300 analysts followed on TipRanks. His ratings have been profitable 64% of the time, and each rating has generated an 18% average return.
Another technology name in Brian White's list is Meta Platforms (META), which is scheduled to report its fourth-quarter earnings on Wednesday "after taking a savage beating in 2022," according to the analyst's words.
The headwinds that the company faced last year, including Apple's privacy initiatives with App Tracking Transparency, the slowdown in advertisement spending, exorbitant investments in the metaverse, and regulatory scrutiny, are not expected to entirely dissipate in 2023. (See Meta Platforms Website Traffic on TipRanks)
However, a leaner cost structure, thanks to its significantly downsized business and other initiatives, as well as softening challenges, will be a relief this year. Additionally, in the long run, White expects Meta to benefit from the secular digital ad trend and innovations in the metaverse.
"With sales up 34% per annum over the past five years, EPS turning in a 32% CAGR and generating an attractive operating margin, we believe Meta Platforms should trade at a premium to the market and tech sector in the long run; however, we expect the current macroeconomic and geopolitical environment will weigh on advertising spending in the coming quarters," observed White, who reiterated a buy rating on the stock with a price target of $150.
India-based business process management company WNS (WNS) is next on our list. The company's solid sales pipeline reflects a healthy demand environment that overshadows economic headwinds. This gives Barrington analyst Vincent Colicchio the "confidence in its ability to generate solid revenue and adjusted EPS growth in fiscal 2023 and beyond."
The company recently reported its quarterly earnings, where it beat Street estimates, thanks to the strong demand for its services and products. "As of the close of fiscal Q3/23, the company's sales pipeline was strong and at record levels and sales cycles declined sequentially, reflecting strong demand. Sales cycles have declined in recent quarters as clients accelerated decisions to improve efficiency ahead of a potential recession," observed Colicchio. (See WNS Stock Chart on TipRanks)
The analyst was encouraged by the fact that WNS did not realize any meaningful pressures from the economic headwinds that have hung heavily on peers. Challenges like volume pressures, productivity issues, delays and cancelations, etc., did not deter the business from its growth path.
Colicchio reiterated a buy rating on the stock with a price target of $97 and even raised his fiscal 2023 and fiscal 2024 earnings-per-share forecasts to $3.86 and $4.14 from $3.78 and $4.12, respectively.
The analyst currently stands at #282 among almost 8,300 analysts tracked by TipRanks. Moreover, 62% of his ratings have been profitable, each generating a 13.1% average return.
BRC (BRCC) is a unique company. The operator of the Black Rifle Coffee Company is founded and led by military veterans. The company was built to serve premium coffee, content and merchandise to active military, veterans and first responders.
BRC has been on Tigress Financial Partners analyst Ivan Feinseth's buy list in recent weeks. The analyst has a $19 price target on the company. (See BRC Insider Trading Activity on TipRanks)
Feinseth is confident that the company is a solid emerging high-growth lifestyle investment opportunity, serving a loyal and niche customer base and offering meaningful growth opportunities through product innovation and a digitally native omnichannel distribution strategy.
BRCC recently announced that it will "shift focus from the near-term buildout of restaurants (Outpost) and DTC (Direct-to-consumer) sales to a faster growth and higher return opportunity in the expansion of the sales of its RTD (Ready-to-drink) beverages packaged and premeasured (k-cup) coffee through an increasing FDM (food drug and mass-market) focus," explained the TipRanks-rated 5-star analyst.
Feinseth's convictions can be trusted, given his 185th position among nearly 8,300 analysts in the TipRanks database. This apart, his track of 63% profitable ratings, each rating delivering 12.1% average returns, is also worth considering.
The world's largest specialty coffee chain retailer Starbucks (SBUX) is also one of Ivan Feinseth's favorite stocks for this year. The company continues to put its numerous growth drivers into action. This includes new product development, a global coffee alliance and ongoing store growth. Starbucks also enjoys strong brand equity and a committed customer base, which will help drive its new reinvention plan for long-term growth, according to the analyst's observations.
"SBUX continues to improve operating efficiencies and customer experience by leveraging ongoing innovation, new technologies, and new store formats," said Feinseth, reiterating a buy rating on Starbucks with a price target of $136.
Moreover, the company's focus on expanding its product portfolio to include new health and wellness beverages, teas, and core food offerings can boost customer traffic during later hours. (See Starbucks' Dividend Date & History on TipRanks)
Staying up to date with the changing industry trends, Feinseth noted that Starbucks is investing in new digital initiatives to improve customer service, supply-chain management, its loyalty program, and mobile ordering and e-commerce capabilities.