Pedestrians walk past a Lululemon store.
Scott Mlyn | CNBC
Markets are tight and May’s scorching inflation report only made matters worse.
Last month’s consumer price index rose 8.6% from a year ago, making it the biggest increase since December 1981. The reading sparked fresh concerns about a recession and bond yields jumped on Friday.
The situation is scary for investors, but it is important for them to take a long view and look beyond the volatility that is rocking the market right now. To that end, top analysts have picked stocks with attractive prospects, according to TipRanks, which ranks Wall Street’s top performing professionals.
Here are five stocks that are catching analysts’ attention.
The Fabless Credo chip company (CRDO) is one of the few tech stocks to post gains so far in 2022. The company went public in January. (See Credo Sentiments Stock Investor on TipRanks)
Nevertheless, Credo ran into obstacles. The resurgence of Covid-19 in China has led to shutdowns in key cities including Kunshan, forcing major suppliers to shut down and further harming the semiconductor industry’s supply chain. Credo’s Active Electrical Cable unit sources materials from suppliers in Kunshan.
However, the company still managed to deliver better than expected quarterly results based on strong sales of its non-Kunshan products. Needham analyst Quinn Bolton said: “We think investors will see this as a sign of resilience as CRDO absorbs the effects of the shutdown due to the strength of non-AEC product earnings. »
Bolton also highlighted the company’s key strengths. He noted that Credo’s strong expertise in analog and DSP design helps the company use the most appropriate technology combinations to deliver “low-power, low-cost, high-performance designs.”
The analyst believes this advantage can lead the company to significantly expand its total addressable market in data centers over the next three years, making it one of the fastest growing semiconductor companies. .
Bolton ranks #3 out of nearly 8,000 financial analysts on TipRanks. He successfully rated stocks 72% of the time, and his rated stocks generated an average return of 45% on each.
The semiconductor company Ambarella’s (AMBA) system-on-chip (SOC) brings together key technologies to deliver superior quality video and images with low power consumption. Its chips are rapidly gaining traction in markets such as autonomous vehicles and the Internet of Things.
Needless to say, semiconductor companies have suffered this year. As if the existing supply chain grunts weren’t enough, the Covid-led lockdowns in China earlier this year further hurt the supply of components to the chipmaking industry. AMBA stock has not been spared and shares have fallen more than 60% this year. (See Ambarella stock chart on TipRanks)
Needham’s Quinn Bolton dipped into the company’s earnings performance and pointed out that the headwinds it faced in the first quarter of financial year 2023 are likely to persist for the foreseeable future. However, the analyst believes that these are only short-term issues that are beyond the company’s control.
Worldwide shipping issues are causing inventory buildups, making it difficult for Ambarella customers to source their orders. This was exacerbated by lockdowns in China, leading to order delays that hurt Ambarella’s performance in the first quarter of fiscal 2023. Guidance for the second quarter of fiscal 2023 also indicated a slowdown in the revenue growth.
However, Ambarella expects supply chain issues to subside in the second half. Bolton opted to go with the fundamentals and strength of the business and look beyond short-term setbacks. He reiterated a buy on AMBA, despite the price target being reduced to $120 from $175.
The analyst is confident in Ambarella’s computer vision (CV) processor suite and believes this product holds the key to strong revenue as well as future share price growth. “We expect Ambarella’s CVflow products to generate more than 50% of annual revenue by CY23. While we estimate Ambarella’s CV-based product sales will grow at a 10-year CAGR of 45%,” Bolton said.
American Tower (AMT), one of the largest infrastructure REITs, is an independent operator of wireless communications and broadcast infrastructure. Its activity is spread over 22 countries around the world. The increasing use of 5G and other technologies supports demand for American Tower infrastructure and space to operate communication services.
Recently, RBC Capital Markets analyst Jonathan Atkins attended a few meetings with AMT management and compiled some key points for investors.
Atkin said management is optimistic about AMT’s business in Europe and is confident about its key partnerships and government support in that region, particularly in Germany, Spain and France.
Atkin believes AMT’s mid-term growth will be supported by US national wireless carriers as they deploy midband 5G spectrum. (See US Tower Dividend Date and History on TipRanks)
Among the challenges, the analyst sees slow growth in India due to Covid-19 and low average revenue per unit, and in Brazil due to Covid-related obstructions. However, he expects AMT to manage these challenges as soon as leasing fundamentals in these markets stabilize following an effective economic recovery from Covid-19.
Atkin ranks 11th among nearly 8,000 Wall Street analysts covered by TipRanks. He got 337 pass marks out of a total of 437 marks. Additionally, he has achieved an average return of 45% on each stock quote.
Lululemon Reseller (LULU) recently managed to deliver impressive Q1 2022 numbers and forecasts amid a string of downside outlooks at other companies.
Guggenheim analyst Robert Drbul had some interesting insights into the company’s developments following the release of its quarterly print. He noted that Lululemon is navigating global supply chain pressures by using air freight to ship orders to customers, despite high transportation costs.
Drbul emphasizes that the company’s products are characterized by limited seasonality, which is a huge advantage. Additionally, its strong e-commerce business and minimal exposure to the wholesale market are a boon in the current situation of rising inventory. (See Lululemon Risk Factors on TipRanks)
The analyst reiterated a buy on LULU stock, encouraged by its medium and long-term trading prospects. “We believe LULU remains on track to quadruple its international business by the end of FY22. This should support continued strong revenue growth and structurally higher operating margins in the years to come (digital operating margins in the 40%+ range), which in our view justifies the equity premium multiple,” Drbul said.
Drbul is ranked #582 out of nearly 8,000 analysts tracked on TipRanks. Notably, 59% of its ratings have been successful so far, with an average return of 8.2% per rating.
Veeva Stocks (VEEV) fell in 2022, driven by the massive sale of technologies. Nevertheless, it is one of the companies that does not see a significant impact on its business. Indeed, it is a cloud computing company that focuses on two key sectors: life sciences and pharmaceuticals.
Interestingly, hedge funds increased their positions in the company’s shares during the March quarter. (See Veeva’s Hedge Fund Trading Activity on TipRanks)
The company released quarterly results earlier this month, beating Street estimates for earnings and earnings per share.
Needham analyst Ryan MacDonald was buoyed by Veeva’s biggest deal – a 12-product win with a major pharmaceutical company in the first quarter. “While VEEV views this win as a short-term, one-time event, it has the potential to fundamentally change the conversation around the strategic roadmap with customers over time,” MacDonald said.
The analyst is also confident that if investors look beyond near-term concerns about slow demand for Veeva’s cloud-based customer relationship management platform, once its products like Compass and Link will begin to gain momentum.
MacDonald maintained his bullishness on VEEV, with a Buy rating on it, despite a price target reduced to $205 from $270. However, long-term investors need not worry because, according to MacDonald, the lower price target accounts for “industry-wide multiple compression.”
The analyst was impressed that Veeva could raise its outlook for FY23 despite the current currency headwinds, as it “highlights the sustainable nature of the business in an uncertain macro.”
MacDonald is ranked No. 482 among nearly 8,000 analysts on TipRanks. With a 49% success rate on its ratings, its rated stocks have returned 14% on average.