People walk past a store of sports goods retailer Nike Inc. at a shopping complex in Beijing, China on March 25, 2021.
Florence Law Reuters
Investors seem caught between the chaos caused by the recent banking crisis, persistent macro headwinds and a potential recession. Looking at stocks with attractive long-term prospects can help during 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 partnerships with leading businesses to advance new artificial intelligence (AI), simulation, and collaboration capabilities across industries.
Based on the event, Mizuho analyst Vijay Rakesh estimated that demand for Nvidia’s AI solutions has been strong in the past month, driven by OpenAI’s ChatGPT and sustained speed for processing large language models (LLMs). Rakesh highlighted Nvidia’s two new products – the L4 tensor core GPU and the 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 noted a “key win” for Nvidia in the auto space, with leading new energy vehicle company BYD expanding the use of the Nvidia Drive Orion platform to a wider range of vehicles. This, along with collaborations with other EV manufacturers, 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 “rapidly emerging leader in generative AI training and inference, as well as dominating gaming and broader AI/accelerated computing, despite near-term investor concerns about a slowdown in consumer and data center 2023E.”
Rakesh has scored 94 pointsth Ranked among over 8,000 analysts followed on TipRanks. His valuations have been profitable 58% of the time, with each valuation providing an average return of 17.3%. (See Nvidia Stock Chart at TipRanks)
From Semiconductor, we have athletic apparel and footwear manufacturer Nike (who). The company recently reported better-than-expected results for its fiscal third quarter (ended February 28). However, Nike’s gross margin shrank significantly due to higher markdowns, which were made to offset higher inventory levels. Margins were also impacted by higher input costs and an increase in freight costs.
Baird analyst Jonathan Komp, who ranks 290th Among the more than 8,300 analysts followed at TipRanks, while Nike’s inventory rose 16% year-over-year in the third quarter, it fell about 5% sequentially. He highlighted that the company is now aiming for a “steeper” liquidation in the fiscal fourth quarter.
Komp also noted management’s comments about the recovery in Greater China. The analyst sees strong margin expansion in the coming fiscal year helped by an expected recovery from “transitory effects” on the expansion of gross margins and direct-to-consumer mix.
Komp reiterated a buy rating on Nike and raised his price target to $138 from $130. “NKE remains attractive based on positive brand momentum and competitive positioning, high operating margins (low earnings sensitivity), and reasonable valuation (NTM P/E premium vs. S&P +71% compared to five-year average +82%),” the analyst said. wrote
Komp has a success rate of 54%, and each of his evaluations returns an average of 14.1%. (See Nike Insider Trading Activity on TipRanks)
Another athletic sport on our list is Lululemon (Lulu). This week, the company impressed investors with encouraging results and solid guidance for the fourth quarter of fiscal 2022 (ended January 29, 2023). However, the quarter’s margins were impacted by markdowns.
However, management expects inventory growth to continue to moderate in the first quarter of fiscal 2023 and lower airfares to provide strong gross margin expansion. (See Lululemon hedge fund trading activity on TipRanks)
After print, Guggenheim analyst Robert Drubull raised his price target for Lululemon stock from $400 to $440 and reiterated a buy rating, saying the company is his “favorite growth story in 2023.” The analyst thinks demand for Lululemon’s business remains solid, saying concerns about competitive pressure from emerging athletic brands seem “overestimated.”
Analysts expect Lululemon to benefit from China’s reopening. He foresees significant growth potential in this sector to help the company achieve its goal of quadrupling international revenue by 2026. He also highlighted limited seasonality, “virtually no wholesale exposure” and strong e-commerce business in Lululemon’s offerings.
“We also see substantial 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 is ranked 439th Followed on TipRanks by over 8,000 analysts. Additionally, 61% of his valuations have been profitable, with an average return of 7.4%.
Casino operator Wynn Resorts (WYNN) performed “healthily well” in the gaming sector and the broader market 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 sees “meaningful upside.”
Drivers behind Santarelli’s bullish view include a “cheaper” valuation, continued sequential growth in Macau tourism and stronger-than-expected Macau margins due to spending cuts and a favorable gaming floor revenue mix. (See Wynn Blogger’s Opinion and 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. Analysts expect the company to provide more details about the project in the coming months, which will draw investors’ attention to new growth opportunities.
Santarelli raised his estimates for Wynn, citing “Macau QTD trends, continued strength in Las Vegas, and steady performance at Encore Boston Harbor.” Santarelli puts 27th Ranked among over 8,000 analysts on TipRanks. He has a success rate of 64%, with each of his evaluations generating an average return of 20.6%.
restaurant and entertainment chain Dave and Buster’s (to play) delivered strong fiscal 2022 fourth quarter (ended January 29) results, driven by strong comparable walk-in sales growth and continued recovery in the special events business.
Management said quarter-to-date comparable store sales for the first quarter of fiscal 2023 were flat in the low-single-digit negative range. Jefferies analyst Andy Barish feels the trend reflects “some noise” due to the increase in omicron demand seen in the prior-year quarter and the spring break shift.
However, Barish noted that the underlying momentum experienced in January continues and sales trends are higher than in the pre-pandemic period. The analyst expects strength in the near term, as “consumer appetite for experiences” appears solid, driven by modest pricing compared to industry averages, promotional offers and other factors.
Barish reiterated a Buy rating on Dave & Buster’s with a $60 price target, concluding, “Even in a recession, Play remains well-positioned for upside and accelerated growth over the next few years.”
Barish is ranked No. 465 out of over 8,000 analysts followed on TipRanks. His ratings are profitable 58% of the time, with each rating providing an average return of 9%. (See PLAY Financials on TipRanks)