Lisa Su, CEO, AMD
Scott Mill | CNBC
It’s been a wild week for stocks, and investors still have plenty of data to weigh in to gauge which companies can emerge winners from the recession.
The Federal Reserve raised interest rates by 0.75 percentage points last week. Investors considered the central bank’s next steps in its policy tightening campaign, while also pricing in a strong jobs report in October.
The murky market picture is another reason why investors maintain a long-term perspective when picking stocks.
To that end, here are five stocks picked by top Wall Street professionals, according to TipRanks, a service that ranks analysts based on past performance.
Learning platform provider Chegg (CHGG) is making great strides amidst macroeconomic challenges. The company reported higher third-quarter revenue and profit and also raised its full-year guidance. This led to a nearly 22% rise in the stock price the following day.
Barrington Research analyst Alexander Paris seemed even more bullish on Chegg after analyzing the earnings and commentary report. The analyst said the company’s valuation was attractive compared to its vertically focused EdTech and SaaS counterparts, and therefore reiterated its buy rating on the stock. He also increased the price target to $30 from $25.
Notably, the fall semester is in full swing, prompting management to increase revenue and adjusted earnings before interest, taxes, depreciation and amortization for the year. (See Chegg’s financial statements on TipRanks)
Paris was also optimistic about Chegg’s strategy to increase its TAM (total addressable market) as well as the percentage of Chegg Study Pack subscribers. These increase the average revenue per user (ARPU) and profitability of the business.
In total, 57% of betting odds generated profits. Additionally, each rating returned 14.6% on average. The analyst is also ranked 207e from more than 8,000 analysts tracked on TipRanks.
Huron Consulting Group
Next on our list of top analysts’ favorite stocks is Huron Consulting Group (HURN), operational and financial consulting firm. The company is benefiting from demand for its digital services, which led to a robust third quarter.
The company raised its full-year revenue forecast, earning the trust of Barrington Research analyst Kevin Steinke. The analyst raised his near-term revenue and adjusted EBITDA estimates and, accordingly, raised the price target from $80 to $89. Steinke also rates Huron as a buy — a rating he’s maintained on the company for the past four years.
The analyst is bullish on Huron’s expectations for adjusted EBITDA expansion into mid-teens by 2025. “This should drive annual adjusted EPS growth in teens through 2025” , Steinke said. (See Huron Consulting stock chart on TipRanks)
The company’s ability to return cash to shareholders was also highlighted by the analyst. The company intends to return 25% to 50% of annual free cash flow to shareholders through buyouts.
Steinke sits at No. 415 out of more than 8,000 analysts on TipRanks. The analyst has had 54% positive ratings over the past year, with each rating generating an average of 11.5% returns.
KAR Auction Services
KAR Auction Services (WHAT) provides a platform to auction used cars and offers salvage auction services in North America and the UK. The company has felt the pain of supply-side challenges in terms of vehicles being auctioned on its platform.
Although the company did not provide quarterly guidance, management said it was reviewing the substance of the supply issues. Management expects the recovery to be slow and gradual due to the various headwinds that continue to weigh on the business. (See Kar Auction Services Blogger Opinions & Sentiment on TipRanks)
Reflecting this sentiment, Barrington Research analyst Gary Prestopino also believes that growing new vehicle production, rising interest rates and a slowing economy “should put downward pressure on vehicle prices. new and used vehicles.
Nonetheless, the analyst is optimistic that KAR’s proactive cost-cutting measures are ahead of schedule and keeping the company afloat in the market.
The analyst reiterated a buy rating on the stock with a price target of $25. “We believe that as the market recovers on a unit volume basis, KAR will show significant leverage and Adjusted EBITDA growth based on a lower cost structure and auction platform. streamlined,” said Prestopino, ranked 56th.e among more than 8,000 analysts on TipRanks.
The analyst also has a track record of 56% profitable ratings over the past year, with each rating generating an average of 31.5% returns.
Developer of high-precision analog and mixed-signal integrated circuits (ICs) Cirrus Logic (RAW) beats the semiconductor industry blues with solid execution and solid design. The company has been a favorite of Susquehanna analyst Christopher Rolland, who recently reiterated his buy rating on the stock with a price target of $95.
Cirrus was also among the tech names that reported significantly better-than-expected quarterly results. In addition, the advice provided was optimistic. Higher smartphone volumes and new product launch pads boosted results. (See Cirrus Logic Risk Factors on TipRanks)
The company’s close association with Apple (AAPL), which is its biggest customer, isn’t as bad as skeptics claim. Rolland sees the relationship between the two companies tightening over time, leading to outsized growth for Cirrus. Additionally, Rolland also thinks Cirrus is a potential buying target for Apple, which is also dependent on Cirrus’ IC products.
Nevertheless, even Rolland was cautious in the short term, saying a resumption of shipments could soon occur. “However, in our experience, multiple quarters of above-expected revenue at Cirrus are often indicative of potential shipment withdrawals,” said Rolland, who expects a steeper sequential decline in March shipments from the next year.
Rolland is placed at 66e position among more than 8,000 analysts followed on TipRanks, and has a success rate of 66% on its ratings. In addition, each of its ratings has generated an average return of 19.3% over the past year.
Leader in semiconductors Advanced micro-systems (AMD) is another action on Christopher Rolland’s buy list. This is despite the company facing headwinds from a correction in PC inventory and slowing demand. The analyst believes that 2023 “will turn into a ‘throwaway year’ for AMD as it resolves major issues in the PC industry.”
The analyst reiterated his buy rating on the stock with a price target of $80, despite the company’s lackluster third quarter and even lackluster fourth quarter guidance. (See Advanced Micro Devices Stock Investors on TipRanks)
Rolland expects AMD to continue to gain market share, albeit at a slower pace than in recent years.
Additionally, AMD’s new revenue stream from Xilinx is “highly strategic and profitable,” Rolland said. The acquisition of Xilinx opens an opportunity for AMD to accelerate its mix shift towards servers, which will be excellent for margins.
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