As the year progresses, the vast majority of companies have already posted their latest quarterly results.
The economic recovery ramped up throughout the first half of 2021, and many firms saw massive revenues. Now, investors' attention has turned from summer and travel trends to what the fall season may have in store.
With TipRanks' unique tools, investors can see which companies Wall Street's top analysts think are well-positioned to capture these shifting trends. These analysts are some of the highest ranked on TipRanks, based on their success rates and average returns per rating.
Here are five stocks that Wall Street's best-performing analysts think still have major upside potential after earnings.
Companies have been preparing their workforces for the grand return to the office, some hybrid, some full-time. However, due to the high rate of infection of COVID-19 in the U.S., several high-profile firms such as Apple have just announced delays in their return dates. This bodes well for cloud computing architecture services, such as Microsoft's Azure and Office 365 platforms.
Upon review of Microsoft's performance, Daniel Ives of Wedbush Securities said that he sees the work-from-home trend persisting. After showing strong momentum throughout 2020 and the first half of 2021, Microsoft continues to close large deals for both enterprise- and consumer-level packages of its cloud-based services. These deals are expected to provide revenue for Microsoft well into 2022.
Ives maintained his buy rating on the stock, and bullishly raised his price target from $325 to $350.
The five-star analyst added that in the "cloud arms race," Microsoft is poised to capture more market share than Amazon Web Services. Microsoft recently hiked its prices for Office 365, which Ives anticipates could generate more than $5 billion in 2022.
Regarding a long-term cloud computing stock pick, Ives stated, "Microsoft remains our favorite large cap cloud play, and we believe the stock will move higher into year-end as the Street further appreciates the cloud transformation story."
Out of more than 7,000 analysts on TipRanks, Ives is ranked as #36. The analyst has a 73% success rate on his stock picks, translating to an average return of 34% per rating.
U.S. consumer discretionary spending trends took off over the last year and half, particularly when it comes to digital shopping. Target has been successful in capturing these movements, and is well-positioned to continue doing so.
Robert Drbul of Guggenheim reported bullishly on the stock, stating that he is "encouraged by the ongoing strength of Target's business, its profitability and cash flow generation." Target recently reported second-quarter earnings results, beating Wall Street consensus estimates by 7% in earnings per share, as well as in several other key sectors and metrics.
Drbul reiterated a buy rating for Target, and raised his price target from $250 to $295.
The five-star analyst mentioned that Target has continued to see confidence-instilling growth, in both in-store and digital sales. The general merchandise retailer marked clear success in its fulfillment-from-store operations, moving 95% of its total sales for the quarter and capturing surging online demand. Same day shipping and pickup services expanded another 55% over the same time period, after massive growth of 270% in 2020.
The large stores continue to remain relevant through high-profile brand partnerships. Additionally, Drbul noted that "all five core merchandise categories delivered positive comparable sales, on top of last year's historic sales performance."
While increases in freight and shipping costs put a slight dent in Target's margins, the company has approved up to $15 billion in new share repurchases, and has already completed repurchasing $1.5 billion in stock from the previously approved program.
On TipRanks, Drbul is rated as #319 out of over 7,000 analysts. His average return per rating stands at 12.3%, and he currently maintains a success rate of 67%.
Closed semiconductor factories, mixed with a heightened demand for smartphones, computers, and automobiles that was brought on by the Covid-19 economic shifts, created the perfect storm. An ongoing semiconductor shortage has been pressuring technology and automotive manufacturers for much of the second quarter. Although several analysts believed it to be easing, the situation is not so simple. The increased demand is, however, good for Applied Materials, which is expected to see revenues continue to grow through 2022.
Bullish Quinn Bolton of Needham & Co. believes the stock "will outperform peers in 2022 due to a structurally favorable WFE [wafer fab equipment] mix next year."
Bolton reiterated a buy rating on the stock and declared a price target of $153.
Just last Thursday, Applied Materials reported strong second-quarter earnings results, beating Wall Street consensus estimates on earnings per share and gross margin, as well as raising guidance for the third quarter
The expansion in demand for semiconductors has been equalizing, as the firm commits to ramping up supply. Despite this, dynamic random-access memory chips remain undersupplied, although their "spot prices started to fall a couple of weeks ago," wrote Bolton.
Applied Materials is said by Bolton to have an order backlog worth more than $10 billion. This fact alone underlines the company's fundamental health and its potential for steady revenues, moving forward.
The five-star analyst is rated by TipRanks as #5 out of over 7,000 total analysts on the site. His stock rating's success rate holds at 74% correct, and he averages a return of 45.1% per rating.
Identifying trends is one of the main requirements of Wall Street's top analysts. Indeed, trends are in favor of Petco. The Covid-19 pandemic kept people at home, and many then acquired pets, which require care. As this pattern sticks, Petco stands to benefit.
Peter Benedict of Robert W. Baird wrote that Petco "operates a unique, fully integrated pet care ecosystem within the ~100B U.S. pet market." Its strong second-quarter earnings, roadmap toward offering health services, and lowered debt burdens help categorize it as an attractive stock.
Benedict maintained a buy rating on Petco and assigned a price target of $30.
Calling pets an "annuity," the analyst noted that several services are necessary to maintain one, so customers are frequently recurring. Petco already captures this market with its diversified offerings, and has been expanding its in-house veterinary services as well. This opportunity is seen by Benedict as a long-term initiative which will expand market share.
The company printed quality second-quarter earnings results, beating expectations and raising guidance. Benedict added that as economies reopened, "in-store shopping drove robust pet care center sales," and premium services like grooming, training, and medical are in high demand.
When taking into account the company's additional initiatives in "merchandising, services, digital and data analytics capabilities," Benedict said that Petco's stock stands at an attractive valuation.
Benedict is rated by TipRanks as #25 of more than 7,000 experts, and 83% of his ratings have been successful. He averages a return of 24.9% per rating.
Another massive semiconductor firm has been experiencing high sustained demand for its chips. Nvidia was successful in closing an upbeat Q2, and is expected to continue raking in revenue as gaming and automotive manufacturers demand its products. While the firm struggles to close an acquisition deal, Rajvindra Gill of Needham & Co. nevertheless published his bullish hypothesis on its future outlook.
Gill reiterated a Buy rating on the stock, and raised his price target from $200 to $245 per share.
Nvidia beat second quarter Wall Street consensus estimates on earnings per share and gross margin. With its margins widening, Gill expects the company to have "significant operating leverage."
On the downside, the five-star analyst does not expect Nvidia's acquisition of technology firm Arm Ltd. to close any time soon. Obstacles are mounting and negotiations are dragging on, so he estimates a 20% chance of success for this opportunity.
Despite this, demand for data centers is growing significantly, as the trend of enterprise-sized cloud computing takes hold. Furthermore, Gill identifies an opportunity for growth, as an internet service provider can run a full data center based on Nvidia's triton programming language. Data center build-outs remain Nvidia's largest driver of growth.
Additionally, the analyst does not see the volatility in cryptocurrency mining regulations as a concern. He writes that while Nvidia's products are used by some miners, the exposure the company has to this revenue stream is not significant.
To Gill, Nvidia remains a buy partly due to its attractive valuation. He is encouraged by its "superior balance sheet," calling it "the best one in the industry."
On TipRanks, Gill has a ranking of #161 among more than 7,000 Wall Street analysts. His ratings return an average of 18.2%, and he is successful 68% of the time.