NVIDIA President and CEO Jen-Hsun Huang
Robert Galbraith | Reuters
Investors are concerned with recession risk, especially as the Federal Reserve remains resolute in raising interest rates.
In these trying times, investors would do well to look for stocks that are positioned to navigate a potential economic downturn.
To help you with the process, here are five stocks chosen by Wall Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Chip giant Nvidia (NVDA) is under pressure from the slump in the PC gaming market. Revenue and profit fell in the fiscal fourth quarter compared to the prior year, but the company managed to beat Wall Street expectations thanks to the year-over-year increase in data center revenue.
Investors applauded Nvidia’s Q1 revenue guidance and CEO Jensen Huang’s comments on how the company is well positioned to benefit from increased interest in generative artificial intelligence (AI).
Jefferies analyst Mark Lipacis expects Nvidia’s data center revenue to accelerate year-over-year after Q1, growing 28% in 2023 and 30% in 2024, supported by higher AI spending. (See Nvidia Stock Chart on TipRanks)
Lipacis said, “Unlike INTC/AMD noting cloud inventory builds, NVDA discussed a positive H100 ramp (already crossed the A100 in just Q2 post-launch), accelerating DC [data center] touring JJ after C1Q23, hinting at better visibility and more optimism for the year due to increasing activity around AI infrastructure, LLMs [large language models]and generative AI.”
The analyst considers Nvidia a “top pick” following the recent results and reiterated a buy rating. He raised the price target for NVDA shares from $275 to $300.
Lipacis ranks #2 out of over 8,300 analysts on TipRanks. Its ratings were profitable 73% of the time, with each rating returning an average of 27.6%.
Ross stores (ROST) delivered optimistic results for the fourth quarter of fiscal 2022 as the retailer’s discount offerings continued to attract customers. However, the company issued conservative guidance for fiscal 2023 due to the impact of high inflation on its low-to-middle-income customers.
The results are followed by Guggenheim analyst Robert Drbul, who ranks 306e among analysts on TipRanks, he downgraded his earnings per share estimate for fiscal 2023 for Ross Stores to reflect the impact of ongoing macroeconomic headwinds.
Nevertheless, he expects Ross Stores revenues to return to double-digit growth in fiscal 2023, thanks to a higher operating margin, the accelerated opening of new stores and the company’s share buyback program.
Drbul reiterated a buy rating for Ross Stores and a price target of $125, citing “the favorable environment for the company given the increased supply of branded goods in the market, a stronger value proposition and a broader range compared to pandemic levels.”
Drbul has delivered profitable reviews 63% of the time and its reviews have averaged a return of 9.1%. (See Ross Stores Hedge Fund trading activity on TipRanks)
Next on our list is another consumer cyclical company – Office Brands (KTB), owner of the iconic Wrangler and Lee Brands. Shares of the clothing company rose on the day it reported solid fourth-quarter results and issued a strong outlook for 2023.
Williams Trading analyst Sam Poser noted that demand for Wrangler and Lee continues to improve, fueled by the company’s brand-building initiatives. Furthermore, he thinks Kontoor’s fiscal outlook for 2023 is “likely to turn out to be conservative”. He expects the company’s sales growth in China to turn positive in the second quarter and gradually accelerate thereafter.
Poser raised its earnings per share estimates for FY 2023 and 2024, reiterated its Buy rating for Kontoor Brands and raised its price target from $53 to $60. (See Insider Trading Activity of Kontoor Brands on TipRanks)
“The combination of better-than-expected 4Q22 results led by a 20% increase in US DTC [direct-to-consumer] earnings, continued improvements in the positioning of both the Wrangler & Lee brands and reasonable guidance are indicative of continued improvements in KTB’s customer-facing capabilities and its overall business,” Poser said.
Poser is ranked 134e among analysts followed by TipRanks. Furthermore, 55% of its reviews have been successful, with an average return of 17.7%.
Fiserv (FISV), a provider of technology solutions for payments and financial services, is also on our list this week. Last month, the company announced its fourth-quarter results and assured investors that it was well prepared to reach its 38e double-digit growth in adjusted earnings per share year in a row, supported by recent client additions, solid recurring revenue and productivity efforts.
Tigress Financial Analyst Ivan Feinseth noted that Fiserv continues to experience strong business momentum, driven by the performance of its payment product portfolio and the strength in Clover, the company’s cloud-based point-of-sale and business management platform. (See Fiserv financial statements on TipRanks)
“FISV’s diversified product portfolio and industry-leading technology position it at the forefront of the continued secular shift to electronic payments and the increasing use of connected devices to provide payment processing services and access to financial data,” said Feinseth. The analyst reiterated a buy rating for FISV shares and raised the price target from $152 to $154.
Feinseth has the 176e ranking among more than 8,300 analysts tracked on the site. In addition, 62% of its ratings were profitable, its ratings generated an average return of 12.3%.
Business day (WDAG), a provider of cloud-based financial and human resources applications, released a subdued outlook for fiscal 2024, overshadowing better-than-expected results for the fourth quarter of fiscal 2023.
Baird analyst Mark Marcon noted that Workday continues to gain market share in human capital management and financial management solutions in the enterprise space, though the pace of growth going forward is “somewhat tempered by macro uncertainty.”
Marcon also noted that despite extended enterprise sales cycles due to macroeconomic pressures, Workday acquired seven new Fortune 500 and eleven new Global 2000 customers in the fiscal fourth quarter. The analyst said new co-CEO Carl Eschenbach is “quickly making a mark on WDAY” and that the company is expected to accelerate subscription revenue growth again to the 20% level once the macro background normalizes.
“While our near-term expectations are more subdued, we believe valuation relative to long-term potential remains attractive given WDAY’s high net revenue retention (over 100%), high GAAP gross margins, strong FCF [free cash flow] and strong growth potential as financial institutions move to the cloud,” said Marcon.
The analyst slightly lowered his price target for Workday stock from $223 to $220 to reflect near-term pressure. He reiterated a buy rating, given the company’s long-term growth potential.
Marcon is in place 444e of analysts followed on TipRanks. His ratings were profitable 60% of the time and generated an average return of 13.5%. (See Workday Blogger Opinions and Sentiments on TipRanks)
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