The Spotify logo hangs on the facade of the New York Stock Exchange along with the flag of the United States and Switzerland as the company trades its shares with a direct listing in New York, on April 3, 2018.
lucas jackson | Reuters
Stocks were volatile last week as investors took in the Federal Reserve’s plans to tighten monetary policy.
Short-term investing looks precarious as investors weigh recession risk, supply chain disruptions and conflicts in Eastern Europe. Furthermore, the Fed’s plans, detailed in the minutes of its March meeting last week, shed light on how the central bank will reduce its balance sheet.
Top Wall Street professionals ignore short-term stock market fluctuations. Instead, they chose the companies they believe have the most long-term potential, according to TipRanks, which tracks top-performing analysts.
Here are five names to watch this week.
disneyTELL) recently saw a massive uptick in revenue from its theme parks as the pandemic and its restrictions eased.
Ivan Feinseth of Tigress Financial Partners is optimistic about Disney’s prospects, noting that the company has managed to generate 100% year-over-year gains on revenue from its theme parks. (See Walt Disney Company Stock Charts at TipRanks)
Feinseth priced the stock as a buy and provided a price target of $229 per share.
In addition to the heavy spending seen at its physical theme parks, the entertainment giant has produced popular content for its movie franchises and its streaming platform, Disney+.
The top-rated analyst went on to write that “content is king, and DIS is king of content,” arguing that its “strong brand equity, innovative entertainment development capabilities, and continued investment in new ‘digital media developments’ they will continue to drive profits for the entertainment giant.
While Disney previously halted dividend payments and share buybacks to protect against uncertain economic swings induced by the pandemic, Feinseth expects these shareholder value activities to resume in the near future.
TipRanks has almost 8,000 analysts in its database, and Feinseth is ranked 67th. He was correct in picking stocks 68% of the time and averaged 30.8% in each of his ratings.
Apple (AAPL) is constantly innovating on different fronts. One is its growing payments business, running its Apple Pay platform, and some have speculated that the company may have plans to become a chartered bank. Evercore ISI’s Amit Darianani doesn’t expect this, pointing out that Apple’s current path is much more advantageous.
Daryanani argued that AAPL will most likely continue to grow its fintech segment, focusing its efforts on building a closed-loop payment system. The tech company would most likely prefer to increase its consumer penetration and ecosystem adherence to the intense regulatory scrutiny that comes with obtaining a banking charter. (See Apple Hedge Fund activity on TipRanks)
The analyst called the stock a buy and calculated a price target of $210.
Apple recently acquired British fintech firm Credit Kudos, a move that Daryanani says bolsters its open banking infrastructure capabilities. In addition, Apple and Goldman Sachs (GS) are reported to be working together to provide “buy now, pay later” services to the tech giant’s users. The project, called Apple Pay Later, is another piece of the financial puzzle created by AAPL.
Daryanani added that Apple is moving several other tools in-house, including “payment processing, loan underwriting, fraud analysis, credit checking, and additional customer service features such as litigation management.”
Out of nearly 8,000 analysts, Daryanani holds a position of 161st. His success rate is 68% and he has an average return of 29.7% on each of his selected stocks.
Cybersecurity is an industry with great potential, and Zscaler (SZ) may be an option that is likely to continue to outperform analysts’ estimates and lift their forecast.
This is at least in line with the views of Needham’s Alex Henderson, who expects the company to “deliver strong growth, improve margins, and ultimately facilitate a shift in business architecture to a Cloud Direct model.” The analyst went on to say that while some short-term consolidation is possible in the stock’s valuation, the company itself has “exceptional long-term value.”
Henderson priced the stock as a buy and assigned a price target of $418.
The analyst detailed the company’s history of strong operating margins and expects ZS to maintain 20-30% of this metric for an extended period. (See Zscaler revenue data at TipRanks)
Henderson highlighted several emerging products that are driving growth, including Zscaler Cloud Protection and Zscaler Digital Experience, which enhance the user experience and complement its previous Zscaler Internet Access and Zscaler Private Access offerings.
Henderson called the company “one of the most dynamic names in our coverage” and said investors should buy the stock and “add in any weaknesses.”
Out of nearly 8,000 analysts in the TipRanks database, Henderson is ranked 43rd. Picking stocks, he was right 71% of the time and has an aggregate average rate of return of 39.3% per rating.
Catching stocks when they are down is easy, but finding stocks with the potential to bounce back is where investors go wrong. In the case of Spotify (PLACE), the stock was hurt not only by strong fourth-quarter growth and technology sales, but also by investor concerns about the streaming company’s actual business model.
The company has yet to prove its ability to generate commanding gross margins, though one analyst believes the answer lies in a key feature of Spotify’s services: its two-sided marketplace.
In his recent bullish report, Evercore ISI’s Marc Mahaney stated that Spotify is reaching a tipping point. (See Spotify’s risk analysis at TipRanks)
Mahaney priced the stock as a buy and offered a price target of $300 per share.
The two-sided marketplace, which Spotify calls its “paid promotional tools it offers artists and record labels,” is essentially a content push option that is built into algorithmic playlists and pop-ups in users’ accounts. These tools have proven their worth, and Mahaney believes they can significantly boost the streaming music service’s margins over the next two years.
He estimates that tools could triple their current contribution, reaching 30% or more of SPOT’s gross margins by 2024 and accounting for about 15% to 20% of total industry marketing spend. That would be a year before Wall Street’s consensus on the issue, and would lead to a “significant revaluation of SPOT shares,” which would certainly boost the valuation, the analyst noted.
Mahaney is ranked 372nd out of nearly 8,000 professional analysts on TipRanks. He was able to price the stock 55% of the time and averaged a 25.3% return on each.
Partly due to growing competition in the industry, Netflix (NFLX) recently saw investors flee its shares, sparking a sell-off from its 2021 highs. The streaming platform still has a sizable market share, though one analyst sees strong potential for further subscriber penetration.
This hypothesis comes from JPMorgan’s Doug Anmuth, who analyzed the company’s global subscriber penetration and identified several large markets that may see growth in the future. By Anmuth’s calculations, Netflix currently has about a third of all broadband subscribers globally, with far fewer in regions such as Asia-Pacific and Europe, the Middle East and Africa. (See Netflix website traffic on TipRanks)
Anmuth priced the stock as a buy and provided a price target of $605. This target would bring the stock closer to its 2021 valuation.
The analyst said that “within EMEA, we see bourses from Eastern and Southern Europe as well as the Middle East and Africa as largely underpenetrated, and Japan, India and South Korea as key growth opportunities in APAC.” In addition, he said that APAC represents the largest but fastest growing untapped market, which Anmuth said will focus on localized content.
Speaking of his broader bullish stance on the company, the analyst wrote that “We believe NFLX is a key beneficiary and driver of continued linear TV disruption, with the company’s content doing well on future scale and resulting in a virtuous cycle of strong subscriber growth, in addition to rising revenues and profits. »
Out of nearly 8,000 analysts, Anmuth is ranked 227th. He was right on his stock picks 58% of the time and averaged 28.6% on each.