Apple CEO Tim Cook speaks during Apple’s annual Worldwide Developers Conference in San Jose, California on June 6, 2022.
Pierre Dasilva | Reuters
We are almost at the middle of the year and the volatility of the stock markets is not about to stop.
Investors, already reeling from the sharp drop in stocks, got another surprise last week when the Federal Reserve raised interest rates by three-quarters of a percentage point. The central bank has made it clear that it is taking steps to stifle inflation, but its actions have further stoked fears of an impending recession.
Investors are looking for a reminder not to lose sight of their long-term goals. Top Wall Street pros name their favorite picks even as uncertainty looms, according to TipRanks, which tracks top performing analysts.
Here are five actions to highlight this week.
With over $2 trillion in market capitalization, Apple (AAPL) is one of the largest companies in the world. He has all the resources to get through the tough times and continue to grow over time.
However, Apple’s size has not shielded it from the current problems weighing on the economy. The iPhone maker itself expects an $8 billion drop in sales in the end-June quarter, due to continued component supply constraints, which have been compounded by Covid-led lockdowns. in China. Additionally, Apple also expects revenue headwinds from halting shipments to Russia.
Macro headwinds are clouding Apple’s short-term outlook, but analysts are looking at the long-term outlook.
Deutsche Bank analyst Sidney Ho recently reiterated a buy rating on the stock despite the price target being reduced to $175 from $200. While Apple didn’t provide guidance for the fiscal third quarter, Ho expects low-single-digit year-over-year growth, factoring in growth headwinds.
Looking at lingering geopolitical issues, rising interest rates and slowing consumer spending, the analyst said he wouldn’t be “surprised to hear more talk about Apple’s cut orders.” .
There is no doubt that the stock has lost almost 26% in 2022. But Ho finds this performance as good, if not slightly better, than its mega-cap peers. Additionally, he said, macroeconomic headwinds will not allow AAPL’s stock valuation to reach its 5-year high of more than 30 times earnings per share in the next 12 months, giving another reason to consider adding the action now. (See Apple stock chart on TipRanks)
Sidney Ho ranks No. 127 among nearly 8,000 analysts tracked on TipRanks. Additionally, he has succeeded in 72% of his stock odds, returning an average of 22.3% on each.
Deutsche Bank’s Ho is also bullish on NetApp (NTAP), which provides enterprise data storage and management solutions. The stock is no stranger to the current setbacks plaguing industries, and its shares are down about 30% year-to-date.
Higher component and logistics costs resulting from supply chain constraints have weighed on the company’s margins. These issues are likely to be short-term barriers.
Despite the headwinds, NetApp demonstrates tremendous ability to execute, and the company has managed to maintain its strong balance sheet and in a net cash position. Having a strong balance sheet has helped this tech giant be consistent with its dividend payments. (See NetApp dividend date and history on TipRanks)
Ho points out that the company’s stock underperformed its computer hardware peers by a significant margin in 2022. However, that opened up a great buying opportunity for long-term compounding returns.
The analyst was a little disappointed when NetApp couldn’t meet its own public cloud recurring annual revenue target due to increased customer churn and sales force turnover in the industry. cloud operations unit. However, Ho isn’t too worried, as NetApp has plans in place to address these issues.
Additionally, Ho is confident that the company’s shift in focus from merger and acquisition activity to share buybacks will drive earnings per share growth.
The analyst cut the price target from $90 to $84, but upgraded NTAP stock to buy-hold, keeping the long-term upside in mind.
Oracle Cloud Software Powerhouse (ORCL) is one of the few tech companies tactfully navigating market headwinds. (See Oracle Hedge Fund trading activity on TipRanks)
Its strong quarterly results came as a breath of fresh air amid the disastrous winds of the season. Moreover, its guidance for the current quarter, which includes the assets acquired from Cerner, is also encouraging. Last December, Oracle announced that it would acquire Cerner, which provides IT solutions for the healthcare industry.
Monness Crespi Hardt & Co. analyst Brian White was among those bullish on Oracle. He underscored Oracle’s confidence in its cloud momentum, which is expected to continue in fiscal 2023.
White also finds significant upside potential in the current valuation, despite the fact that its 12-month price-earnings target is above its recent valuation high. This is based on the belief that “the successful creation of a solid foundation to support strong cloud growth in the years to come has the potential to increasingly provide the market with greater confidence in the long-term business model. of the company”.
White reiterated a buy rating on Oracle, but cut the price target to $113 from $126 to account for near-term headwinds in the tech sector.
Out of nearly 8,000 Wall Street analysts tracked by TipRanks, White ranks 579th based on 55% passing ratings and an average return of 9.2% on each rating.
Deviating slightly from the core tech sector, the next stock on the top analyst radar is IHS Holding (IHS), which owns, operates and develops a shared telecommunications infrastructure. With an expanding international footprint, the current situation has made dollar availability relatively tight, and IHS shares are down nearly 28% so far this year. (See the IHS Holding stock chart on TipRanks)
Nonetheless, the company released upbeat quarterly numbers last month, prompting RBC Capital Markets analyst Jonathan Atkin to dive deep into the company’s financials and developments. Atkin noted the company’s “low churn, long-term contracts, and attractive annuity-like cash flows.”
Atkin sees IHS’ significant exposure to African markets as a key growth driver, as the continent has one of the highest subscriber growth rates. Infrastructure companies have a strong advantage in African markets as 2G and 3G are still common in the region, but they are bound to be upgraded in the future.
Furthermore, Atkin is also confident in IHS’ abilities to meet the challenges, given its strong track record of operating in Nigeria for 22 years. Notably, the Nigerian markets face several operational, financial and compliance challenges that make it difficult for international businesses to operate.
Based on these observations and more, the analyst reiterated a buy rating on the stock with a price target of $21.
Jonathan Atkin ranks 15th out of nearly 8,000 analysts tracked on TipRanks, giving us all the more reason to consider his beliefs on a stock. He hit 75% of his grades, generating returns of 15.4% on each.
Bank of America
Bank of America Stock (BAC) are down almost 30% this year. Nevertheless, the banking juggernaut is taking advantage of the high interest rate environment. The bank’s CEO, Brian Moynihan, said earlier that rising interest rates and loan growth should significantly improve short-term net interest income. (See Bank of America stock investor sentiment on TipRanks)
In a recent research report, RBC Capital analyst Gerard Cassidy seems to agree. “Due to expected increases in short-term interest rates, we have increased our net interest income estimates which were more than offset in 2022 by lower than expected investment banking income, but only partially offset in 2023,” he said.
Cassidy recalled that historically, monetary and fiscal policies have resulted in increased base deposits for BAC. He thinks deposits are generally stickier than expected, giving more time to hold invested deposits. Thus, the analyst expects the bank’s profitability to remain initially high in the monetary policy tightening cycle.
Cassidy maintained his bullish position on BAC with a buy rating, but reduced his price target to $45 from $51 based solely on lower valuation multiples.
Notably, Cassidy ranks 34th in a group of nearly 8,000 analysts tracked on TipRanks. Additionally, 67% of its ratings were profitable, generating an average return of 22.8% per rating.