As the earnings season rolls on, investors are getting a glimpse into how companies are handling an array of macro pressures.
Analysts can pick apart these quarterly reports and help investors identify companies that can withstand near-term challenges and deliver attractive returns in the long term.
To that end, here are five stocks favored by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
Netflix
Streaming giant Netflix (NFLX) recently delivered a beat on third-quarter earnings per share, with its crackdown on password sharing helping to add more subscribers to its platform.
Evercore analyst Mark Mahaney said that there were several key positives in the company’s third-quarter print, including 8.76 million subscriber additions, stronger-than-anticipated Q4 2023 subscriber addition guidance, and share buybacks of $2.5 billion. He also noted an increase in the 2023 free cash flow outlook to about $6.5 billion, from the previous guidance of at least $5 billion and a price hike for the basic and premium plans.
“We continue to believe that NFLX’s ad-supported offering and password-sharing initiatives constitute major Growth Curve Initiatives [GCI] – catalysts that will drive a material reacceleration in revenue and EPS growth,” said Mahaney.
The analyst thinks that the company is pursuing these GCI catalysts from a position of strength, given that it is a global streaming leader based on several metrics, including revenue, subscriber base and viewing hours.
Mahaney reiterated a buy rating on NFLX stock with a price target of $500. Interestingly, Mahaney ranks No. 48 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 55% of the time, with each delivering a return of 25.4%, on average. (See Netflix Technical Analysis on TipRanks)
Nvidia
Next up is semiconductor giant Nvidia (NVDA). The stock has witnessed a stellar run this year, thanks to demand for NVDA’s chips in building generative artificial intelligence (AI) models and applications.
In a recently updated investor presentation, the company revealed roadmaps for its data center graphics processing units, central processing units and networking chipsets.
JPMorgan analyst Harlan Sur, who holds the 88th position out of more than 8,500 analysts on TipRanks, noted that NVDA’s product roadmaps indicate two major shifts. First, Nvidia has accelerated its product launch timing from a 2-year cycle to a 1-year cycle, which is expected to help the company keep pace with the growing complexity of large language compute workloads.
Regarding the second major shift, Sur said that the roadmaps indicated “more market segmentation (cloud/hyperscale/enterprise) by expanding the number of product SKUs [stock keeping units] that are optimized for a broad spectrum of AI workloads (training/inference).”
The analyst thinks that with these notable developments, the company is taking a multi-pronged approach to strengthen its data center market and technology. He reaffirmed a buy rating on the stock with a price target of $600, noting the growing demand for NVDA’s accelerated compute and networking silicon platforms and software solutions in the development of generative AI and large language models.
Sur’s ratings have been successful 64% of the time, with each rating delivering an average return of 18.2%. (See Nvidia Insider Trading Activity on TipRanks).
Instacart
Grocery delivery platform Instacart (CART) made its much-awaited stock market debut in September. Baird analyst Colin Sebastian recently initiated a buy rating on CART stock with a price target of $31.
Explaining his bullish stance, Sebastian said, “Despite a range of well-financed online and legacy retail competitors, Instacart enjoys an enviable combination of scale, retail integrations, vertical expertise, and proprietary technology.”
The analyst highlighted that the essence of Instacart’s business model is an asset-light partnership strategy. He also thinks that Instacart’s data and technology sophistication are its key competitive advantages. He believes that most food retailers might not be able to build similar internal e-commerce capabilities.
Most importantly, Sebastian views Instacart’s advertising business as one of the most successful launches of retail media, second only to e-commerce behemoth Amazon (AMZN). He pointed out that consumer packaged goods advertisers are promoting their products by leveraging Instacart’s performance ad formats that help in reaching target customers with relevant product ideas.
Sebastian holds the 340th position among more than 8,500 analysts on TipRanks. His ratings have been successful 52% of the time, with each rating delivering an average return of 10.7%. (See Instacart Options Activity on TipRanks).
SLB
Oilfield services company SLB (SLB), formerly Schlumberger, recently reported better-than-expected third-quarter adjusted earnings. SLB stated that the oil and gas industry continues to gain from a multi-year growth cycle that has shifted to international and offshore markets, where the company claims to enjoy a dominant position.
Goldman Sachs analyst Neil Mehta contends that while there are no clear near-term catalysts for SLB stock, the long-term growth story remains intact due to resilient customer spending. The analyst highlighted that Saudi Aramco is expected to spend about $245 billion through 2030, reflecting about 5% to 6% annual growth. Further, additional spending (at a modest growth rate) is anticipated from the United Arab Emirates’ ADNOC, Qatar and other players in the region.
Given that 80% of SLB’s revenue is from international and offshore markets, Mehta is confident that the company is well-positioned to leverage the long-term momentum in the Middle East.
“SLB remains the preferred way to gain exposure to the international and offshore theme, with additional growth drivers in the expansion of its digital footprint with customers, which is margin accretive at ~40-45%, in our view,” said Mehta.
Calling SLB a structural winner, particularly during pullbacks, Mehta reiterated a buy rating on the stock with a price target of $65. He ranks No. 155 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 65% of the time, with each delivering an average return of 12.5%. (See SLB’s Stock Charts on TipRanks)
Tesla
Our final name this week is electric vehicle maker Tesla (TSLA). The company missed earnings and revenue guidance for the third quarter, with macro pressures, a highly competitive EV market and aggressive price cuts affecting its performance.
Mizuho analyst Vijay Rakesh noted that despite the sequential decline in the company’s Q3 gross and operating margin due to lower pricing and Cybertruck R&D expenses, they remain at the high end of the margins of legacy automakers and way above rival EV makers’ margins.
The analyst lowered his price target for TSLA stock to $310 from $330 to reflect near-term headwinds like margin pressure, macro weakness and Cybertruck ramp challenges. Nevertheless, he reiterated a buy rating, noting that the stock still trades at a discount to disruptors such as Nvidia, while also generating profitability at scale.
“We believe TSLA is prioritizing market share, technology, and cost leadership and is better positioned than peers to weather any turbulence to the broader Auto market,” said Rakesh.
Rakesh ranks No. 82 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 57% of the time, with each delivering a return of 18.6%, on average. (See Tesla Financial Statements on TipRanks)