Nasdaq listing during Datadog IPO, September 19, 2019.
Amid mixed economic data and earnings, picking the right stocks can be difficult for investors. One strategy is to follow the investment ideas of Wall Street experts and gain valuable insights to make successful stock decisions.
To that end, TipRanks, a platform that ranks analysts based on their past performance, has identified five stocks that are highly favored by senior analysts. Learn more about these stocks below.
The e-commerce and cloud computing giant Amazon (AMZN) is this week’s top pick. Earlier this month, the company beat analysts’ second-quarter earnings estimates and returned to double-digit revenue growth.
DBS analyst Sachin Mittal noted that the company’s retail segment posted an operating profit in the second quarter after seven quarters of losses due to macro headwinds. The analyst expects the retail segment to be the main driver of AMZN’s share price appreciation starting this year.
He also noted that AWS is Amazon’s most valuable business, with a 32% share of the global cloud infrastructure market. It’s worth noting that AWS accounted for only 17% of AMZN’s total revenue in the second quarter, but accounted for 70% of the company’s profit.
Mittal raised his price target on AMZN to $175 from $150 and affirmed a buy rating on the stock, citing the company’s leading position in e-commerce and cloud dominance through AWS.
The analyst is also optimistic about strong growth opportunities for Amazon’s online advertising business. “More advertisers are turning to AMZN’s retail media network to circumvent Apple’s privacy changes and reach shoppers,” Mittal said.
Mittal is ranked #744 out of over 8,500 analysts on TipRanks. His ratings are 75% successful, with an average return of 18.4% per rating. (See Amazon insider trading activity on TipRanks).
AppLovin mobile app technology platform (APP) recently impressed Wall Street by beating second-quarter earnings estimates. The company also posted better-than-expected revenue guidance for the third quarter.
After the Q2 print, Goldman Sachs analyst Eric Sheridan raised his price target for AppLovin to $50 from $25 and reiterated a buy rating. The evolution of the company’s software platform led to an increase in revenue and margin in the second quarter amid improving industry trends, the analyst noted.
The analyst raised operating estimates to reflect higher revenue growth expectations, supported by the launch of Axon 2.0, the company’s latest artificial intelligence (AI)-based ad engine.
Despite near-term concerns about volatility in the advertising and gaming markets, Sheridan is bullish on the stock. He “continues to take a long-term view of the collection of businesses under AppLovin as it generates average industry growth and a strong margin profile in a recovering mobile ads/mobile gaming landscape.”
Sheridan is ranked #188 out of over 8,500 analysts on TipRanks. Its ratings are 61% profitable, with each rating earning an average of 13.3%. (See AppLovin’s Stock Chart on TipRanks)
Another Goldman Sachs analyst on this week’s list is Kash Rangan, who continues his bullish streak at Datadog (DDOG) even after the cloud-based IT monitoring and security platform spooked investors with a weak third-quarter revenue forecast. The company also lowered its full-year revenue guidance.
Rangan noted that cost reductions by Datadog’s larger customers and the pace of net new business additions (80 in the second quarter of 2023 compared to 130 in the previous quarter) disappointed investors.
Still, the analyst is encouraged by solid second-quarter orders, with remaining performance obligations (or RPOs) up 42% year-on-year, compared to the 33% increase seen in the first quarter. The increase in RPO is due to higher average deal size and contract duration.
Rangan reiterated his buy rating on DDOG shares at $114, saying his long-term thesis remains intact. “Datadog maintains its competitive edge as an E2E (end-to-end) surveillance platform, as evidenced by product consolidation driving large deal sizes.”
The analyst also highlighted strong product stickiness, growing platform penetration and product innovation as reasons for his optimism.
Rangan is ranked 601 out of over 8,500 analysts tracked on TipRanks. Also, 58% of its ratings have been profitable, with an average return of 8%. (See Datadog’s Blogger Reviews and Sentiments on TipRanks)
Now we move on to the cruise operator Royal Caribbean (RCL), recently raised its full-year forecast and reported blockbuster second-quarter earnings. The company has been enjoying strong business as travel demand has eased.
This week, Tigress Financial analyst Ivan Feinseth reiterated his buy rating on RCL and raised his price target to $139 from $102, citing strong demand for cruise vacations, the company’s industry leadership and solid value proposition.
The company is well-positioned to profit from the re-prioritisation of consumer spending on travel and experiences post-pandemic, the analyst believes. Demand in North America remains strong, he said. In particular, Feinseth expects RCL’s “Perfect Day at CocoCay” private island resort to be a key growth driver and industry differentiator, which could drive significant incremental revenue growth and earnings.
“RCL’s current liquidity and growth in cash flow will enable continued funding for its fleet expansion and upgrades, growth initiatives and balance sheet optimization,” Feinseth said.
Feinseth is ranked #266 out of over 8,500 analysts on TipRanks. Its ratings were profitable 59% of the time, and the average return was 11.8%. (See RCL Financial Reports on TipRanks)
We end this week’s list with streaming giant Netflix (NFLX), which reported good second-quarter earnings but missed analysts’ revenue expectations.
Despite the decline in NFLX stock since its Q2 results, JPMorgan’s Doug Anmuth reiterated his buy rating on the stock with a $505 price target. The analyst pointed to certain areas of concern for investors, including paid sharing monetization and how and when it will increase average revenue per membership.
While the monetization of paid sharing is happening at a slower pace than Anmouth originally forecast, it continues to expect it to be highly active for revenue over time. Of the more than 100 million password-sharing users globally, the analyst expects Netflix to monetize 18.8 million by the end of this year, 31 million by the end of 2024 and 38 million by the end of 2025.
However, Anmut, ranked 92nd out of more than 8,500 analysts tracked on TipRanks, expects advertising to be a bigger and more reliable revenue stream than paid streaming for Netflix in the future.
Calling Netflix a key beneficiary of the continued disruption of linear TV, the analyst said, “The recent launch of NFLX’s ad-supported tier, as well as the broader Pay-Share launch, should help re-accelerate subscriber and revenue growth. – margin incremental revenue.”
Anmut’s success rate is 61% and each of its ratings returns an average of 17.1%. (See Netflix Hedge Fund Trading Activity on TipRanks).