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Ben Silbermann, co-founder and chief executive officer of Pinterest
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The U.S. Presidential election is only days away, and Wall Street is bracing for market turbulence. However, given the lingering uncertainty, it's unclear whether market volatility could persist post-election.
"Time will tell if expected volatility turns into realized market volatility," Charley Ripley, a senior investment strategist from Allianz Investment management, stated.
In such an unpredictable economic environment, one approach to pinpointing compelling plays is to follow the recommendations from analysts with a proven track record of success. TipRanks analyst forecasting service uses in-depth market data to find the analysts with the highest success rate and average return per rating, measured on a one-year basis. These metrics factor in the number of ratings published by each analyst.
Here the best-performing analysts' five favorite stock picks right now:
Advanced Micro Devices
Chipmaker Advanced Micro Devices just posted strong Q3 results and revealed it's set to acquire Xilinx for $35 billion in stock. For Rosenblatt Securities analyst Hans Mosesmann, these developments reaffirm his confidence in AMD's long-term growth narrative.
Given the new Ryzen 5000 and Milan EPYC3 product cycles, Mosesmann argues that momentum witnessed in the third quarter will most likely persist in 2021. Additionally, he believes the Xilinx acquisition was the right move as the data center space is in flux and offloading dynamics are becoming even more essential.
"With Intel Corporation INTC continuing its woes, we see no reason why AMD can't capture 50% of the entire x86 CPU market in coming years on technology/product roadmaps, accelerating design pipelines, increasing attach rates of GPUs to optimize EPYC server CPUs, etc," Mosesmann commented.
On top of this, strong x86 CPU and GPU product roadmaps will give AMD an edge over Intel and Nvidia, according to Mosesmann. As the deal boosts AMD's total addressable market to $110 billion, the analyst thinks the semiconductor company could double in size over the next few years.
All of the above prompted Mosesmann to maintain his Buy rating and $120 price target (54% upside potential) on October 28.
Landing within the top 100 on TipRanks' ranking of best-performing analysts, Mosesmann is currently tracking a 21.4% success rate.
O'Reilly Automotive
Following an impressive Q3 update, O'Reilly Automotive received a thumbs up from Wells Fargo's Zachary Fadem, with the five-star analyst reiterating a Buy rating on October 28. Along with the bullish call, the analyst kept a $525 price target on the stock. Should this target be met in the year ahead, shares stand to gain 19%.
ORLY announced that comps reached 16.9%-plus, EBIT margin expanded by over 249 basis points and EPS beat the consensus estimate by 9.8%-plus. What's more, DIY outperformed, DIFM surpassed expectations and Q4-to-date has been going well, with the first three weeks of October tracking positive LDD%.
"In our view, tonight's results provide further evidence that industry trends remain robust despite miles driven declines and recent stimulus roll off (in August)," Fadem commented.
Even though gross margin, which came in at –96 basis points, reflects "the single blemish on an otherwise exceptional print," Fadem argues that "ORLY is taking outsized share and anticipate another round of upward EPS revisions."
Expounding on this, the analyst stated, "All in, we continue to view auto part retailers as underappreciated in today's environment, and are constructive on ORLY's best-in-class execution, non-discretionary assortment and NT upside from share gains and incremental stimulus. With ORLY shares now sub-19x our CY21 EPS estimate (versus LT peak/trough of 27x/15x) we see increasingly favorable risk/reward and would be aggressive buyers on weakness."
With a 76% success rate and 25.5% average return per rating, Fadem is one of the top 60 analysts ranked by TipRanks.
Orbcomm
Industrial Internet of Things (IoT) company Orbcomm has scored unanimously bullish praise from the analyst community recently. Among the bulls is one of the best-performing analysts, Northland Capital's Michael Latimore.
On October 29, the five-star analyst reiterated a Buy rating. In addition, he continues to assign a $6 stock price forecast, putting the upside potential at 50%.
Latimore argues that ORBC is improving corporate efficiency. To back this up, he points out it has consolidated 25 web portals to two, reduced SKU count by 75%, trimmed COGS by 30%, improved inventory management and simplified billing.
On top of this, ORBC recently announced a new service, OGx, which is part of a collaboration with Inmarsat. "The new service will be 40x faster than the current IDP and require less power at the terminal. Current customers will get an over-the-air update. ORBC extended its contract with Inmarsat to 2035, and the new service will be available in 2022," Latimore explained.
What's more, the analyst sees the new dual mode satellite add-ons and video offering as providing "interesting incremental growth opportunities." He added, "ORBC should launch its video service in 1-2 quarters; this could increase ARPU to $30 from $6 on connections that take it. Video is mainly a greenfield opportunity, and ORBC is particularly focused on video for cargo. Dual mode could become 25% of sales, up from under 5% today."
To this end, ORBC expects to report Q4 revenue of between $60-$64 million, compared to the $63.3 million consensus estimate. "We believe the company is assuming it closes about 30% of the pipeline, reefer customers continue at current rates, and dry van upgrades to 4G (such as Hub) improve," Latimore commented.
Scoring the #175 spot on TipRanks' list of top-rated analysts, Latimore sees an 18.7% average return per rating.
Enphase Energy
For five-star analyst Colin Rusch, of Oppenheimer, Enphase Energy is one of his top picks in the energy space. On October 28, he reiterated both his Buy rating and $116 price target, which suggests 12% upside potential.
In Q3, ENPH reported upside to both the top and bottom lines as the company continues to experience strong demand, with U.S. market growth surpassing expectations and it making significant progress in Europe.
Stable pricing and the benefit of energy storage also contributed to the strong performance. Encharge accounted for roughly 10% of Q3 revenue and management says its 50MWh capacity is mostly booked for Q4. Rusch added, "Management noted encouraging reception from long-tail installers, with Tier 1s engaging ahead of IQ8 rollout, which will support flexible independent grid formation."
"Given visibility on battery supply coming online and strong demand for its ensemble products, we believe the company can continue to outperform margin expectations through 2021," the analyst commented.
What's more, as beta testing for its 640W commercial rooftop solution is starting, Rusch sees "potential for a growth driver beyond our current estimates." With elevated OpEx spending supporting multi-year expansion, he believes there's a "possibility for incremental operating leverage as the commercial product ramps and energy storage gains traction."
Summing it all up, Rusch stated, "We note the market has seen significant multiple appreciation in recent months with increased confidence in a recovery coupled with the inflationary impact of low interest rates."
TipRanks shows the #58-rated analyst boasts a 57% success rate and a 33.2% average return per rating.
Pinterest
Wall Street's 22nd best-performing analyst, Justin Post, of Bank of America Securities, is betting on image sharing and saving company Pinterest, with the analyst bumping up the price target from $58 to $72 on October 29. Along with the price target update, he maintained a Buy rating.
During the third quarter, the company generated revenue of $443 million, reflecting a gain of 58% year-over-year and handily beating the Street's $384 million call. According to management, strong user and usage growth, a spend shift from the advertiser boycott, a rebound in advertiser demand (SMB, international and large CPG) and new initiatives such as conversion optimization, shopping ad products, automated bidding and video uploads were behind the stellar performance.
Shares of PINS surged 28% in after-hours trading, implying that the coronavirus impact was more than just a one-time occurrence, in Post's opinion. "We think Street sees strong progress with shopping initiatives, and has more confidence in long-term ARPU expansion," he noted.
Additionally, total MAU increased 37% year-over-year to 441 million, with users under age 25 also continuing to increase faster than the total.
"Overall Q3 engagement (e.g., impressions, closeups and saves) and search volume moderated somewhat from Q2 highs but remained well above preCOVID-19 levels. We think the increase in under 25 users and growth in search usage suggest Pinterest is becoming an increasingly relevant shopping site," Post opined.
All of this led Post to conclude that PINS is on the path to achieve 61% revenue growth in Q4, up from his original 46% projection. When it comes to the valuation, Post stated, "Given faster user growth, use case expansion (shopping), and strong product pipeline, we think a premium multiple to peers is warranted (Snap is trading at 14x 2022 P/S)."
Post's track record of success is evidenced by his 75% success rate and 28.4% average return per rating.
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