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Interior Design area of the Restoration Hardware store in the Meatpacking District of New York.
Source: RH
How can you pinpoint compelling investing opportunities in the current environment? Stocks tumbled for the week in a tech-led selloff after reaching record highs. However, even after the pullback, the S&P 500 has still surged almost 15% on a one-year basis. That means there’s still room to fall.
Indeed as IHT Wealth Management’s Yussef Gheriani told CNBC’s Trading Nation recently: “There’s just a lot of uncertainty out there both between Covid, the stimulus packages, the election itself and there’s also still significant trade uncertainty between us and China.” In short, it’s best to pick your stocks wisely in case further volatility lies ahead.
One way to go about this is to follow the latest stock recommendations from analysts with a proven track record of success. TipRanks analyst forecasting service attempts to pinpoint Wall Street’s best-performing analysts. These are the analysts with the highest success rate and average return measured on a one-year basis — factoring in the number of ratings made by each analyst.
Here are the best-performing analysts’ six favorite stocks right now:
RBC Capital’s Mark Mahaney believes the market may be underappreciating the level of product development at FB. He has just carried out a deep-dive into three of Facebook’s most interesting product initiatives.
For instance, Facebook Marketplace has over 1B monthly active users (MAUs), making it larger than Alibaba, and ~2x eBay & ~12x Craigslist. He sees Marketplace generating up to $2.8B in ’24 Revenue, based on a ‘light’ 5% Take Rate on $54B of GMV (gross merchandise value).
As for Facebook Shops, Mahaney is now anticipating $4.9-8.0B in incremental 2025 Revenue driven by more ‘transactionable’ ad units. “We believe FB still needs to get much closer to a “One Click” shopping experience, but we view Social Commerce as one of the most powerful trends on the Internet today and FB as arguably the best way to play it” the analyst wrote.
And with Instagram Reels representing a ‘reasonably competitive’ answer to the incredibly popular TikTok, the analyst now has even “greater conviction in our above-Street ’21 ests. (6% Revenue & 13% EPS).”
The five-star analyst reiterated a FB buy rating and $320 stock price forecast on September 9.
RH
Five-star Wells Fargo analyst Zachary Fadem reiterated his bullish call on RH after the Restoration Hardware parent reported a stellar earnings beat.
RH has successfully transformed itself from a sleepy mall-based retailer to an innovative, multi-channel luxury brand says Fadem, with experience-focused design galleries, a member-based revenue model and emerging hospitality offering.
“Despite elevated expectations, RH’s Q2 update impressed across the board with sharp demand improvement, a 29% EBIT beat and a surprisingly bullish 2H outlook comprised of ~18% sales growth and ~22% EBIT margins” the analyst exclaimed on September 9.
Post-print, he boosted his stock price forecast from $365 to $400- noting that 20% EBIT margins in FY20 exceeded even the most bullish of buyside expectations.
Even with considerable coronavirus-challenges (re-opening, supply chain constraints, restaurant closings, etc.), Fadem believes the power of RH’s model shined through in Q2. And looking forward he sees continued momentum from robust home reinvestment and strong second home demand.
Ultimately Fadem believes that the RH story continues to impress, writing “RH’s potential remains early innings, with upside to consensus estimates.”
A Top 30 analyst, Fadem boasts a 79% success rate and 28.8% average return per rating.
Activision Blizzard
This week gaming giant Activision Blizzard scored the thumbs up from top Needham analyst Laura Martin. “We believe that COVID-19 lock-downs have accelerated several media trends, and ATVI is among the biggest beneficiaries” she cheered on September 9.
For example, Activision’s installed base of players grew by 30% y/y and play times rose 70% y/y in 2Q20. That’s down to hit content titles (ie, Call of Duty play times rose 8x y/y in 2Q20) and superior execution coupled with more hours spent at home by ATVI’s core demographic.
As a result, Martin reiterated her buy rating on the stock and $102 stock price forecast. She also boosted her FY20 Non-GAAP revenue forecast 2% to $7.76B (up 22% y/y), and Non-GAAP EPS estimates 5% to $3.21 (up 43% y/y).
Crucially, Martin is confident that post-pandemic engagement levels will remain elevated compared to January 2020 (ie, pre-coronavirus) levels.
“Structurally, video game upside is being driven by mobile games (which attracts new gamers), genre expansion (50% of ATVI’s users are now women), and esports which drives higher engagement and spending from existing players” she explained.
Thanks to a strong 19.9% average return per rating, Martin is ranked as a Top 100 analyst on TipRanks.
Uber
At an investor conference this week Uber CFO Nelson Chai updated the Street on gross booking trends for August, indicating gross booking volumes were down less than -10% y/y in the month, from -12% in July and -36% y/y in 2Q.
Mobility/ ridehailing trends are tracking generally in line with Street estimates, while food delivery demand remained robust and is tracking ahead of forecasts, five-star Stifel Nicolaus analyst Scott Devitt.
Devitt reiterated his Uber buy rating on September 8 and bumped up his price target from $40 to $41. His 3Q total gross booking estimate is now -12% from -16% y/y previously.
He continues to believe Uber is addressing significant transportation and food delivery market opportunities globally, and highlights Uber’s growth opportunity, scale, and market-leadership in most regions, with an opportunity to consolidate some international markets.
“For a longer-term horizon, we continue to recommend Uber shares as a recovery-scenario investment idea with a stay-at-home floor in food delivery” Devitt told investors, adding “Over an 18 to 24 month period we see a 50%+ return potential in shares.”
With a 71% success rate and 26.5% average return per rating, Devitt is currently one of the Top 20 analysts tracked by TipRanks.
Lovesac
US furniture retailer Lovesac, which specializes in a patented modular furniture system called Sactionals, has just reported Q2 results showing strong underlying momentum.
Oppenheimer’s Brian Nagel came away from his initial review of Lovesac’s results and management commentary upbeat and with incremental conviction in his positive call on the shares.
“In our view that LOVE is set to emerge from COVID-19 headwinds an even stronger, better positioned, up and coming brand” Nagel commented on September 9. He has a buy rating on LOVE with a $30 stock price forecast.
In Q2, adjusted EBITDA expanded to $2.2M from a loss of $3.3M last year. LOVE easily topped a Street forecast for a loss of $4.4M, upon total company sales growth of 29%, including an increase in internet revenue of nearly 390%.
“We view LOVE as representing one of the most exciting up-and-coming brands and operators to emerge in the consumer sector in a long while” applauded the analyst.
He believes the company’s unique and patent-protected Sactionals and sacs are positioned well to continue to capture market share within a ‘large, fragmented, and somewhat tired’ home furnishings sector.
A Top 20 analyst, Nagel is currently tracking a 76% success rate and 23.5% average return per rating.
Global Blood Therapeutics
GBT is an emerging pharmaceutical developing innovative treatments for blood disease. The lead is Oxbryta, an oral, once-daily first-in-class potentially disease-modifying treatment for sickle cell disease (SCD).
On September 8, GBT announced an agreement with Biopharma-Middle East and Africa to distribute Oxbryta tablets in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
Following the news top Wedbush analyst Liana Moussatos reiterated her buy rating and Street-high $152 price target on GBT. “While its global burden is substantial, SCD is most common in certain regions of the world such as sub-Saharan Africa and the Middle East” she commented on September 9.
Expanding access to this region of the world with more than 100,000 people aged 12 year and older affected by the disease not only effectively offers another US-sized market opportunity, says Moussatos, but also serves as a chance to gather more accurate data on SCD in a region lacking readily available information.
She notes that GBT is planning to expand Oxbryta to younger patients in the US, and should score European approval in 2022. The analyst continues to project potential achievement of over $2.1B in US sales for Oxbryta in 2024 and peak US sales of about $2.7B in 2026.
