Top Wall Street analysts pick these five stocks for the long term
A line of shoppers wait to enter BJ’s Wholesale Club market at the Palisades Center shopping mall during the coronavirus outbreak in West Nyack, New York, March 14, 2020.
Mike Segar | Reuters
Concerns about a bank crisis have added to the woes of investors, who were already burdened with stubbornly high inflation and fears of an economic slowdown.
Given the ongoing uncertainty, turning to stock market experts to pick attractive stocks for the long term could be a good decision.
Here are five compelling stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their track records.
Allegro Microsystems (ALGM) develops sensing and power semiconductor solutions for motion control and energy-efficient systems. On Tuesday, the company held its inaugural analyst day to provide insights into its strategy and technology.
Needham analyst Quinn Bolton noted that at the event, management focused on the rapidly growing opportunities across two “secular megatrends” – electrification (mainly e-mobility) and industrial automation. Allegro expects to flourish in these two key markets and to deliver low-double-digit percentage revenue growth from fiscal 2023 to 2028.
Bolton thinks that his margin estimates for fiscal 2024 and 2025 seem conservative, given Allegro’s new long-term model that targets a gross margin of more than 58% and an operating margin of over 32%. He highlighted that the company’s e-mobility serviceable available market is expected to grow at a 25% compound annual growth rate to $3.9 billion by fiscal 2028.
“ALGM’s portfolio is aligned with the industrial secular growth trends in clean energy and automation,” said Bolton. Allegro expects its clean energy and automation SAM to grow at an 18% CAGR to $3.5 billion by fiscal 2028. (See Allegro Insider Trading Activity on TipRanks)
Impressed by Allegro’s growth prospects, Bolton raised his price target to $50 from $42 and reaffirmed a buy rating. Remarkably, Bolton ranks 2nd out of more than 8,000 analysts followed on TipRanks. His ratings have been profitable 67% of the time, generating a 36.3% average return.
Recent results of several cybersecurity companies, including CrowdStrike (CRWD), have reflected resilient demand. Enterprises are moderating their IT spending due to macro pressures but continue to allocate decent budgets to cybersecurity due to growing cyber attacks.
CrowdStrike’s adjusted earnings per share for the fourth quarter of fiscal 2023 (ended Jan. 31) increased 57%, fueled by revenue growth of 48%. At the end of the fiscal fourth quarter, the company’s annual recurring revenue stood at $2.56 billion, reflecting 48% year-over-year growth.
TD Cowen analyst Shaul Eyal attributed CrowdStrike’s upbeat performance to solid execution and robust demand for the company’s Falcon platform. Eyal added that the company is collaborating with Dell to deliver its Falcon platform to Dell’s customers through various avenues.
“We believe CRWD is positioned to achieve its goals of generating ending ARR of $5B by the end of FY26 and of reaching its target operating model in FY25,” said Eyal. He reiterated a buy rating on CrowdStrike with a price target of $180.
Eyal is ranked No. 14 among more than 8,000 analysts tracked on TipRanks. His ratings have been profitable 66% of the time, with each rating delivering a return of 23.7%, on average. (See CrowdStrike Stock Chart on TipRanks)
Next on our list is enterprise software giant Oracle (ORCL), which delivered mixed results for the third quarter of fiscal 2023 (ended February 28, 2023). The company’s adjusted EPS grew 8% and came ahead of Wall Street’s expectations, while revenue growth of 18% fell short of estimates.
Nonetheless, Oracle is optimistic about the solid potential of its cloud business, which delivered 45% revenue growth in the fiscal third quarter. Further, management stated that Cerner, a healthcare technology company acquired in June 2022, has increased its healthcare contract base by about $5 billion.
Monness, Crespi, Hardt, & Co. analyst Brian White said Oracle delivered “respectable 3Q:FY23 results in a treacherous environment.” He contends that the company’s cloud business continues to navigate ongoing challenges better than the leading public cloud vendors, who reported notable deceleration in revenue growth.
White cautioned investors that the “darkest days” of the economic downturn are ahead of us. That said, he reiterated a buy rating on Oracle with a price target of $113, saying, “Oracle represents a high-quality, value play with the opportunity to participate in a compelling cloud transformation and gain exposure to digital modernization initiatives in the healthcare industry.”
White holds the 50th position among more than 8,000 analysts on TipRanks. Additionally, 64% of his ratings have been profitable, with an average return of 18%. (See Oracle Blogger Opinions & Sentiment on TipRanks)
BJ’s Wholesale Club
Warehouse club chain BJ’s Wholesale Club (BJ) continues to perform well even as the macro backdrop is getting tougher and pandemic-induced tailwinds have faded. The company recently held its fourth-quarter earnings call and first-ever investor day.
Baird analyst Peter Benedict, who ranks 129th on TipRanks, noted that the company’s membership base is “stronger than ever.” Membership fee income grew 10% in fiscal 2022 (ended January 28, 2023), driven by a 7% increase in members to 6.8 million, a rise in higher-tier penetration and solid renewal rates. It’s worth noting that BJ’s hit its all-time-high tenured renewal rate of 90% for the year.
“With a structurally advantaged business model, growing/increasingly loyal membership base and emerging unit growth runway, BJ has the fundamental building blocks of a compelling long-duration consumer staple growth story,” explained Benedict. (See BJ’s Wholesale Financial Statements on TipRanks)
Benedict increased the price target for BJ stock to $90 from $85 and reiterated a buy rating based on multiple strengths, including a solid balance sheet, free cash flow generation and efforts to enhance assortment. His ratings have been profitable 64% of the time, with an average return of 13.4%.
Medical devices giant Stryker (SYK) has built a solid business over the years through strategic acquisitions and continued innovation in its medical and surgical, neurotechnology, and orthopaedics and spine divisions.
BTIG analyst Ryan Zimmerman recently hosted a fireside chat with Spencer Stiles, group president of Stryker Orthopaedics and Spine business and Jason Beach, vice president of investor relations. He highlighted that orthopedics procedure volumes are benefiting from a backlog that is projected to last about four to six quarters, as patients who postponed care previously are returning.
Zimmerman thinks that “SYK retains its growth leadership position in orthopedics even as competitive robotic systems iterate.” He expects Stryker’s new Mako Knee 2.0 software, the Insignia Hip launch and upcoming robotic launches in shoulder and spine in fiscal 2024 could “support a long and robust growth cycle.”
Zimmerman reiterated a buy rating on Stryker with a price target of $281. The analyst ranks 657 out of more than 8,300 analysts on TipRanks, with a success rate of 45%. Each of his ratings has delivered an average return of 8.9%. (See Stryker Hedge Fund Trading Activity on TipRanks)