Top Wall Street analysts find these stocks compelling
Jim Umpleby, CEO of Caterpillar Inc.
Adam Jeffery | CNBC
During these challenging times, making informed decisions with a long-term view is vital for investors.
Here are five stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their track records.
Advanced Micro Devices
Semiconductor company Advanced Micro Devices’ (AMD) fourth-quarter results surpassed Street expectations even as continued weakness in the PC market dragged down the company’s client segment revenue. Nevertheless, higher sales from the data center and embedded divisions helped offset the weakness in the client and gaming segments.
Although AMD expects its revenue in the first quarter of 2023 to decline by about 10%, CEO Lisa Su remains optimistic about the company’s ability to win market share this year.
Susquehanna analyst Christopher Rolland said the company’s client and gaming results were better than feared. However, he noted that management’s weaker data center outlook for the first half was a “surprise.”
“While sales into North American hyperscalers more than doubled in 2022, management believes cloud is now undergoing a period of digestion in 1H, returning to growth in 2H (we think helped by ramps of Genoa, Bergamo, MI300 and Pensando, all of which are on track),” explained Rolland about the data center segment guidance. (See AMD Blogger Opinions & Sentiment on TipRanks)
Overall, Rolland reiterated a buy rating for AMD with a price target of $88, saying he prefers to look beyond the uncertainty in 2023 “towards a better 2024.” Rolland’s conviction is worth trusting, given that he is ranked at the 13th position among more than 8,300 analysts tracked by TipRanks. Moreover, 72% of his ratings have been profitable, with each generating a 21% average return.
Leading electric vehicle maker Tesla’s (TSLA) upbeat fourth-quarter results wiped out investors’ concerns about supply chain disruptions, the distraction related to Elon Musk’s Twitter acquisition, and the recently announced price cuts.
Tesla is focused on reducing costs and enhancing productivity to combat the near-term macroeconomic pressures and rising competition. Taking into account potential supply chain issues and other possible headwinds, the company issued production guidance of 1.8 million EVs in 2023, even though it has the potential to make 2 million units.
Mizuho Securities analyst Vijay Rakesh projects Tesla’s revenue will grow 29% this year and 26% in 2024. The analyst highlighted that his conservative growth estimates reflect “potentially slowing macro demand offset by secular EV transitional trends.”
Rakesh reaffirmed a buy rating and $250 price target, pointing out that Tesla has industry-leading margins and is on the path to deliver more than $10 billion in free cash flow, compared to rivals who are still at negative free cash flow. (See Tesla Hedge Fund Trading Activity on TipRanks)
Rakesh holds the 113th position among more than 8,000 analysts tracked on TipRanks. Additionally, 60% of his ratings have been successful and have generated a 17.4% average return.
After fast-moving EVs, fast-food giant McDonald’s (MCD) is next on our list. McDonald’s topped expectations, as the restaurant chain witnessed better-than-anticipated traffic at its domestic stores in the final quarter of 2022.
McDonalds’ delivered robust comparable sales across the domestic and international markets, thanks to “strategic menu price increases” in the U.S., attractive menu offerings, and marketing campaigns like the Happy Meal offering for adults. (See McDonald’s Dividend Date & History on TipRanks)
Despite tough macro conditions, McDonald’s intends to expand further to grab additional business. It plans to open about 1,900 restaurants, with over 400 of these locations in the U.S. and the International Operated Markets segments. The remaining restaurants will be opened by developmental licensees and affiliates.
BTIG analyst Peter Saleh, who reiterated a buy rating and $280 price target, expects McDonald’s to gain from “moderating inflation, carryover pricing, easing lockdowns in China, and foreign exchange finally becoming a modest tailwind.”
Saleh ranks 383 out of more than 8,300 analysts on TipRanks, with a success rate of 65%. Each of his ratings has delivered a 12.3% return on average.
Mondelez International’s (MDLZ) recent results reflected the advantages of being a manufacturer of resilient product categories like chocolate, cookies and baked snacks. The Oreo-brand owner delivered robust revenue growth, fueled by higher pricing, increased volumes and strategic acquisitions, including Chipita and Clif Bar.
Despite currency headwinds and higher costs, Mondelez is positive about driving “attractive growth” in 2023 and beyond by increasing its exposure to high-growth categories, cost discipline, and continued investments in iconic brands. (See MDLZ Stock Chart on TipRanks)
J.P.Morgan analyst Kenneth Goldman, who ranks 652 out of over 8,300 analysts tracked by TipRanks, feels that it is “refreshing to see at least one company surprise to the upside” on the volumes front amid growing concerns about this key metric in the staples industry.
Given the likelihood of several food producers reporting weak volumes in the coming days, Goldman said it could “become increasingly important to own stocks of companies with (a) relatively inelastic categories, (b) strong and unique brands with limited private label competition, and (c) a commitment to continually spending behind their brands.”
In line with his bullish stance, Goldman reiterated a buy rating and increased his price target to $74 from $71. It’s worth noting that 61% of his ratings have been successful, generating a 9.3% average return.
Construction and mining equipment maker Caterpillar (CAT) ended 2022 with a double-digit increase in revenue in the fourth quarter, driven by steady demand and higher pricing. However, investors seemed concerned about the impact of rising input costs and the strengthening U.S. dollar on the company’s bottom line.
Furthermore, Caterpillar’s warning about weaker China demand in 2023 didn’t go down well with the shareholders. Nonetheless, the company is optimistic about higher overall sales and earnings this year due to healthy demand across its segments.
Jefferies analyst Stephen Volkmann reaffirmed a buy rating following the Q4 print and maintained a price target of $285. Volkmann called the company’s pricing strength as “the standout positive.”
The analyst also noted that the demand for Caterpillar’s products remains strong, as indicated by a $400 million rise in the order backlog in the fourth quarter on a sequential basis. (See Caterpillar’s Insider Trading Activity on TipRanks)
Volkmann’s recommendations are worth paying attention to, given that he stands at the 51st position out of 8,300 plus analysts tracked by TipRanks. Remarkably, 69% of Volkmann’s ratings have generated profits, with each rating bringing in a 19.9% average return.