Top Wall Street analysts name their best stock ideas to ride out the market turbulence

Jim Umpleby, CEO of Caterpillar Inc.

Adam Jeffery | CNBC

This year has already been a tough one, and 2023 isn’t looking much better, with economic growth expected by the Federal Reserve to come in at just 1.2%. Given this dour outlook, investors will have to carefully choose where to put their money to work.

To choose the right stocks, staying aware of what Wall Street analysts are saying can be of help. Here are five stocks chosen by pros who are at the top of their game, according to TipRanks, which ranks analysts based on their performance records.

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Caterpillar

Mining equipment manufacturer Caterpillar (CAT) is navigating supply chain snarls and cost pressures like a champion. Cost-saving and pricing actions are helping the company improve its top and bottom lines even when end markets remain volatile.

The North American housing market has slowed considerably, with the ill effects trickling down to construction equipment demand. However, Cowen analyst Matt Elkott thinks that end-markets like housing are expected to show improvement in 2023 and will recover more meaningfully in 2024. (See Caterpillar Stock Chart on TipRanks).

Elkott also expects a late-2023 recovery in revenues once the Biden administration’s infrastructure bill kicks in. Revenue benefits from the bill should also be meaningful in 2024. Additionally, Elkott is optimistic about Caterpillar’s services segment growth.

“Growth in the company’s services revenue is on track to meet the goal of doubling by 2026 to $28B. The new state of global energy insecurity should be supportive of oil & gas CapEx, at least by the privates for now,” the analyst noted.

Elkott has a buy rating and a $225 price target on the stock. He holds the 782nd position among almost 8,000 analysts tracked on TipRanks and has a success rate of 52%. Each of his ratings has garnered average returns of 12.5%.

National Instruments

National Instruments (NATI) has a resilient business of developing automated testing and measurement systems to aid the research and validation of new technologies. Earlier this year, the lockdown in Shanghai and suspension of operations in Russia hurt the company’s business.

Nonetheless, Goldman Sachs analyst Mark Delaney is bullish on the company. (See National Instruments Dividend Date & History on TipRanks).

National Instruments operates in industry-specific business units (BU’s), which are dependent on secular trends, and a BU portfolio that is exposed to macroeconomic factors. Now, the company is focusing on achieving its target of bringing in at least 74% of its revenue from its industry-specific BU’s by 2025. This transition is expected to make the company more resilient to market cycles in the coming years.

Strong uptrends in emerging technologies like ADAS (Advanced Driver Assistance Systems), electric vehicles and 5G make Delaney believe that the company can withstand an economic slowdown better than many, “as parts of its business are tied to secularly growing end markets” that have defensive characteristics.

The analyst has a buy rating on NATI stock with a price target of $49.

Delaney, who is ranked No. 765 among nearly 8,000 analysts ranked on TipRanks, has had success with 56% of his ratings. An average of 9.8% returns were generated on each of his ratings.

Plug Power

Hydrogen fuel cell developer Plug Power (PLUG) is one of the top beneficiaries of the Inflation Reduction Act (IRA), which was signed into law last month. According to the law, a $3 per kg production tax credit will be provided to developers producing green hydrogen (hydrogen produced with electrolyzers sourced from clean energy).

H.C. Wainwright analyst Amit Dayal thinks the IRA helps taxpayers in the hydrogen industry “to stack credits and allow for transfer of hydrogen-related tax credits.” To this end, Plug Power has already entered several partnerships with major companies, including Amazon (AMZN), to supply green hydrogen and electrolyzers, and Dayal expects more such deals to be signed in 2023. (See Plug Power Blogger Opinions & Sentiment on TipRanks).

“We believe the IRA should be supportive to Plug’s target of building out its green hydrogen generation network to 70 tons per day (TPD) production by the end of 2022, 500TPD in North America by 2025 and 1,000TPD globally by 2028,” noted Dayal.

Dayal is also eager for Plug Power to begin scaling and absorbing its early upfront investment costs, as this would boost its near-term financial performance by improving operating costs and margins. The analyst expects the company to generate operating profits in 2025.

“We believe that the company should be able to grow its gross margins from negative levels today to 15.7% in 2023 and subsequently reach approximately 35.0% by 2030 as revenues continue to rise,” projected Dayal.

Interestingly, Dayal is a five-star rated analyst on TipRanks, and is ranked No. 27 among almost 8,000 analysts tracked on the platform. About 42% of his ratings have been successful and have generated 44.9% average returns per instance.

Salesforce

As its ticker symbol suggests, Salesforce (CRM) is a customer relationship management software giant, which is benefiting from the growing digitalization of industries. The company last week provided an upbeat medium-term revenue and margin forecast, which pulled more investors to its shares.

Expansion of the company’s addressable market, geographic spread and customer base are key growth catalysts that are helping it navigate the pessimism around tech stocks with finesse. (See Salesforce Stock Investors on TipRanks).

Monness Crespi Hardt analyst Brian White predicted that the current headwinds, including recession-related concerns, inflationary pressures and growing geopolitical issues, will keep Salesforce from realizing its full growth potential over the next 12-18 months.

Still, White is one of the Salesforce bulls, who hold strong convictions about the company’s longer-term prospects. Although White acknowledged the problems that might come with a recession (which looks almost impossible to avoid, as of now), he said that Salesforce is “uniquely positioned” to benefit from accelerated digital transformation in the long run.

Salesforce has demonstrated an ability to navigate turbulent times better than most software companies, a testament to relentless innovation, acquisitions, excellent execution, and strong secular trends,” White said.

The analyst reiterated his buy rating on Salesforce. He has a price target of $215. White holds a rank of 484 among nearly 8,000 analysts tracked on TipRanks. Fifty-seven percent of his ratings have been profitable, with each generating average returns of 10.4%.

Adobe

Adobe (ADBE)recently disappointed investors with an earnings miss, and its recent signing of a deal to acquire collaborative product design platform Figma for a whopping $20 billion baffled investors. Adobe’s price targets were slashed and the company was even downgraded by a few.

Still, Goldman Sachs analyst Kash Rangan decided to go against the tide and reiterate his Buy rating on the stock with a price target of $540. “We see Adobe investing in a market transition that can access a wide TAM and drive growth acceleration,” said Rangan, speaking about the prospects of the Figma acquisition. (See Adobe Hedge Fund Trading Activity on TipRanks).

Expressing faith in the company’s decision, the analyst recalled how Adobe’s 2005 acquisition of Macromedia and its business model transition of 2011 expanded its growth potential manifold.

Moreover, drawing comparisons with other major acquisitions, Rangan noted that Figma’s integration into Adobe would bring on board more developers, expanding its market opportunity just like LinkedIn and Github increased Microsoft’s (MSFT).

“Based on the level of innovation Adobe has brought to each strategic transaction it has made, we believe it can expand Figma’s $16.5bn TAM,” observed Rangan, who is ranked 769th among about 8,000 analysts on TipRanks.

The analyst has 55% profitable ratings, with each rating having garnered 7.1% average returns.