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Wall Street’s top analysts see gains in store for these stocks

A sign is posted in front of the NVIDIA headquarters on May 10, 2018 in Santa Clara, California.

Justin Sullivan/Getty Images

With COVID-19 cases surging again around the world as well as growing concerns about the economic reopening, navigating the current financial landscape can be challenging.

In this case, the key is to look for stocks that not only appear undervalued but are also poised for gains going forward.

The names mentioned below fit the bill and have the backing of analysts with impressive stock picking abilities. TipRanks’ analyst forecasting service identifies the best-performing Wall Street analysts, or the analysts with the highest success rate and average return per rating. These metrics factor in the number of ratings each analyst has published.

Here are the best-performing analysts’ top stock picks right now:   

The Lovesac Company

Following “decidedly upbeat” 4Q results, Oppenheimer analyst Brian Nagel’s bullish thesis on The Lovesac Company remains very much intact. As such, he reiterated a Buy rating on the furniture maker. In a further display of optimism, the analyst bumped up the price target from $60 to $85 (18% upside potential).

Looking at the print, the company posted adjusted EBITDA of $25.9 million, easily beating the $12.6 million consensus estimate. On top of this, gross margin expanded by 900 basis points to 57.9%, versus 49% in the prior-year quarter.  

“For a while we have highlighted Lovesac as a compelling and still largely over-looked, digitally-driven small cap growth opportunity, within home furnishings and consumer, broadly. Shares have rallied and recently crossed through our prior objective,” Nagel commented.

Management didn’t offer any formal guidance for FY21 due to continued uncertainty, but estimates were provided for unaided brand awareness for the company and its products. At only 2%, Nagel tells investors that there’s “still significant near and longer-term sales and market share opportunities for Lovesac, particularly as leadership improves further marketing reach and effectiveness.”

Expounding on the opportunity ahead, Nagel stated, “In our view, a restart of key investments in coming quarters, combined with now improved operational controls and still healthy sector tailwinds position LOVE well for continued outsized top and bottom-line expansion in 2022 and beyond.”

With this in mind, LOVE shares “underappreciate meaningfully near- and longer-term prospects,” in Nagel’s opinion.

A 79% success rate and 38.4% average return per rating more than support Nagel’s #6 ranking on TipRanks’ list.

RingCentral

Bank of America Securities analyst Daniel Bartus just reinstated coverage of RingCentral given that it has the “right partners at the right time.” In addition to assigning a Buy rating, he also set a $450 price target, which puts the upside potential at 38%.

Although Bartus’ price target is based on 23x CY22E EV/S, which reflects a premium to the software as a service group at 18x to 19x, the analyst believes this is “justified.”

Noting that “RingCentral is leading the UCaaS market at a key inflection point for the industry,” Bartus highlights the fact that the company has reached agreements with Avaya, ALE, and Atos/Unify, top legacy UC vendors, to be their exclusive cloud partner.

UCaaS is short for “unified communications as a service.”  

“We believe the timing of these deals aligns well with COVID serving as a major cloud catalyst amongst legacy enterprise customers. On top of RingCentral’s track record of 30%-plus revenue growth 2017-2020, we think the market inflection and partnership contributions are likely to drive upside to management’s 25% growth target in 2021. Our partner model also shows a path to $10 billion revenue in CY30 vs. our $1.5 billion CY21 estimate, supporting potential upside beyond our price objective,” Bartus explained.

Arguing that “COVID did not create a short-lived tailwind for UCaaS vendors, and instead adds multi-year momentum to an already healthy market,” the analyst points to two other competitive advantages for RNG.

First and foremost, Bartus believes that RNG boasts “superior telephony, which remains critical.” On top of this, the xCaaS offering is “more holistic” and now includes Video Meetings and tighter CCaaS integration.

XCaaS stands for “any communications as a service,” while CCaaS is short for “contact center as a service.”

According to data from TipRanks, Bartus has achieved an 86.2% average return per rating.

Nvidia

On April 19, the U.K.’s Secretary of State for Digital, Culture, Media and Sport announced that it would be ordering an investigation into Nvidia‘s $40 billion acquisition of chip designer Arm, citing concerns related to national security.

To make this decision, the Secretary of State took the advice of officials from across the investment security community. Now, the Competition and Markets Authority has until July 30 to prepare a report that details any potential nation security or antitrust issues related to the deal, which was originally announced back in September.  

Rosenblatt Securities’ Hans Mosesmann did not expect the U.K. government to step in. “This intervention is a surprise to us, and given ARM’s headquarters and ancestral foundings in the U.K., it carries significant weight that could sway other key countries, including China, to also vote against or intervene against the deal,” the analyst said.

However, Mosesmann remains optimistic about Nvidia’s overall prospects. Bearing this in mind, the five-star analyst left his Buy rating and $800 price target as is. Given this price target, shares could surge 30% in the year ahead.

“We continue to like the Nvidia story and, despite this intervention, this does not deter against the longer term story of AI and accelerated computing being the path forward and the next cycle,” Mosesmann told clients.

On top of this, Nvidia just unveiled its Grace CPU, which was designed to address the computing requirements of AI supercomputing, natural language processing and recommender systems.

With this in mind, Mosesmann noted, “Our own position has been that the deal was a 50-50 proposition, and given last week’s sudden announcement of Grace, Nvidia’s Plan B CPU roadmap without the ARM acquisition is on the table.”

Earning the #107 spot on TipRanks’ list of best-performing analysts, Mosesmann is tracking a 68% success rate and 25.8% average return per rating.

Coinbase

Crypto trading platform Coinbase just made its public market debut via direct listing on April 14.

After initiating coverage of the stock with a Buy rating and $500 price target (60% upside potential) the following morning, BTIG analyst Mark Palmer spoke with multiple institutional investors about COIN. Taking this feedback into consideration, the analyst reiterated the rating and price target on April 18.

Palmer highlights the fact that although some investors analyzed the company before its IPO and understood the different components of the platform, “it became clear that others were less aware of the company’s non-trading offerings, and its institutional prime brokerage platform in particular.”

Additionally, there are concerns that COIN‘s retail take rate will drop as other players try to grab market share by offering lower trading fees.

“Based on our discussions with investors, we believe COIN’s progress in assembling a unique prime brokerage platform focused on institutional crypto investors was largely overlooked and underappreciated. This may be accounted for in part to COIN’s decision to pursue a direct listing rather than a traditional IPO which would have been preceded by a full road show during which its institutional capabilities could have been highlighted,” Palmer wrote.

It should also be noted that Coinbase only announced the acquisition of blockchain infrastructure and staking services provider Bison Trails on January 19.

Expounding on the implications of this deal, Palmer commented, “We believe the acquisition provided the company with a differentiated institutional offering… While Bison Trails was mentioned only very rarely in the media coverage of COIN’s direct listing, we believe its role in providing scalable crypto infrastructure and staking offers a significant complement to the company’s custody services and other institutional offerings.”

Among the top 160 analysts tracked by TipRanks, Palmer’s calls, on average, generate a 20.8% return. What’s more, his success rate comes in at 66%.

Netflix

According to top JPMorgan analyst Doug Anmuth, post-1Q earnings, Netflix will “become more controversial” and “could be range-bound near-term.” This, however, is not to say that he has joined the Netflix bears.

Even though Anmuth trimmed the price target from $685 to $600 (18% upside potential), he reiterated a Buy rating on April 21.

“Our overall view on NFLX doesn’t change—and we don’t think it will for most—but on the margin there will likely be increased concerns on the importance of hit content, competition, and overall visibility. Despite soft 1H net adds, we are encouraged by underlying metrics such as engagement per household up year-over-year, retention up year-over-year, and churn already below pre-price change levels in many increased markets, including the US,” Anmuth explained.

Specifically, for 1Q, net adds landed at 3.98 million, well below the 6 million consensus estimate. In addition, management’s guidance for 1 million net adds in 2Q also missed the Street’s 4 million call. 

“NFLX does not believe competitive intensity changed in 1Q or was a major contributor to light subs given the shortfall came across all geos, but we believe it could have impacted acquisition on the margin. Importantly, as comps ease and content production picks up, NFLX expects total sub growth will accelerate in 2H21, but management stopped short of projecting year-over-year net add growth in 2H21, instead preferring to limit comments to only a quarter out,” Anmuth commented.

Additionally, Anmuth mentions that there are risks related to the pandemic. However, the risk is that pull-forward impact persists, as opposed to user behavior changing as countries re-open.

“We also believe the pullback in shares will be attractive to some investors more focused on the free cash flow and buyback narrative, who are looking to be opportunistic on the net add-driven sell-off,” the analyst added.

Ranked #72 on TipRanks’ list, Anmuth has an impressive 69% success rate and 26.5% average return per rating.

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