Top Wall Street analysts bet on these stocks to beat market volatility

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Apple CEO Tim Cook visits the Apple Fifth Avenue store for the release of the Apple iPhone 14, New York City, September 16, 2022.
Andrew Kelly | Reuters

The fall rally seems to have regained its strength this past week.

A better-than-expected reading of the consumer price index last week lifted investor sentiment and pushed the Dow Jones Industrial Average to a 1,200-point jump on Thursday. The gains continued on Friday, and all three major averages advanced for the week.

Nevertheless, investors need to keep a level head and a focus on the long term as they pick out stocks for their portfolios.

Here are five stocks chosen by Wall Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.

Apple

In an unusual move, Apple (AAPL) announced that the company is expecting lower production numbers for the iPhone 14 as a consequence of repeated lockdowns in China. Granted, Apple revenues are likely to take a hit over the next quarter or two, but the longer-term outlook for the business with multiple secular growth avenues does not change.

JPMorgan analyst Samik Chatterjee agrees. Acknowledging the downside risks for the coming few weeks as Apple grapples with reduced capacity at its largest production site, the analyst believes that brand loyalty will come into play to ease the pressure. That is, iPhone consumers are ready to wait longer for delivery. This will ensure that among all other Apple products, iPhones will face the least demand destruction as a result of supply pushouts. (See Apple Financial Statements on TipRanks)

Chatterjee also shows how risks are spread out over the longer term, and short-term disruptions shouldn’t be a deterrent for investors. “Supply chain challenges have been frequent the last couple of years, and there is limited evidence that delays in shipping devices have had any impact on overall volumes for a product cycle (example: iPhone 12 or iPhone 13) over a multi-quarter period,” the analyst said.

Chatterjee reiterated his buy rating as well as his $200 price target on Apple. The analyst has been ranked 724th among more than 8,000 analysts followed on TipRanks. Moreover, 51% of his ratings have been profitable, resulting in average returns of 9.5%.

O’Reilly Automotive

O’Reilly Automotive (ORLY), a retailer of automotive parts, tools, supplies, equipment and accessories, delivered what Wells Fargo analyst Zachary Fadem called a “Q3 Gem.” An EBIT margin of more than 15.25% year over year was the company’s best in 2022.

Despite an uncertain outlook for the retail sector in the face of slowing demand and high inflation, Fadem remained upbeat about the company’s prospects, and even raised the price target to $850 from $800, while maintaining a buy rating on the stock.

Sales for O’Reilly’s do-it-yourself business were up by a low single-digit percent in the third quarter. The analyst observed that this growth suggests stable three-year DIY trends. (See O’Reilly Auto Stock Investors on TipRanks)

“While broader retail grows increasingly cloudy, ORLY delivered its best quarter of FY22, and considering best-in-class execution, offensive/defensive characteristics, and a fresh round of upward revisions, we like the setup into FY23,” observed the analyst.

Fadem is one of the top 100 analysts on TipRanks, ranked at No. 81. He has a success rate of 65%. Additionally, each of his ratings generated 18.2% on average over the past 12 months.

Cars.com

Automotive products and services provider Cars.com (CARS) pulls in more than 27 million unique users every month, making it a top marketplace for car purchases and dealerships. The company has also made a few strategic acquisitions like CreditIQ, and Accu-Trade, which have helped Cars.com expand into domains like auto financing and used car transactions.

The company recently delivered its quarterly results, which, Barrington Research analyst Gary Prestopino says, “highlights continued progress despite a challenging environment.” (See Cars Hedge Fund Trading Activity on TipRanks)

The analyst highlighted the momentum in the adoption of Cars.com’s Digital Solutions. Importantly, he pointed out that the adoption rate the company is witnessing now is a fraction of its total potential, “as adoption of all Digital Solutions by a dealer can easily double ARPD (average revenue per dealer).”

Cars.com’s financial results and long-term outlook continue to improve, yet this improvement is not being reflected in the valuation of the stock,” said Prestopino, who has a buy rating and a $25 price target on CARS.

Ranked 68th in an over 8,000-strong database of analysts on TipRanks, Prestopino has delivered profitable ratings 57% of the time. Each of his ratings has returned 29.6% on average.

Veeco Instruments

Semiconductor process equipment manufacturer Veeco Instruments (VECO) is facing a slowdown in a few aspects of its business on account of soft mobile and computer equipment sales. Nonetheless, Benchmark analyst Mark Miller points out several areas of strength in the business that are hard to overlook.

Veeco’s laser annealing systems for logic applications are gaining traction among customers, as is clear from the increase in orders during the third quarter.

Miller expects a $5 million impact on the top line in the fourth quarter due to trade restrictions with China. Nonetheless, the company is confident it will be able to ship most of its Chinese backlog, as “most of Veeco’s tools are used in trailing edge applications.” (See Veeco Blogger Opinions & Sentiment on TipRanks)

Despite the near-term headwinds that await Veeco in the next one or two quarters, Miller believes that the recent decline in VECO’s share price has fully discounted the likelihood of lower earnings in 2023 compared to 2022.

The analyst reiterated a buy rating on the stock with a price target of $25. Miller ranks 254th among more than 8,000 analysts tracked on the platform. Over the past year, 51% of his ratings have been profitable, returning 15.1% on average.

Starbucks

Coffee giant Starbucks (SBUX) is riding on strong same-store sales in the U.S. with its “affordable luxury resonating with consumers,” according to BTIG analyst Peter Saleh. A return to normalcy has been the theme that has lifted the company’s revenues. The analyst believes that the momentum of customer traffic will continue to build now.

Saleh is also upbeat about Starbucks’ same-store sales in China, which are expected to surge remarkably after a Covid-led decline. “We believe this trajectory, coupled with the addition of a new store every nine hours, should unlock significant earnings power as the year progresses and into FY24,” said the analyst. (See Starbucks Stock Chart on TipRanks)

Saleh has an interesting suggestion for the company to help cover the investments made by Starbucks toward wage increases and other employee benefits. The analyst believes that a little more aggressiveness in menu pricing will not affect sales that much, and a mid-single-digit price hike could offset the aforementioned cost to the company.

Peter Saleh reiterated a buy rating on the stock with a price target of $110. The analyst ranks No. 445 among more than 8,000 analysts tracked on TipRanks. His ratings have been successful 62% of time and each of the ratings has delivered average returns of 11%.

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