Top Wall Street analysts expect these stocks to thrive despite macro pressures

Layoff announcements and warnings of an economic downturn from multiple CEOs during the earnings season have made it difficult to look beyond the ongoing turmoil and pick good stocks for the long term. 

To help with the process, here are five stocks chosen by Wall Street’s top pros, according to TipRanks, a platform that ranks analysts based on their track records.

Walmart (WMT) topped analysts’ expectations for the fiscal fourth quarter as budget-conscious customers preferred to shop at the big-box retailer due to its lower-price offerings. However, it issued a subdued sales outlook, as stubbornly high inflation continues to impact spending on discretionary items.

Nonetheless, Guggenheim analyst Robert Drbul noted that Walmart is starting the new fiscal year on “solid competitive and operational footing.” The analyst also highlighted the retailer’s market share gains in grocery, growth in private brands and the improvement in inventory levels.

“We continue to believe Walmart is well positioned in an uncertain macro environment, with its price and value proposition and with increased convenience and assortment, despite persistent indicators of pressure on the consumer, including stubborn food inflation,” Drbul said.

The analyst also thinks Walmart can gain more business from higher income families “because the company has made strides in pickup, delivery, and membership.” Drbul reiterated a buy rating on Walmart and a price target of $165.

Drbul ranks 247^th among over 8,300 analysts on TipRanks. Moreover, 65% of his ratings have been successful, with each generating a 9.8% average return. (See Walmart Hedge Fund Trading Activity on TipRanks.)

Casual footwear maker Crocs (CROX) is seeing robust demand for its products despite difficult macro conditions. Its fourth-quarter revenue surged 61%, reflecting organic growth and the momentum of the Heydude brand, which the company acquired in 2022.  

While Crocs acknowledges the macro headwinds affecting it, it is confident about achieving a record 2023, fueled by demand for its sandals, international growth potential of the Crocs brand and higher market penetration of the Heydude brand in the U.S.

Reacting to the results, Baird analyst Jonathan Komp commented, “The Q4 update included multiple positive developments, including stronger-than-expected Q4 EBIT margin performance, continued robust brand momentum, and reassuring 2023E EPS guidance which is front-weighted and includes multiple areas of conservatism.”

Komp raised his 2023 and 2024 earnings per share estimates, stating that Crocs remains a “favorite idea” at current valuations, given the company’s multiyear growth potential. He reiterated a buy rating and increased his price target to $175 from $155.      

Komp holds the 386^th position out of more than 8,300 analysts followed on TipRanks. His ratings have been profitable 54% of the time, with each rating generating a 13.8% average return. (See Crocs Blogger Opinions & Sentiment on TipRanks)

Another company that has displayed strength amid difficult conditions is Chefs’ Warehouse (CHEF), a distributor of specialty food products. It distributes over 55,000 products to more than 40,000 locations in the U.S. and Canada.

Chefs’ Warehouse’s fourth-quarter adjusted earnings per share surged nearly 85% year over year, driven by robust sales and improved margins. The company has been boosting its business through organic growth and key acquisitions. In the fourth quarter, the company acquired Chef Middle East, which helped it expand into new markets like United Arab Emirates, Qatar and Oman.

Following the fourth-quarter results, BTIG analyst Peter Saleh reiterated a buy rating and “Top Pick” designation on CHEF, with a price target of $48. Saleh, who ranks 346 out of 8,341 analysts tracked by TipRanks, thinks that “continued sales and earnings progression builds out the company’s favorable long-term potential.”

Saleh noted that the company is “still undervalued given the consistent growth it is achieving.” He also pointed out that investors misunderstood the recent convertible notes issuance, stating, “We believe investors missed the technical details in the filing that place the dilution overhang much higher than the stated conversion price. In our view, this could act as a tailwind for the shares in the near-term.”

Saleh’s ratings have been profitable 65% of the time and each rating has generated a 12.5% return, on average. (See Chef’s Warehouse Stock Chart on TipRanks)

Next on our list is cloud-based software company Datadog (DDOG), which recently reported market-beating fourth-quarter results. That said, investors were spooked by its revenue outlook for the first quarter and full year 2023. Macro uncertainties are impacting the cloud spending of Datadog’s larger customers, thus affecting its expansion rate.

Baird analyst William Power lowered his 2023 revenue estimate based on the company’s outlook. He also reduced his operating income forecast to reflect continued growth investments made by the company. (See Datadog Insider Trading Activity on TipRanks)

Nevertheless, Power remains bullish about the long-term prospects of Datadog, as the company has “one of the broadest platforms and a strong R&D engine.” The analyst also noted “strong enterprise trends,” with the company ending the fourth quarter with nearly 2,780 customers contributing annual recurring revenue of $100,000 or more, up from 2,010 customers last year.

Power maintained a buy rating on Datadog and a $100 price target. He ranks 268 among more than 8,000 analysts tracked on TipRanks. Moreover, 55% of his ratings have been profitable, with each rating generating a return of 15.5%, on average.    

Applied Materials (AMAT) provides manufacturing equipment and software to makers of semiconductors, electronic devices and related industries. Despite the ongoing challenges in the semiconductor space, the company delivered better-than-expected fiscal first-quarter earnings.  

Cheering the results, CEO Gary Dickerson stated that the company’s resilience is backed by its “strong positions with leading customers at key technology inflections, large backlog of differentiated products and growing service business.”

Needham analyst Quinn Bolton increased his price target for Applied Materials to $135 from $120 and reiterated a buy rating following the recent results. Bolton noted that ICAPS (chips for IoT, Communications, Auto, Power and Sensors) “stole the show” in the report. (See Applied Materials Financial Statements on TipRanks)

“ICAPS was the main focus on the call as it was mentioned 56 times and rightfully so. AMAT has become incrementally more positive on ICAPS than it was last Q, as it is set to grow Y/Y in 2023 even in the face of China export restrictions,” Bolton said.

He further explained that the market growth of ICAPS is way higher than the leading edge chips this year due to “end market strength, higher capital intensity, and government incentives.”

Bolton’s convictions can be trusted, given that he is ranked number 1 among more than 8,300 analysts in the TipRanks database. Additionally, his track record of 70% profitable ratings, with each rating delivering an average return of 39.8%, is laudable.