A man walks past the brand logo of Alphabet Inc’s Google outside its office in Beijing, China, August 8, 2018.
Thomas Peter | Reuters
Earnings season can bring heightened volatility to the markets, and this time it’s showing no sign of slowing down.
In tumultuous times like these, short-term bets can be dangerous. Instead, investors may better withstand the turbulence by taking a long-term perspective.
Some of Wall Street’s top pros have tuned out the noise and picked out five stocks as ideal long-term investments, according to TipRanks, which tracks the best-performing analysts.
Here are five companies that analysts expect to do well in the future despite the current macro headwinds.
Snap (SNAP) is the social media company behind photo-sharing app Snapchat, which attracts more than 330 million daily active users. It recently reported results for the first quarter, a “challenging” period for the company, according to CEO Evan Spiegel. (See Snap Hedge Funds Holdings on TipRanks)
Brian Fitzgerald of Wells Fargo Securities believes that Snap has bright days ahead. In a recent report, the analyst noted continuing growth in Snap’s audience, engagement, and monetization. He sees the growth accelerating as the macro environment improves.
Fitzgerald rated the stock a buy with a price target of $48.
The analyst said that Snap’s Conversions API and privacy-safe tools are contributing to a stronger return on advertising spend, meaning the company is impressing its clients. Additionally, Fitzgerald observed that Snap is managing its content and infrastructure costs well, explaining that those are some of the fruits of the Snapchat parent’s cloud computing deals with Amazon (AMZN) and Google (GOOGL).
Fitzgerald is ranked at No. 78 out of nearly 8,000 analysts on TipRanks. The analyst’s stock ratings have been correct 60% of the time, with an average return of 23.7% per rating.
Microsoft (MSFT) reported strong quarterly results, powered by solid performance in the cloud computing business. The Windows software maker went on to provide an upbeat outlook for the current quarter and fiscal year as it expects its cloud business to continue to perform well. (See Microsoft News Sentiment on TipRanks)
Wedbush’s Dan Ives agrees that Microsoft’s cloud business will continue to shine. In a recent report, the analyst pointed out that the company is expecting to report cloud revenue of as much as $21.35 billion in the current quarter, compared to Wall Street’s consensus estimate of $20.89 billion.
Ives rated the stock a buy with a price target of $340.
The cloud services that Microsoft and others provide help companies modernize their systems so they can operate more efficiently. According to Ives, companies will continue investing in their digital transformation despite the Federal Reserve’s rate hikes and inflation issues likely slowing down the economy. As a result, cloud spending is only going to accelerate, and Microsoft is well positioned to take advantage of it. Further, the analyst noted that Microsoft’s other businesses are also doing well.
Out of almost 8,000 analysts in the TipRanks database, Ives is ranked at No. 119. The analyst’s stock ratings have been accurate 61% of the time, with an average return of 21.6% per rating.
Alphabet’s (GOOG) stock fell after the company reported quarterly results that showed lower-than-expected YouTube ad revenue growth. The Google parent primarily generates its revenue from advertising, and YouTube is one of its most important assets in this business. (See Alphabet Blogger Sentiment on TipRanks)
Although a slowdown at YouTube may be an issue for investors to worry about, Raymond James analyst Aaron Kessler believes there is much to like in GOOGL stock. First, Alphabet’s management explained that the issue with YouTube was the direct response ad type, which faced a tough comparison with the same quarter the previous year. However, the company believes that there is still a great opportunity in the direct response category.
Kessler rated the stock a buy with a price target of $3,180.
The analyst sees long-term growth potential for Google search, even though the war in Ukraine may be reducing ad spending in Europe. In a recent report, he pointed out that retail and travel recovery will continue to drive gains in Google’s search business. Even at YouTube, the strong growth in YouTube Shorts user engagement is positive, Kessler said. YouTube Shorts receives more than 30 billion daily views.
Kessler also observed that the cloud business is also a major bright spot for Alphabet, noting that the business is gaining momentum. According to the analyst, Alphabet’s Other Bets, which include self-driving unit Waymo, also have a promising future.
Alphabet’s $70 billion boost to its share repurchase program also caught Kessler’s attention. The new plan is in addition to the roughly $4 billion remaining under its previous repurchase program, the analyst noted.
Kessler is ranked at No. 88 out of nearly 8,000 analysts in the TipRanks database. His stock ratings have been correct 65% of the time, with an average return of 19% per rating.
The payment network Visa (V) reported a solid fiscal second quarter, despite the hit from suspending its operations in Russia. Although Visa expects the Russia exit to shave 4% off of its fiscal second half net revenue, the business is generally doing well. The management expects growth elsewhere to make up for the lost Russian revenue within a year. (See Visa Hedge Funds Holdings on TipRanks)
Wedbush analyst Moshe Katri agrees that Visa’s business can continue booming despite the Russian headwind. The analyst rated Visa stock a buy with a price target of $270.
The global travel recovery is a boon for Visa. In a recent report, Katri highlighted that Visa’s cross-border travel volumes were improving, adding that this was a high-margin business for the company. Moreover, while inflation may be dealing a blow to many businesses, Katri pointed out that it’s actually a tailwind for Visa because it means high average ticket prices.
It also serves Visa well that affluent consumer spending is back in force in areas such as travel, meals, and entertainment, as the management has explained. The pandemic lockdowns prevented affluent consumers from spending because they could not go out, but now they are back as vaccines give people more confidence to venture outside.
Out of nearly 8,000 analysts on TipRanks, Katri ranks at No. 335. The analyst’s stock ratings have been successful 72% of the time, with an average return of 16.8% per rating.
Juniper Networks (JNPR) makes networking products and also offers cybersecurity solutions. Although the company reported a beat on quarterly revenue estimates, the JNPR stock sold off after the management lowered the 2022 full-year gross margin outlook. (See Juniper Networks Retail Investors on TipRanks)
However, Needham analyst Alex Henderson said in a recent report that the gross margin adjustment is a minor issue. The analyst said that Juniper’s underlying fundamentals look strong and that the management’s execution is also likely to look better than those of comparable companies.
The supply chain disruption, particularly stemming from lockdowns in China because of the resurgence of Covid-19, has been a major concern for investors. While that may be an issue, Henderson said that Juniper has diversified its supply chain and is now less dependent on China than in the past.
Henderson rated the stock a buy with a price target of $38.
Further, the analyst pointed out that Juniper’s $730 million software business is on track to more than double over the next three years. The momentum in the software division is also driving gains in the company’s other businesses, such as switching, routing, and security.
Finally, Henderson said that Juniper’s acquisitions of Mist, Apstra, 128 Technology, and Netrounds should help accelerate growth across the company’s portfolio.
Henderson is ranked at No. 71 out of almost 8,000 analysts on TipRanks. His stock ratings have been accurate 59% of the time, with an average return per rating of 23.7%.