Sanjay Mehrota, CEO, Micron
Scott Mlyn | CNBC
With focus locked in on the emergence from the pandemic, there is still plenty of uncertainty lingering on Wall Street.
So, how can exciting investment opportunities be found? By following the latest stock recommendations from the analysts that consistently get it right.
TipRanks’ analyst forecasting service attempts to pinpoint Wall Street’s best-performing analysts. With this ranking factoring in the number of ratings made by each analyst, these top experts are the analysts who have the highest success rate and average return per rating on a one-year basis.
Here are the best-performing analysts’ five favorite stocks right now:
On the heels of the “Disinformation Nation: Social Media’s Role in Promoting Extremism and Misinformation” Energy & Commerce House Committee hearing, Monness analyst Brian White remains bullish on Facebook. To this end, he reiterated a Buy rating and a $375 price target (27% upside potential) on March 29.
White argues that the hearing demonstrated “a rare phenomenon; reigning in the leading social media platforms through increased regulation, changes to Section 230, or possibly breaking up the largest platforms has become one of the very few issues that both Democrat and Republican leaders can agree on.”
That said, “Mark Zuckerberg delivered the best performance of the hearing, coming off as well-prepared, thoughtful, professional, respectful of the issues at stake and open to improving the platform,” in White’s opinion.
Calling the hearing a “brazen political grandstanding on both sides of the aisle,” the analyst believes that lawmakers were trying to appeal to local constituents. However, he doesn’t dispute that serious issues have been brought about by social media.
Expounding on this, White stated, “We believe the societal dangers these platforms have plagued our culture with are well founded, and meaningful changes are imperative before there is no turning back.
It should also be noted that part of the discussion was focused on whether social media platforms should be considered publishers rather than just carriers of information, which would essentially make them “ineligible for liability protection under Section 230.”
On top of this, other subcommittee members called for the “break up of Big Tech,” with Facebook, Google-parent company Alphabet, and Twitter being compared to Standard Oil and AT&T.
“If this journey ultimately ends in the breakup of Facebook and/or Alphabet, we believe the stocks would enjoy a higher valuation than today,” White commented.
As one of the top 75 analysts tracked by TipRanks, White’s calls see an average annual return of 28.2%, with the success rate landing at 73%.
Shares of Micron popped over 4% in after-hours trading on March 31 after the chip maker released its results for the fiscal second quarter. In response to the better-than-expected showing, RBC Capital’s Mitch Steves reiterated a Buy rating and increased the price target from $110 to $120. The updated target implies 36% upside potential.
Looking at the details of the print, Micron posted revenue of $6.24 billion, which exceeded the $6.19 billion consensus estimate, and EPS of $0.98, also beating the Street’s $0.95 call. Additionally, DRAM made up roughly 71% of revenue, with sales volumes gaining by high single-digits quarter-over-quarter.
As for guidance, it was also better than analysts had originally expected. Management guided for $6.9-$7.3 billion in revenue and EPS of $1.55-$1.69, besting the $6.83 billion and $1.32 consensus estimates. On top of this, Steves notes that gross margins are “expanding rapidly considering that the firm guided to 41.5% gross margins at the midpoint.”
There was one surprise, though, for Steves. After the market closed on March 31, The Wall Street Journal reported that Micron and Western Digital are considering a deal that would result in the acquisition of Kioxia for about $30 billion. Based on the article, a deal is not a sure thing, and Kioxia would potentially be interested in an IPO later this year if a deal ultimately isn’t reached.
Weighing in on the impacts of a deal, Steves commented, “Overall, given that the end result would be consolidation (if a deal occurs), this would be a net positive for the memory industry, in our view. Long-term, this would likely lead to improved memory supply/demand dynamics.”
Given Steves’ impressive 76% success rate and 35.2% average return per rating, he is among the top 30 analysts tracked by TipRanks.
Based on increasing confidence in growth as well as the margin outlook, Needham’s James Ricchiuti upgraded electronic manufacturing services (EMS) company Benchmark Electronics from Hold to Buy on March 30. Additionally, the five-star analyst assigned a $35 price target, putting the upside potential at 13%.
Ricchiuti tells clients he had previously expected its semiconductor capital equipment-related segment to be up about 10% in 2021 given commentary from the company. That said, the analyst now believes this estimate could be “conservative” based on the “increasingly positive tone in the semi-cap market, including from Applied Materials, BHE’s largest customer (12% of 2020 revenue).”
With this in mind, the firm’s semi-cap team is projecting 21% growth in WFE in 2021. “Given the more positive backdrop for this part of BHE’s business, we are more optimistic of upside to our overall estimates,” Ricchiuti said.
It should also be noted that Benchmark came into this year “with strong bookings momentum in 2020 (over $800 million in new bookings) despite the pandemic.”
This prompted Ricchiuti to state “BHE is targeting 5% top-line growth through 2022, which looks increasingly reasonable in an improving economy. Given its strong mix of higher-value revenues, we are confident of solid sequential improvement in gross margins over the course of 2021, while at the same time we expect BHE to hold the line on SG&A.”
What’s more, strength in defense could offset headwinds in the commercial aerospace part of the A&D business, in Ricchiuti’s opinion.
With a 67% success rate and 23.5% average return per rating, Ricchiuti is ranked #83 on TipRanks’ list of best-performing analysts.
Lantheus develops diagnostic imaging agents and products that help healthcare providers identify diseases. For SVB Leerink analyst Richard Newitter, its recent acquisition of the global rights to Noria Therapeutics’ NTI-1309, which is a PET oncology imaging agent, is an “interesting addition to LNTH’s cancer diagnostics/pharma services offering.”
Bearing this in mind, Newitter reiterated a Buy rating on the stock. What’s more, the analyst kept the $25 price target as is, with this figure suggesting that 17% upside potential could be in store.
Per the terms of the acquisition, LNTH will have the exclusive rights to develop, manufacture, and commercialize NTI-1309. Additionally, Noria will be responsible for the early clinical development of of the candidate, and when the Phase 1 study is completed, NTI-1309 will be integrated into LNTH’s portfolio of imaging biomarkers and included in the offering to academic organizations and pharmaceutical companies to use in oncology drug development programs.
Further weighing in on the recent purchase, Newitter said, “NTI-1309 has the potential to broaden LNTH’s reach beyond prostate cancer…through additional diagnostic biomarker targeting and pharma service capabilities into other cancer types.” He added, “In our view, NTI-1309 represents a longer-term initiative and enhances the overall value of LNTH’s diagnostics/pharma services portfolio.”
As such, Newitter expects the company to sustain a roughly 20% 2020 –2023E revenue CAGR as it uses its expanding diagnostic image enhancing solutions pipeline to “target sizeable, rapidly growing and underpenetrated cardio/oncology market opportunities.”
That being said, PyL, Lantheus’ fluorine-18 (F-18) prostate-specific membrane antigen (PSMA)-targeted PET imaging agent for prostate cancer diagnosis, remains the key area of focus for the SVB Leerink analyst. The therapy is under FDA priority review, with the PDUFA date set for May 28.
“We view PyL as an exciting new product cycle for the company and a major growth driver for the company over the near- and intermediate-term. We model PyL rev of $5.7 million in 2021E and $52 million in 2022E, which mgmt. seemed comfortable with during recent meetings,” Newitter explained.
Landing the #178 spot on TipRanks’ ranking, Newitter has achieved a 71% success rate and 26.9% average return per rating.
After a call with Marvell CEO Matt Murphy, Susquehanna analyst Christopher Rolland is optimistic about the semiconductor company’s long-term growth prospects.
As such, the top analyst maintained a Buy rating. What’s more, Rolland bumped up the price target from $60 to $62, to reflect increased visibility. This new target implies 27% upside potential from current levels.
According to Rolland, the most important portion of the call was the discussion around Marvell’s ASIC strategy.
“Overall, management believes custom ASICs (5G, Cloud, Auto) could be billions of dollars of opportunities five years from now. The Inphi addition and its strong optics position should be an accelerator and attractant for new ASIC businesses more broadly. In switching, Marvell should continue to push speeds and feeds, to eventually offer ASIC capabilities that can rival Broadcom,” the analyst noted.
Furthermore, the company will continue to “push speeds and feeds,” potentially offering ASIC capabilities that match those of Broadcom, in Rolland’s opinion. From a financial perspective, the analyst believes that ASICs will only modestly impact gross margins, but other areas like NRE could give operating margins a boost.
As for 5G, Rolland stated, “In addition to Marvell’s strong core 5G offerings, we think FPGA replacement may be taking place now in the radio head, perhaps illuminated by Marvell’s most recent announcement with Samsung. Marvell has demonstrated ~70% power savings vs. previous FPGA solutions in the radio head.”
On top of this, Murphy pointed out that O-RAN is gaining momentum globally, with the recent C-band auction also potentially providing a boost “as carriers should soon begin investing more aggressively on base stations hardware after spending billions on associated spectrum auctions.”
A top 50-ranked analyst, Rolland boasts a 74% success rate and 21.7% average return per rating.