Elon Musk, founder of SpaceX and chief executive officer of Tesla Inc., arrives at the Axel Springer Award ceremony in Berlin, Germany, on Tuesday, Dec. 1, 2020.
Johannessen-Koppitz | Bloomberg | Getty Images
The second quarter of 2021 is underway, and Wall Street analysts are reviewing the stocks they cover. At the same time, concerns over new variants of COVID-19 continue to paint a picture of uncertainty.
So, what does this mean for investors looking for fresh investment opportunities? There are still stocks poised to outperform, and one way to find them is by following the recommendations of analysts with a proven track record of success. TipRanks analyst forecasting service attempts to identify the best-performing analysts on Wall Street, or the analysts with the highest success rate and average return per rating. These metrics take the number of ratings published by each analyst into account.
Here are the best-performing analysts’ top stock picks right now:
The Chefs’ Warehouse
The Chefs’ Warehouse, a distributor of specialty food products, focuses on independent and chef-inspired restaurants.
Stating in a research note that this name has “great ingredients for a great reopening,” Lake Street Capital analyst Ben Klieve initiated coverage of The Chefs’ Warehouse with a Buy rating on April 5. Additionally, he set a $38 price target, which puts the upside potential at 21%.
Klieve acknowledges the fact that the company was up against “unprecedented headwinds throughout 2020.” However, he argues that these headwinds are subsiding.
“Amid nationwide restrictions on indoor dining, we believe the company made it through 2020 in as good of a position as could be expected. We look for significant sequential improvement throughout 2021 as governments lift restrictions and a return to near-normal conditions by the end of 2022. We expect the stock can return to pre-pandemic levels as investors better-appreciate Chefs’ competitive position, economic moat, and earnings power,” Klieve commented.
Given that CHEF’s niche is the independent and chef-inspired restaurant space, Klieve believes the company’s position within the distribution industry is solid, with “significant pent-up demand exists for a return to these same restaurants for indoor dining,” in the analyst’s opinion. He added, “Company management describes an investment in CHEF as investing in one’s favorite neighborhood restaurant, an apt description in our view, and one which we believe represents a significant catalyst for 2021.”
When it comes to the valuation, Klieve tells investors “the CHEF value proposition is not predicated on where the stock can be in a manner of days or weeks, but where a broadly reopened economy can take the stock in a year.”
Currently, Klieve is tracking a 62% success rate and 29.9% average return per rating.
On April 4, electric vehicle maker Tesla released its 1Q21 production and delivery results, with the figures coming in ahead of the Street’s estimates. In response to this development, Oppenheimer analyst Colin Rusch reiterated a Buy rating and a price target of $1,036 (54% upside potential).
Digging into the details of the announcement, total 1Q deliveries came in at 184,800, beating the 172,230 consensus estimate. Model 3/Y deliveries landed at 182,780, exceeding the consensus estimate by over 20,000. Although Model S/X deliveries of 2,020 were well below analysts’ expectations, the company was “in the early stages of ramping the new version of those vehicles,” according to Rusch.
“We believe deliveries were weighted to China, and to a lesser extent the U.S., as supply chain friction is lower in China. We believe mix toward China will benefit GM and help offset inflationary pressures on input costs. We expect bears to point to low Model S/X sales as indicative of demand for its premium vehicles, but we believe the transition to the new design will spur renewed demand for the vehicles,” Rusch explained.
Given that Tesla was able to deliver this solid performance amid supply constraints and the progress it has made on the commercialization of higher level ADAS functionality, Rusch is optimistic about the growth prospects.
“We remain constructive on shares looking toward the 1Q21 call and automotive margin details along with ADAS commentary as key drivers of the stock,” Rusch opined.
Earning the 7th spot on TipRanks’ list of best-performing analysts, Rusch has achieved a 63% success rate as well as an impressive 69.1% average return per rating.
Azure Power Global
Azure Power Global is one of the top developers of utility scale solar power in India. Taking this into consideration, RBC Capital analyst Elvira Scotto initiated coverage with a Buy rating and a $42 price target. This figure brings the upside potential to 50%.
Scotto notes that she sees AZRE as “a way to play power and solar demand growth in India.” According to the IEA, power generation in India is poised to grow roughly 145% through 2040.
“Given this increase, desire for greater energy independence and cleaner air, India targets 450 GW of non-hydro renewable electricity capacity by 2030, including 300 GW of solar (implies ~25-30GW of solar capacity additions through 2030), which we believe provides significant growth opportunity for AZRE,” Scotto commented.
Looking at its recent wins, the company generally enters into power purchase agreements with durations of about 25 years, providing “highly visible, long-term cash flow generation (currently has ~2 GW operational).” What’s more, AZRE won awards from SECI for 4 GW of solar capacity.
“We expect SECI to sign a power purchase agreement with AZRE in early April 2021 and forecast these contracts will grow AZRE’s revenue by 102% and EBITDA by 109% through 2026. Additional auction wins would drive upside to our estimates,” Scotto said.
There is another factor that should give AZRE a leg up. “As a first mover, AZRE has gained scale (provides supply chain advantages), expertise and a strong reputation. In addition, AZRE has a vertically integrated business model, which provides AZRE control over its projects and can also lower overall costs. Specifically, given the challenges in securing land in India, we believe AZRE’s experience and capabilities in land acquisition provide it with a significant competitve advantage,” Scotto cheered.
Based on her 64% success rate and 20.3% average return per rating, Scotto scores the #218 position on TipRanks’ ranking.
Cloud-based software provider New Relic just announced that it has committed to a restructuring plan designed to realign its expenses to reflect its shift to a consumption-based model.
On the heels of this development, Needham analyst Jack Andrews kept both his Buy rating and $78 price target (23% upside potential) as is.
According to Andrews, “compared to a traditional SaaS subscription approach, where a large percentage of revenue is derived from committed contracts and bookings from the balance sheet, a consumption business inherits a different set of unit economics and requires a different go-to-market approach.” To this end, renewals will become a “non-event,” and each additional “stream of customer consumption becomes a series of small renewals.”
With this in mind, management is hoping to simplify Sales and Customer Adoption roles and decrease its workforce both in the U.S. and internationally.
“NEWR has historically out-spent its peers in sales and marketing and G&A and intends to shift some of these dollars to better invest in its product and R&D roadmap. Historically, monitoring tools (in particular APM) remain under-penetrated within NEWR accounts and shifting to a consumption-based model aims to reduce frictions and drive customer expansions in the long-term (i.e. customers no longer face uncertainty around TCO and a high marginal cost for the next workload),” Andrews stated.
On top of this, New Relic announced preliminary 4QFY21 results, with revenue, ARR, non-GAAP EPS and non-GAAP EBIT all coming in higher than the company’s previous guidance.
Andrews also argues that based on the “lowered financial bar and attractive valuation,” the current “risk/reward setup is favorable.”
Data from TipRanks shows that Andrews boasts a 61% success rate and 24.6% average return per rating.
On April 6, Everbridge, which provides critical event management software, revealed that it is set to acquire xMatters, with the cash-and-stock deal valued at $240 million. After the news broke, Northland Capital analyst Michael Latimore reiterated a Buy rating and $165 price target, suggesting that 32% upside potential could be in store.
Everbridge believes that “the combination with EVBG’s CEM offering will create a powerful IT alerting and incident management offering,” with the deal expected to close in 2Q.
What’s more, according to EVBG, the goal is to reduce the time needed to restore IT services and remediate breaches, with it expecting partial year revenue of $9-$11 million and minimal EBITDA effect.
As for xMatters, it is a service reliability platform that helps DevOps and operations teams deliver products at scale by automating workflows and ensuring infrastructure is working, with it boasting 2.7 million users daily and customers like BMC, athenahealth, Box and Vodafone.
“Combined with EVBG, the service will proactively discover IT issues, assemble responders, apply remediation code, manage patches and drive continuous improvement. The solution will help companies advance digital transformation while providing solutions for IT resiliency,” Latimore wrote in a research note.
Expounding on the implications of the deal, Latimore points out that “EVBG’s IT alerting business has been growing above Everbridge’s corporate average, and this acquisition further strengthens Everbridge’s position.”
It should be noted that the company recently unveiled Everbridge for Digital, and according to Latimore, it has “a unique position in providing physical and digital security.” The analyst also thinks that EVBG’s scale and reach will accelerate xMatters’ growth.
Landing among the top 90 analysts tracked by TipRanks, Latimore has delivered a 62% success rate and 33.2% average return per rating.