Starbucks Irish Cream Cold Brew holiday drink.
Between the Federal Reserve’s interest rate hike, new economic data and a flurry of earnings from the tech giants, it’s been a busy week for investors.
Since the market can be so volatile, it’s essential to maintain a long-term perspective and avoid making decisions based on sudden stock moves.
Check out these five stocks, which top Wall Street pros have highlighted for their long-term outlook, according to TipRanks, a service that ranks analysts based on their performance.
Starbucks high-end coffee chain (SBUX) is an excellent candidate for a strong rebound, thanks to its strong brand and healthy financials.
Ahead of its fiscal 2022 third-quarter earnings release, scheduled for August 2, Evercore ISI analyst David Palmer sounded optimistic about the company. The analyst believes that the recent increase in subway traffic in China may have had a positive impact on same-store sales growth in the country. (See Starbucks dividend date and history on TipRanks)
Palmer also expects Starbucks to make key changes to its outdated bar facilities, machinery and technology, which will boost the chain’s deal growth opportunities in FY23. “We see an upside in growing consensus estimate of transactions in North America for fiscal year 23,” Palmer said. “We also envision these changes boosting partner morale and ultimately minimizing the risk of unionization.”
With those comments, the analyst, who is ranked No. 657 among nearly 8,000 analysts rated on TipRanks, reiterated a Buy rating and $95 price target on Starbucks. The analyst was successful with 60% of his ratings, each of which generated average returns of 5.9%.
Another company that is on Palmer’s shopping list is Domino’s Pizza (DPZ). Like most other companies operating in the food and fast food industry, Domino’s has been plagued by high input costs, reduced consumer discretionary spending, and labor shortages.
However, its efficient supply chain management, strong brand, reasonably priced offerings and technological innovation capabilities help the company scale its business despite headwinds. (See Domino’s stock chart on TipRanks)
Palmer is optimistic about the pizza chain’s efforts to internalize delivery order management and ease delivery constraints to increase labor capacity. “To that end, the company is working to share best practices in work scheduling, pushing more orders to efficient mobile ordering and pickup (a $7.99 value helps), and testing probably the technology to make it easier for drivers to ‘opt-in’ as drivers,” the analyst said.
Palmer also sees a good opportunity to gain market share in the take-out segment as “stagflationary forces build.” Additionally, the company’s digital offering of a $7.99 large pizza with the option of a mix and match is another factor that may support comparable store sales growth.
To block (SQ) is a provider of payment processing solutions. The company has faced some troubled waters over the past two years, and its experiences in 2022 add to the challenge. Block faces significant revenue losses as competition intensifies and consumer spending shrinks in a stagflationary environment.
Nonetheless, the strong momentum of its Cash App offering helps the company stay above water. Deutsche Bank analyst Bryan Keane predicts significant profitability for Block’s second quarter of 2022, with results expected to be released on August 4. drive Cash App activity.
“We remain constructive on Cash App and believe the segment has the potential to surprise on the upside in 2Q22 above our estimate of gross margin organic growth rate of 18% (spending velocity will remain resilient in a slowdown economic in our view),” Keane said.
The analyst also believes that synergies from acquired pioneer “buy now, pay later” Afterpay should be good for earnings growth. (See Block Hedge Fund Trading Activity on TipRanks)
Keane reiterated a buy rating on SQ stock with a price target of $155. The analyst, whose ratings provided an average return of 8.7%, currently ranks 601st among nearly 8,000 analysts in the TipRanks database. He passed with 59% of his marks.
Keane is also keen on the outlook of another fintech services company: Fiserv (FISV). The company is showing encouraging growth trends despite macroeconomic headwinds affecting its operating margin.
In its recent second-quarter results, the company raised its outlook for revenue and earnings per share (EPS) growth for FY22, despite factoring in the possibility of a recession. It was an impressive decision, solidifying Keane’s belief in the title. (See Fiserv’s insider trading activity on TipRanks)
Additionally, the analyst also pointed out that new deals, expansion of old deals, and a strong international footprint, especially in Latin America, are significantly increasing the company’s revenue.
The analyst raised his outlook for Fiserv’s EPS growth in FY22, 23 and 24. He also bolstered his outlook for the company’s revenue growth in FY23. Keane reiterated a buy rating on the stock with a price target of $135.
Top analysts rely on software company Datadog (DDOG). The company uses its real-time data monitoring platform to help companies analyze their entire stack seamlessly. The business may not be immune to macroeconomic headwinds, but it is highly likely to recover quickly and effectively given the strong IT spending environment.
Ahead of quarterly results due out on August 4, Monness Crespi Hardt analyst Brian White maintained his position on Datadog with a buy rating, despite lowering the 12-month price target to $130 versus $160 due to macroeconomic setbacks. (See Datadog Risk Factors on TipRanks)
White believes the acceleration of digital transformation has created a secular growth trend in the cloud that will continue to drive long-term demand for Datadog’s solutions. “Given Datadog’s rapid growth, strong secular tailwinds in the observability market, and the company’s cloud-native platform, we believe the stock will benefit from a higher valuation relative to other next-generation software vendors,” White said.
The analyst also said Datadog has immense long-term potential to achieve profitability as the business matures.
White’s notes gave him a pass rate of 57% and earned an average return of 9.9% each. The analyst is placed at No. 524 among almost 8,000 analysts followed on TipRanks.