Between the Federal Reserve’s interest rate hike, fresh economic data and a flood of earnings from tech giants, it has been a busy week for investors.
Since the market can be so volatile, it’s key to maintain a long-term perspective and avoid making decisions based on sudden movements in stocks.
Check out these five stocks, which Wall Street’s top pros have highlighted for their long-term prospects, according to TipRanks, a service that ranks analysts based on their performance.
Starbucks
Premium coffee chain Starbucks (SBUX) is a great candidate for a strong rebound, thanks to its brand strength and its sound finances.
Ahead of the release of its third-quarter fiscal 2022 results, slated for Aug. 2, Evercore ISI analyst David Palmer appeared to be optimistic about the company. The analyst believes that the recent surge in subway traffic in China might have had a positive impact on same-store sales growth in the country. (See Starbucks Dividend Date & History on TipRanks)
Palmer is also hopeful that Starbucks will make key changes to its outdated bar set-ups, machinery, and technology, which will boost the chain’s transaction growth opportunities in FY23. “We see upside to consensus FY23 estimated North America transaction growth,” said Palmer. “We also envision these changes boosting partner morale and ultimately minimizing unionization risk.”
With these observations, the analyst, who is ranked No. 657 among nearly 8,000 analysts rated on TipRanks, reiterated a buy rating and a $95 price target on Starbucks. The analyst has had success with 60% of his ratings, each of which has generated average returns of 5.9%.
Domino’s Pizza
Another company that is on Palmer’s buy list is Domino’s Pizza (DPZ). Like most other companies operating in the food and quick-service restaurant industry, Domino’s was a victim of high input costs, reduced consumer discretionary spending and labor shortages.
However, its efficient supply chain management, strong brand name, fairly priced offerings, and technology innovation capabilities are helping the company scale its business despite the headwinds. (See Domino’s Stock Chart on TipRanks)
Palmer is upbeat about the pizza chain’s efforts to internalize the management of delivery orders and mitigate delivery constraints in order to increase labor capacity. “To this end, the company is striving to share best practices in labor scheduling, it is pushing more orders to labor-efficient mobile order & pick up ($7.99 value is helping), and it is likely testing technology to allow drivers to more easily ‘opt-in’ as drivers,” said the analyst.
Palmer also sees a good opportunity for market share gain in the carryout segment as “stagflationary forces grow.” Additionally, the company’s digital offering of a large pizza at $7.99 with the option of a mix and match is another factor that can sustain the growth of same-store sales.
Block
Block (SQ) is a payment processing solutions provider. The company has been dealing with troubled waters in the past two years, and its experiences in 2022 are adding to the challenge. Block is facing significant revenue losses in the face of intensifying competition and reduced consumer spending amid a stagflationary environment.
Nonetheless, strong momentum in its Cash App offering is helping the company to stay above water. Deutsche Bank analyst Bryan Keane predicts meaningful profitability for Block’s second quarter of 2022, the results of which are scheduled to be released on Aug. 4. The analyst cites “improving new product attach rates and positive changes in pricing” as two of the factors that are boosting the Cash App business.
“We remain constructive on Cash App and believe the segment has the potential to surprise to the upside in 2Q22 above our gross profit organic growth rate estimate of 18% (velocity of spend will remain resilient in an economic slowdown in our view),” said Keane.
The analyst also believes that synergies from the acquired “buy now, pay later” pioneer Afterpay should be good for bottom-line growth. (See Block Hedge Fund Trading Activity on TipRanks)
Keane reiterated a buy rating on the SQ stock with a price target of $155. The analyst, whose ratings have delivered an average return of 8.7%, currently ranks No. 601 among almost 8,000 analysts on the TipRanks database. He has been successful with 59% of his ratings.
Fiserv
Keane is also keen on the prospects of another financial technology services company: Fiserv (FISV). The company is showing encouraging growth trends despite the macroeconomic headwinds that are affecting its operating margin.
In its recent second-quarter earnings results, the company raised its FY22 revenue and earnings per share (EPS) growth outlook, despite factoring in the possibility of a recession. This was an impressive move, solidifying Keane’s conviction on the stock. (See Fiserv Insider Trading Activity on TipRanks)
Moreover, the analyst also pointed out that new deals, the expansion of old arrangements and a strong international footprint, particularly in Latin America, are significantly boosting the company’s revenues.
The analyst raised his outlook for Fiserv’s EPS growth for FY22, FY23 and FY24. He also boosted his outlook for the company’s FY23 revenue growth. Keane reiterated a buy rating on the stock with a price target of $135.
Datadog
Top analysts are banking on software company Datadog (DDOG). The firm uses its real-time data-monitoring platform to help corporations analyze their entire stack seamlessly. The firm may not be sheltered from the macroeconomic headwinds, but it is most likely to recover quickly and efficiently, given the solid environment for IT spending.
Ahead of quarterly earnings results that are scheduled to be reported on Aug. 4, Monness Crespi Hardt analyst Brian White maintained his stance on Datadog with a buy rating, despite lowering the 12-month price target to $130 from $160 due to the macro setbacks. (See Datadog Risk Factors on TipRanks)
White believes that accelerated digital transformation has created a secular growth trend in cloud, which will keep driving long-term demand for Datadog’s solutions. “Given Datadog’s rapid growth, the strong secular tailwinds in the observability market and the company’s cloud native platform, we believe the stock will command a premium valuation relative to other next-gen software vendors,” said White.
The analyst also said Datadog has immense long-term potential to reach profitability when the business matures.
White’s ratings have generated a 57% success rate for him, and have garnered an average return of 9.9% each. The analyst is placed at No. 524 among almost 8,000 analysts followed on TipRanks.