A Meta Platforms Inc. logo is seen at the booth of the Viva Technology conference on innovation and startups at the Porte de Versailles exhibition center in Paris, France, June 17, 2022.
Benoit Tessier | Reuters
The second half of the year has really started and earnings are increasing.
Investors who follow the action can glean useful insights from Wall Street experts’ top stock picks that can help them make informed decisions when aiming for solid returns over the long term.
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Here are five stocks investors should consider, according to Wall Street’s top pros on TipRanks, a platform that ranks analysts based on their past performance.
First up this week is the Mediterranean restaurant chain Cava (CAVA), which made a blockbuster audience debut last month. The rally in CAVA shares since the IPO reflects investor optimism about the fast-casual restaurant chain’s growth prospects. Cava has grown to 263 locations since opening its first restaurant in 2011.
Stifel analyst Chris O’Cull issued a Buy rating on Cava with a price target of $48. With the company planning to expand to at least 1,000 restaurant locations across the U.S. by 2032, the analyst sees robust growth potential. Cava’s expansion plans include a push into new markets in the Midwest next year.
O’Cull believes the company’s growth plans are backed by a healthy balance sheet. He pointed out that after the IPO, Cava had about $340 million in cash and no funded debt. The analyst estimates annual sales growth of 20% over the next four years, driven by at least a 15% growth in cava presence. He forecasts that adjusted earnings before interest, taxes, depreciation and amortization will nearly double to $112 million in 2026 from $58 million this year, and that the company will start generating positive free cash flow beginning in 2026.
“In our view, the stock’s premium rating can be justified by its AUV [average unit volume] and unit count growth opportunities and the potential for solid operating momentum that will result in upward revisions to near-term estimates and long-term earnings potential,” said O’Cull.
O’Cull is ranked 349th out of more than 8,400 analysts tracked by TipRanks. Its reviews were profitable 62% of the time, with each review delivering an average return of 12.3%. (See CAVA Technical Analysis on TipRanks)
tech giant Apple (AAPL) is known for its innovative products, including the iPhone and iPad. However, the company’s higher-margin services segment has grown rapidly in recent years, boosting the company’s revenue and profitability.
Evercore ISI analyst Amit Daryanani, ranked 258th out of more than 8,400 analysts tracked on TipRanks, recently announced the results of his company’s annual Apple Services survey. The survey found that adoption of Apple services continues to grow across the board. Apple Pay, Music, and TV+ in particular saw the most significant increases in adoption compared to last year’s survey.
The survey found that the average revenue per user (ARPU) of services in the US is $110, well above Daryanani’s global estimate of $81. The analyst claims that ARPU growth is the key catalyst for the services business as smartphone adoption is likely to have peaked.
“We continue to see Apple Services well positioned to sustain double-digit growth into fiscal 2027 and beyond, driven by increasing ARPU coupled with new product launches,” Daryanani said.
Daryanani reiterated his buy rating on AAPL with a price target of $210. He has a 60% success rate and each of his reviews averaged 11.5%. (See AAPL insider trading activity on TipRanks)
Next on our list is the social media giant Meta (META), which recently launched Threads, a social media app challenging Twitter.
Ivan Feinseth, an analyst at Tigress Financial Partners, thinks the thread launch was timely to capitalize on Twitter’s declining popularity. He said the introduction of Threads created an additional catalyst for growth that could further fuel Instagram’s engagement.
Feinseth also anticipates that Meta’s ongoing investments and integration with artificial intelligence will continue to drive engagement and ad revenue across its apps. The analyst noted that Meta’s solid balance sheet and cash flows help support its growth initiatives, including investments in Metaverse, strategic acquisitions and share buybacks.
Feinseth reiterated his buy rating on Meta, increasing the price target to $380 from $285. The analyst said, “Increasing AI integration, better cost management and greater operational efficiencies will lead to a renewed acceleration in business performance trends.”
Feinseth ranks 205th among more than 8,400 analysts on TipRanks. Sixty percent of its reviews were profitable, with an average return of 12.8%. (See Meta Blogger Opinions and Sentiment on TipRanks)
semiconductor giant Nvidia (NVDA) is seen as one of the main beneficiaries of the growing interest in generative AI, which is fueling the huge demand for its GPU chips.
Goldman Sachs analyst Toshiya Hari noted that Nvidia has already benefited from the traditional AI boom for a decade, as reflected in the increase in revenue in its data center segment from $129 million in fiscal 2013 to $15 billion for the fiscal year 2023 reflects earnings estimates for Nvidia as he believes the company has entered a new phase of generative AI-driven growth.
Hari anticipates that demand for Nvidia’s products for training generative AI models will represent a cumulative revenue opportunity of approximately $85 billion (baseline) in calendar years 2023-2025. (See Nvidia financial reports on TipRanks)
Meanwhile, he estimated that inference (which includes key applications that could leverage generative AI, such as search, enterprise productivity tools, e-commerce, email, and social media) represents a nearly $7.7 billion revenue opportunity from 2023 to 2025 could, including $4.5 billion in 2025.
Hari raised his target price on Nvidia stock to $495 from $440 and reiterated his buy rating. He continues to see “great strides for the company given its robust competitive position in a rapidly growing (nascent) AI semiconductor market.”
Hari ranks 171st among more than 8,400 analysts on TipRanks. Additionally, 63% of its reviews were profitable, with an average return of 19.1%.
US groceries (USFD) distributes fresh, frozen and dry food as well as non-food products to customers in the hospitality sector.
Recently, BTIG analyst Peter Saleh reiterated a buy rating on USFD with a price target of $48, saying, “US Foods has been one of the best self-help stories on our coverage, with the majority of its EBITDA growth driven by operational improvements by management” since diligently implement it for a year.”
After an excellent first quarter gross margin, Saleh increased its second quarter gross margin estimate by 20 basis points to reflect increased market penetration of private label, rationalization of stock keeping units (SKU), reduction of waste and improved workforce retention.
The analyst also raised its second-quarter EBITDA estimate, expressing confidence that US Foods can beat expectations. He cited the company’s strategic initiatives, resilient industry revenues and its track record of significantly beating Wall Street’s EBITDA forecasts in recent quarters.
Saleh ranks 325th among more than 8,400 analysts tracked on TipRanks. Its reviews were profitable 64% of the time, with each one delivering an average return of 12.7%. (See US Foods Stock Chart on TipRanks)
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