Starbucks Irish Cream Cold Brew Holiday Drink.
Source: Starbucks
Between the Federal Reserve’s interest rate hike, new economic data and a slew of earnings from tech giants, it’s been a busy week for investors.
Because the market can be so volatile, it’s key to keep a long-term perspective and avoid making decisions based on sudden stock movements.
Check out these five stocks, which top Wall Street pros have singled out for their long-term outlook, according to TipRanks, a service that ranks analysts based on their performance.
starbucks
Premium coffee chain Starbucks (SEX) is a strong candidate for a strong rebound, thanks to the strength of its brand and its solid finances.
Ahead of the release of its fiscal third quarter 2022 results, scheduled for August 2, Evercore analyst ISI David Palmer seemed to be optimistic about the company. The analyst believes that the recent increase in subway traffic in China could have had a positive impact on same-store sales growth in the country. (I will see Starbucks dividend date and history on TipRanks)
Palmer is also hopeful that Starbucks will make key changes to its aging bar facilities, machinery and technology, which will drive the chain’s transaction growth opportunities in FY23. “We see upside to the consensus of the ‘FY23 estimated transaction growth in North America,’ Palmer said. “We also anticipate that these changes will increase member morale and ultimately minimize the risk of unionization.”
With those remarks, the analyst, who is ranked 657 out of nearly 8,000 analysts rated on TipRanks, reiterated a buy rating and a $95 price target on Starbucks. The analyst has been successful with 60% of his ratings, each of which has generated an average return of 5.9%.
Domino’s Pizza
Another company that is on Palmer’s shopping list is Domino’s Pizza (DPZ). Like most other companies operating in the fast food and 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 branding, fairly priced offerings and technological innovation capabilities are helping the company scale its business despite headwinds. (I will see Domino’s stock chart on TipRanks)
Palmer is optimistic about the pizza chain’s efforts to internalize delivery order management and mitigate delivery constraints in order to increase labor capacity. “That’s why the company is striving to share best practices in labor scheduling, is pushing more orders for efficient mobile ordering and pickup (the $7.99 value is helping), and is likely to be testing technology to allow drivers to more easily “Opt-in” as drivers,” the analyst said.
Palmer also sees a good opportunity to gain market share in the takeout segment as “stagflationary forces build.” In addition, the company’s digital offering of a $7.99 large pizza with the option to mix and match is another factor that may sustain same-store sales growth.
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Block (SQ) is a provider of payment processing solutions. The company has been dealing with troubled waters in the past two years, and its experiences in 2022 add to the challenge. Block faces significant revenue losses in the face of intensifying competition and reduced consumer spending amid a stagflationary environment.
However, strong momentum from its cash-app offering is helping the company stay afloat. Analyst at Deutsche Bank Bryan Keane predicts significant profitability for the second quarter of 2022 for Block, whose results are scheduled to be released on August 4. The analyst cites “improving new product adoption rates and positive pricing changes” as two of the factors driving 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 estimate of an organic gross profit growth rate of 18% (expenditure velocity will remain resilient in an economic slowdown in our view),” he said. Keane.
The analyst also believes synergies from acquired “Buy Now, Pay Later” trailblazer Afterpay should be good for bottom line growth. (I will 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 have yielded an average return of 8.7%, is currently ranked 601 out of nearly 8,000 analysts in the TipRanks database. It has been successful with 59% of its ratings.
Fiserv
Keane is also interested in the prospects of another financial technology services company: Fiserv (FISV). The company is showing encouraging growth trends despite macroeconomic headwinds affecting its operating margin.
In its recent Q2 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, cementing Keane’s belief in the stock. (I will see Fiserv privileged trading activity on TipRanks)
In addition, the analyst also noted 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 for FY22, FY23 and FY24. He also raised his outlook for the company’s FY23 revenue growth. Keane reiterated a buy rating on the stock with a price target of $135.
Datadog
Major analysts are betting on a software company datadog (DOG). The company uses its real-time data monitoring platform to help corporations seamlessly analyze their entire stack. The business may not be protected from macroeconomic headwinds, but it is more likely to recover quickly and efficiently given the robust environment for IT spending.
Ahead of quarterly earnings results to be reported on August 4, Monness analyst Crespi Hardt Brian White maintained its position on Datadog with a buy rating, despite lowering its 12-month price target to $130 from $160 due to macro headwinds. (I will see Datadog Risk Factors on TipRanks)
White believes that accelerated digital transformation has created a secular growth trend in the cloud, which will continue to drive long-term demand for Datadog’s solutions. “Given Datadog’s rapid growth, strong secular headwinds in the observability market and the company’s cloud-native platform, we believe the stock will command a premium valuation relative to other next-generation software vendors,” White said.
The analyst also said that Datadog has immense long-term potential to achieve profitability as the business matures.
White’s ratings have earned him a 57% success rate and earned an average return of 9.9% each. The analyst is ranked #524 out of nearly 8,000 analysts followed on TipRanks.
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