Earnings season is in full swing, with performance from tech giants and industry leaders influencing the direction of the market.
While these updates provide important insight into a company’s performance, investors should remember that investment decisions should not be based on a single quarter’s results.
Instead, you should consider recommendations from Wall Street’s top analysts, who dissect company fundamentals and highlight stocks with solid long-term growth potential.
According to TipRanks, a platform that ranks stocks based on analysts’ past performance, these are the three stocks that top Street pros favor:
alphabet
The first stock of the week is Google’s parent company alphabet (GOOGL) The company recently reported second-quarter results, highlighting strength in its search and cloud businesses, but YouTube ad revenue growth slowed during the quarter and fell short of analyst expectations.
Following the results, BMO Capital analyst Brian Pitts reiterated his buy recommendation on GOOGL shares with a $222 price target, and the stock remains a top pick for BMO.
“The combination of growing search query volume and declining incremental costs suggests the benefits of AI to search will be a multi-year event,” Pitts said, referring to artificial intelligence-related tailwinds for Alphabet’s search business.
Additionally, he raised his 2024 and 2025 forecasts for its cloud business to reflect AI-driven profits. Pitts highlighted that the company’s AI infrastructure and generative AI solutions for cloud clients are adopted by more than 2 million developers and have already contributed “billions of dollars” in revenue.
Despite YouTube’s second-quarter revenue missing expectations, Pitts remains confident in the business. He believes YouTube is well-positioned to benefit from a significant portion of the $150 billion in global linear TV ad spend expected to shift to the digital world, and he expects YouTube’s impressive AI creator tools to boost the company’s prospects.
Pitts is ranked 189th out of more than 8,900 analysts tracked by TipRanks. His ratings have been successful 74% of the time and have delivered an average return of 17.1%. (See Alphabet Hedge Fund Trading Activity on TipRanks)
Service Now
next Service Now Cloud-based software company ServiceNow recently surprised investors with strong second-quarter results. The workflow automation platform showed better-than-expected net new annual contract value (NNACV) and generative AI contributions. ServiceNow also raised its 2024 subscription revenue outlook.
In light of the strong earnings and outlook, Goldman Sachs analyst Kash Langan raised his price target on NOW shares to $940 from $910 and reaffirmed his buy recommendation.
The day after ServiceNow’s quarterly earnings were released, shares rose 13%. Analysts said the rise in NOW shares following the earnings release signaled investors’ “renewed confidence in ServiceNow’s GTM.” [go-to-market] The execution, quality and breadth of their platform is clearly resonating with IT buyers despite a volatile macro environment.”
Langan highlighted that the 22.5% increase in constant currency in ServiceNow’s current remaining performance obligations, an indicator of future revenue, was driven by strong NNACV and early renewals.
He believes the acceleration of remaining performance obligations to 31% in Q2 2024 signals the adoption of NOW’s platform across the enterprise. Overall, the analyst is optimistic that the company can sustain a growth rate above 20%, buoyed by continued AI momentum and accelerating backlog.
Langan is ranked 579th out of more than 8,900 analysts tracked by TipRanks. His ratings have produced profits 57% of the time, with an average return of 8.7%. (See ServiceNow stock chart on TipRanks)
Travel + Leisure
The third stock this week is Travel + Leisure TNL is a membership and leisure travel company. TNL reported second-quarter profit that beat analysts’ expectations, but revenue that fell short of estimates. The company raised its full-year adjusted earnings before interest, taxes, depreciation and amortization outlook, reflecting strong consumer demand for vacation ownership and timeshares.
On July 29, Tigress Financial analyst Ivan Fienneszes reaffirmed his buy recommendation on TNL shares and raised his target price to $58 from $54. The analyst’s bullish stance is supported by demand for vacation ownership. Fienneszes also expects TNL to benefit from lower interest rates later this year and further rate cuts in 2025.
He expects TNL’s revenue and cash flow to be driven by “a combination of property development, membership sales, increasing membership fees and resort operating expenses” as the travel boom continues.
Feinseth believes TNL’s strategic alliance with Sports Illustrated Resorts and the launch of its ultimate sports-themed active lifestyle resort network will be a major driver of TNL’s growth. The company also expects to benefit from technology investments, marketing alliances and acquisitions, including the acquisition of Accor Vacation Clubs.
Fiennes-Zess is ranked 235th out of more than 8,900 analysts tracked by TipRanks. His ratings have been successful 60% of the time, delivering an average return of 12.8% each. (See TipRanks Travel + Leisure Stock Buybacks)
