Investors are grappling with a variety of conflicting signals as recent data suggests the economy may be softening and the S&P 500 soars to new highs.
To help navigate this complex environment, investors may turn to the research of Wall Street’s top analysts as they search for stocks with strong balance sheets and solid growth prospects.
With that in mind, here are three stocks that top Street pros favor, according to TipRanks, a platform that ranks stocks based on analysts’ past performance.
Micron Technology
Chip Manufacturer Micron Technology Our top pick this week is MU. The company recently reported better-than-expected third-quarter sales and profits thanks to demand induced by the ongoing artificial intelligence (AI) wave. Management is confident about the outlook going forward and expects to generate record revenue in fiscal 2025, buoyed by AI-driven opportunities.
Following the results, Goldman Sachs analyst Toshiya Hari reaffirmed his buy recommendation on MU shares and raised his price target to $158 from $138. The analyst believes the post-earnings pullback is a good opportunity for investors to build positions. He expects AI-driven demand and disciplined supply to drive above-consensus earnings growth in calendar year 2025.
The analyst highlighted several reasons for his bullish investment thesis, including market share gains in the higher-margin, high-bandwidth memory segment, as well as growth in AI computing within Micron’s data center business and edge computing.
Hari noted that Micron generated $425 million in free cash flow in the third quarter, rebounding from several quarters of negative FCF. He added that “the company remains focused on generating positive cash flow through the fourth quarter and into fiscal 2025, even given the significant increase in capital expenditures expected in fiscal 2025.”
Hari is ranked 25th out of more than 8,900 analysts tracked by TipRanks, and his ratings have produced profits 69% of the time, with an average return of 29.2%. (See Micron technical analysis on TipRanks)
Amazon
Towards an e-commerce and cloud computing giant Amazon (AMZN) Recently, Evercore ISI analyst Mark Mahaney reaffirmed his buy recommendation and $225 price target on AMZN shares following results from the firm’s 12th annual U.S. Online Retail Survey of 1,100 respondents.
Mahaney highlighted the survey results, saying Amazon remains the market leader in U.S. online retail, and that its dominance is reflected in the three key shopping metrics it tracks: price, selection and convenience. But he cautioned that the survey results show that Amazon Retail’s competitive environment is complex, especially when it comes to competing with rivals. Walmart (WMT) shows notable improvements in selectivity and convenience metrics.
Mahaney noted that AMZN leads its nearest rivals by three to four times in all three key metrics. Additionally, the company continues to improve its satisfaction scores, up 2% year over year to 84%, a significant increase from a low of 65% in 2020. The analyst believes the improved scores “reflect Amazon’s continued focus on improving speed and selection (particularly through localization efforts).”
The analysts also noted that Amazon Prime penetration reached an all-time high of 81%, with attractive perks like Prime Video, free same-day delivery, Prime Music and groceries making the Prime membership even more appealing to survey respondents.
Overall, Amazon is Evercore’s #1 Large Cap Long Position, and the findings support the company’s long-term investment thesis. In particular, the findings support the analysts’ view of three fundamental drivers for 2024: significantly accelerated growth in Amazon Web Services, rising operating margins for its North American retail business, and robust free cash flow margins.
Mahaney is ranked 20th out of more than 8,900 analysts tracked by TipRanks. His ratings are successful 63% of the time, generating an average return of 32.2%. (See Amazon hedge fund trading activity on TipRanks)
Twilio
Cloud Communication Platform Twilio TWLO is our third pick this week. The company reported better-than-expected first-quarter 2024 results and that its active customer accounts had grown to more than 313,000 as of March 31, up from 300,000 at the end of the same period last year. However, shares fell in response to the results as second-quarter guidance fell short of expectations, reflecting the impact of weaker customer spending.
Nonetheless, analyst Ivan Feinseth of Tigress Financial recently initiated coverage on TWLO shares, with a buy recommendation and a price target of $75. The analyst sees the stock’s shortfall as an attractive buying opportunity, supporting his view that “TWLO is well positioned to benefit from the continued acceleration of AI-driven digital customer engagement.”
Analysts expect Twilio to benefit from demand for artificial intelligence-based autoresponders that ensure timely and cost-effective customer responses. The company’s continued investments in research and development, as well as the integration of predictive and generative AI into new products, will help drive customer adoption.
Feinseth also highlighted Twilio’s cutting-edge “call center as a service” platform and the company’s industry-leading position in the communications market. He expects the company’s cost-cutting efforts and efficiency measures will lead to higher margins and improved profitability.
Fiennes is ranked 195th out of more than 8,900 analysts tracked by TipRanks, and his ratings have produced profits 61% of the time, with an average return of 13.1%. (See Twilio stock chart on TipRanks)
