Investing

In this article

Shannon Stapleton | Reuters

Rising oil prices, the prospect of the Federal Reserve dialing back its easy-money policy and tension among lawmakers in Washington are just a few of the factors behind the latest bout of volatility in the markets.

Top analysts are sticking by these names amid the overall macro volatility, according to TipRanks, which tracks the best-performing stock pickers.

Several recent trends, including higher ad spending at Google, digital disruptions at schools bolstering Chegg, and pandemic exercise-at-home trends driving sales at Peloton, have helped position some stocks into top analysts’ good faith. Let’s take a look at how they built their bullish hypotheses.

Alphabet

Even companies that seem to be involved with everything have room to continue growing. Generating an overwhelming portion of its revenues from advertising spending, Google-parent Alphabet (GOOGL) is expected to continue hauling it in as the year winds down. Brent Thill of Jefferies expects the summer slump in spending to continue trending back upward. (See Alphabet Stock Analysis on TipRanks)

Bullishly stating that GOOGL “remains a top large-cap pick,” Thill rated the stock a Buy and declared a price target of $3,325 per share.

The five-star analyst explained that in the fourth quarter, online brand managers may wish to “flush,” or spend, all of their budgets on hefty ad campaigns, in case the same copious amounts of cash are no longer allotted the following fiscal year.

Meanwhile, across other platforms, TV advertisement budgets have already been slashed. This is causing YouTube to see considerable benefits as advertising spend is diverted to the internet. The online video sharing website is a subsidiary of Google, and has been a significant revenue stream for Alphabet.

Concurrent with the high demand, the video-sharing platform is currently raising ad prices and has strong content supply levels. Additionally, the concerns about Apple’s iOS updates did not materialize into impacts on advertising revenues for GOOGL. Indeed, it appears Facebook was far more affected than YouTube.

Beyond travel and leisure ad spending, the rest of the industry has nearly recovered from its mid-summer lows. July and August saw lower levels of spending, due in part to the supply constraints of both the physical products sold and the staff to sell them. Thill foresees long-term monetization opportunities for YouTube, as Alphabet continues investing in new advertising initiatives like “shoppable ads and actionable CTV ads.”

On TipRanks, Thill stands as No. 53 out of more than 7,000 expert analysts. He has been successful in his ratings 71% of the time, and returned an average of 26.6% on each rating.

Chegg

In some cases, the digital shifts caused by the Covid-19 pandemic were actually accelerations toward trends that will persist long past the pandemic. For example, online schooling tech saw massive interest, and for the most part, that won’t change in the near future. Chegg (CHGG) continues to see expansion of its student subscribers, as well as their retention levels on the direct-to-student learning platform.

Ryan Macdonald of Needham & Co. expects the company to grow its user base domestically and internationally, even as students return to campuses, with the fall 2021 semester underway. He bullishly added that “amidst increasing usage and competition, Chegg remains one of the three most commonly used digital study tools in the U.S. and has taken over the top spot internationally.” (See Chegg News Sentiment on TipRanks)

Macdonald rated that stock a Buy, and provided a price target of $120 per share.

He asserted that in the current environment, about 70% of domestic users are retained, along with 80% internationally. Students abroad tend to use fewer digital study tools in general, but they are moving from free to paid services at a quicker pace. Moreover, fewer accounts are now being shared than were during the pandemic, indicating successful authentication initiatives by Chegg.

With “healthy usage dynamics and strong international adoption,” Macdonald anticipates Chegg performing beyond Wall Street consensus estimates.

Coming in ranked as No. 85 out of over 7,000 financial analysts, Macdonald maintains a success rate of 65% and average returns of 36.8%.

Facebook

Despite weeks of negative headlines and several congressional hearings, Brad Erickson of RBC Capital is not all that concerned for Facebook (FB) and its future. The massive technology and social media company is fundamentally sound in regard to its business performance, and highly sought after by advertisers due to its “best in class targetability [of consumers] and return on investment.”

Erickson wrote highly of the controversial firm, noting that “FB has created one of the most valuable ad franchises in the world,” and that it has “captured unmatched knowledge of the world’s consumers.”

He reiterated a Buy on the stock, and provided a price target of $425.

Although bullish, the analyst did admit that Facebook’s future growth is contingent on its success in transforming itself into more of a well-rounded “super-app” for its billions of users. While it has almost 3 billion users across its various platforms, FB has the power to shift toward becoming more vertically integrated with consumers. 

The five-star analyst was encouraged by monetization opportunities seized by Facebook through its in-house initiatives, such as Shops, Messenger, and Pay platforms. These types of vertical integrations will ultimately provide sustainable substance that will satiate shareholders. (See Facebook Insider Trading Activity on TipRanks)

While Facebook’s management almost certainly does not appreciate having its reputation repeatedly questioned in the news cycle media, the core foundations of its business do not yet seem to have been shaken.

Out of more than 7,000 financial analysts, Erickson stands at No. 171. His accurate ratings have resulted in a 60% success rate, and have netted an average return of 36.3%.

Peloton

For companies that gained significantly from Covid-19 pandemic trends, the difficulty now comes in turning their businesses into long-term sustainable enterprises. This is particularly acute for Peloton Interactive (PTON), which saw sales increase 120% thus far in 2021. The exercise equipment and services firm is now looking to focus on a new strategy, and analysts are taking notice.

Scott Devitt of Stifel Nicolaus wrote that PTON has secured a “banner year” during 2021, and is currently in a position to target even more subscriber growth and international market penetration. Thus, the company is increasing its product offerings.

Devitt rated the stock a Buy and assigned a price target of $120.

The bullish analyst explained that Peloton has both reduced the price of its main bike product and extended the payment plan timeframe. By offering more affordable equipment, the company hopes to secure more gains in subscribers for its exercise services. Additionally, PTON has recently relaunched a treadmill, which can provide for a wider penetration into households that are less interested in cycling.

While investor sentiment has been waning over the last month or so, the lower valuation could provide for an attractive entry point for investors with long-term outlooks. (See Peloton Interactive Blogger Opinions & Sentiment on TipRanks)

Furthermore, Peloton is taking aim at international audiences, which currently comprise about 11% of its revenue streams. Devitt is encouraged by the room for opportunity beyond domestic consumers. The company has been investing in exercise course instructors who speak foreign languages, as well as in localized content.

TipRanks maintains Devitt at rank No. 60 from over 7,000 other analysts. His ratings have been successful 66% of the time, and have returned him an average of 31.4% per rating.

The Trade Desk

Open internet advertising spending has rebounded from pandemic-induced lows, and the companies that facilitate the data necessary for it are well positioned for more growth. Most notably, The Trade Desk (TTD) has been deemed a “winner among demand side platforms.” This is due in part to its scale, international and domestic exposure, and strong partnerships.

Laura Martin of Needham & Co. reported on the stock, hypothesizing that the advertising titans of Facebook, Amazon, and Alphabet will soon yield market share to the open internet platforms. She believes that The Trade Desk wields considerable competitive advantage over the “walled gardens” of the tech world.

Martin rated the stock a Buy, and bullishly assigned a price target of $100.

Stating that TTD “maximizes global revenue scalability and margin growth,” the five-star analyst explained that the company’s international market is expanding faster than its domestic, despite only 15% of 1H revenues originating from abroad. This statistic instills confidence that there is much more room to ramp up beyond U.S. customers.

Additionally, about a third of its revenue is sourced to Connected TVs, the prevalence of which is increasing. (See The Trade Desk Risk Factors on TipRanks)

Martin was encouraged to find that TTD’s most recent upgrade, Solimar, has seen success in driving new user acquisition and existing user retention. The promising platform is forecasted by TTD to eventually drive half of all impressions displayed.

Financial data aggregator TipRanks currently quantifies Martin as No. 221 out of more than 7,000 other analysts. Her impressive ranking is reflected in her 57% success rate and her average return of 23.6% per rating.

Articles You May Like

Nvidia sees ‘remarkable’ influx of retail investor dollars as traders flock to AI darling
Common reserve bond funds spurring investment
After taking morning profits, we’re afternoon buyers of 2 stocks in an oversold market
Starboard sees an opportunity to create value at Riot Platforms amid growth in hyperscalers
Moody’s says Chicago’s 2025 budget doesn’t change credit trajectory