Shantanu Narayen, CEO, Adobe.
Mark Neuling | CNBC
Investors are grappling with uncertainty after a difficult September left the major averages reeling.
However, the current scenario also offers an opportunity to pick stocks that could generate attractive returns despite short-term pressures.
To that end, here are five stocks favored by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.
Impressed with the quarter’s print, Deutsche Bank analyst Brad Zelnick boosted his price target for ADBE stock to $610 from $550 and reaffirmed a buy rating. The analyst said the results reinforce his view of Adobe as a winner in an emerging generative artificial intelligence world.
Ahead of the results, Adobe announced the commercial availability of its Firefly generative AI offering and increased the pricing of its Creative Cloud product to reflect the integration of the new AI features. The analyst said that this pricing strategy could drive the adoption of the core Creative Cloud product with the embedded generative AI tools, which is better than selling the new features separately.
“This strategy should enable creatives to better appreciate the productivity benefits of generative AI more quickly, and make Firefly-powered generative AI offerings a critical part of their workflows, creating competitive differentiation as well as increasing the overall value of Creative Cloud,” said Zelnick.
The analyst also sees additional monetization opportunities through new standalone offerings like GenStudio.
Zelnick ranks No.50 among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 71% of the time, with each delivering a return of 15.5%, on average. (See Adobe’s Technical Analysis on TipRanks)
Zelnick is also bullish on another cloud software vendor: Salesforce (CRM). The analyst reiterated a buy rating on the stock with a price target of $260 following the company’s Dreamforce annual conference and investor meetings with the CEO of a Salesforce consulting partner and a global consulting firm executive.
He said that the Dreamforce event emphasized Salesforce’s leadership in AI customer relationship management (CRM), supported by a combination of “trust, data and interoperability.” (See Salesforce Hedge Fund Trading Activity on TipRanks).
The analyst noted that data cloud commentary from partners was optimistic, based on real demand and ongoing implementations.
“With strong pricing power, unparalleled access to enormous trusted data, an eventual rotation back to front office spending, as well as management’s laser-focus on margins and cash flow growth, we believe Salesforce shares are poised to outperform,” said Zelnick.
Image-sharing platform Pinterest (PINS) held its investor day on Sept.19. At the event, the company said that it expects a compound annual growth rate in the mid to high teens for its revenue and an earnings before interest, taxes, depreciation and amortization margin that is in the low 30% range over the next three to five years.
Baird analyst Colin Sebastian noted that management expects an upside to its long-term targets if the underlying trends improve. The analyst highlighted that the shopping experience remains vital in the company’s overall strategy. Specifically, 96% of searches on Pinterest are unbranded, providing advertisers a huge opportunity to target users, with more than 50% of them using the platform to shop.
“Importantly, the Amazon ads integration seems to be going well, exceeding management’s initial expectations, with Pinterest using its recommendation engine to target Amazon ads at its own users,” added Sebastian.
The analyst reaffirmed a buy rating on PINS stock and a price target of $34, with a valuation that reflects rapid growth rate, an early stage of market share gains, as well as significant cash flow generation over the long term.
Sebastian ranks 328th out of more than 8,500 analysts tracked on TipRanks. Also, 54% of his ratings have been profitable, with an average return of 11.7%. (See Pinterest Blogger Opinions & Sentiment on TipRanks)
Goldman Sachs analyst Kash Rangan thinks that the developments announced by the company reflect solid execution against its Copilot product roadmap and the strength of its OpenAI partnership.
“Microsoft’s speed to market, strong presence across the tech stack and well-established footprint within the enterprise give us confidence that Microsoft is well positioned to drive growth on the back of these announcements and be a key leader in the Gen-AI era,” said Rangan.
The analyst thinks that the company should be able to capture a solid part of its more-than-$135 billion total addressable market within Microsoft 365, with additional opportunities across its Azure, Windows, Dynamics and Bing/Edge offerings. He reiterated a buy rating on MSFT with a price target of $400.
Rangan holds the 509th position among more than 8,500 analysts on TipRanks. His ratings have been profitable 58% of the time, with each delivering an average return of 8.5%. (See Microsoft Financial Statements on TipRanks)
We end this week’s list with logistics giant FedEx (FDX). The company recently reported fiscal first-quarter earnings that beat expectations, but a decline in revenue due to macro pressures. The bottom line benefited from the company’s cost-reduction initiatives.
Evercore analyst Jonathan Chappell, who holds the 156th position out of more than 8,500 analysts on TipRanks, noted the improvement in the company’s full-year earnings guidance range, despite the lower revenue outlook. The earnings outlook was fueled by the cost reductions under FedEx’s DRIVE program that is targeting savings of $1.8 billion in fiscal 2024.
Chappell said that FedEx grabbed about 400,000 packages of volume from its closest peer (UPS), with a lower possibility of these share gains reversing immediately. Further, FedEx gained almost 5,000 shipments per day from the liquidation of a key competitor (Yellow).
The analyst said, “FDX continues to build a track record of execution on its ambitious cost-cutting and efficiency targets, rendering the equity as a unique investment opportunity for when demand returns.”
Chappell maintained a buy rating on FDX and raised his price target to $291 from $276, saying that FDX remains his top pick. His ratings have been successful 65% of the time, with each rating delivering an average return of 19.7%. (See FedEx Insider Trading Activity on TipRanks).