Given the uncertain financial landscape, investors want to know how they can pinpoint stocks that are poised to deliver returns through 2021 and beyond.
One strategy is to follow the recommendations of analysts with a proven track record of success. TipRanks analyst forecasting service attempts to identify the best-performing analysts on Wall Street. These are the analysts with the highest success rate and average return per rating, taking the number of ratings published by each analyst into consideration.
Here are five stocks that Wall Street's best-performing analysts believe could be long-term winners.
Following impressive second quarter results and third quarter guidance, Susquehanna's Christopher Rolland gave Cirrus Logic a thumb's up. As such, the five-star analyst reiterated a Buy rating and $115 price target, bringing the upside potential to 44%.
"While we had always been a bit confused by the dour initial June guidance last quarter, we were delighted to see the strong bounce back and exceptional guidance for the September quarter. We urge investors not to judge any one quarter for Cirrus, or try to match up CRUS and Apple iPhone sell-through, and rather look at two or three holistically to get a clearer picture," Rolland said.
Referring to the June quarter guidance as "challenging," the company did not disappoint with its outlook for the September quarter. What's more, management told investors that the company could have shipped even more of its products to customers during the quarter, but upside was limited by the supply.
It should be noted that Cirrus reached a long-term supply agreement with semiconductor manufacturer GlobalFoundries. "While details were scarce, we believe the primary purpose was as a second source supplier, a prudent move given the growing constrained environment," Rolland said.
Additionally, the company offered up more details about its acquisition of Lion Semiconductor, which was announced in July. Management is calling for $60 million in additional revenue for the year, and Cirrus is expecting to have existing strong relationships with numerous Chinese original equipment manufacturers.
"The company also carefully highlighted new shipments into the laptop PC market, perhaps a new area of growth beyond their traditional handset stalwart," Rolland said.
All of this prompted the analyst to add, "In short, we were encouraged by the strong bounce back."
Offering further explanation, he said, "We were pleased by the strong top-line snap back as we continue to believe the close relationship with Apple, shared IP, and high level of execution in delivering quality product will continue to grow Cirrus content at the [original equipment manufacturer] over time. Additionally, while a 'moonshot call', we could also envision a scenario in which Apple makes a bid for Cirrus, turning their TX facilities into 'Apple Austin' and a hub for the OEM's custom high-performance mixed-signal silicon innovations."
Earning the #36 spot on TipRanks' list, Rolland has a 76% success rate and 24.6% average return per rating.
Mizuho Securities analyst Siti Panigrahi says the "strong momentum" is continuing for Twilio. Bearing this in mind, the top analyst gave the price target a boost, with the figure moving from $400 to $430 (15% upside potential). In addition, he left his bullish call as is.
"We continue to see the company as a significant beneficiary of post-Covid-19 digitization efforts… Longer-term, we view Twilio as a durable growth story, one benefiting from several secular tailwinds including proliferation of the API economy, adoption of multichannel communication, and growth in cloud contact centers," Panigrahi said.
In the most recent quarter, the cloud communications company posted a revenue gain of 67% year-over-year, handily beating the 49% consensus estimate.
On top of this, organic revenue growth ramped up from 49% year-over-year to 52% year-over-year, with the analyst pointing out that the "strength in the quarter was broad-based." Panigrahi added, "In particular, management highlighted strong initial Segment post-merger integration, several customer examples of enterprise penetration, and Twilio's contact center solution, Flex."
That being said, Segment revenue slightly missed analysts' expectations. However, Panigrahi remains optimistic about the company's long-term growth prospects.
"Management appears to be very bullish on the combined opportunity of Segment +Twilio and the recent launch of Segment Journeys. We believe Segment's customer development platform (CDP) brings significant value for Twilio to become a leading customer engagement platform," the analyst noted.
Looking ahead to the third quarter, Panigrahi said that the outlook for revenue growth is "conservative" despite the "tough 2H21 comps due to lack of political traffic and other one-time pandemic-related benefits."
Based on data from TipRanks, Panigrahi is currently tracking a 75% success rate and 23.7% average return per rating.
In addition to announcing second quarter earnings results, Square revealed that it is set to acquire Afterpay, which offers several "buy now, pay later" services, in an all-stock deal worth $29 billion.
According to Needham analyst Mayank Tandon, this purchase could help Square "make a big splash in the buy now/pay later space while also bolstering its international growth plans." He added, "we believe that the Afterpay deal will provide additional opportunities to enhance long-term growth and profitability."
As such, the analyst increased the price target from $310 to $350 (31% upside potential) and reiterated a Buy rating on Square.
When it comes to its second-quarter performance, the payments company delivered a strong showing. Gross payment volume for the quarter landed at $42.8 billion, exceeding Tandon's $34.8 billion projection and reflecting a gain of 88% year-over-year. Management notes that this strong result was "driven by continued strength in both the Seller and Cash App segments."
Most noteworthy, though, for Tandon is that Seller and Cash App revenue of $1.31 billion and $605 million, respectively, beat his $1.06 billion and $527 million estimates. On top of this, gross profit soared 91% year-over-year to $1.14 billion, while Cash App gross profit rose 94% year-over-year.
It should be noted that Square didn't provide guidance due to pandemic-related uncertainty. That being said, the company did offer up more details on July trends, with seller gross payment volume up 45% during the month, thanks to the reopening of local economies. Cash App trends were also robust, even though there is a tough year-over-year compare.
Summing it all up, Tandon said, "We remain positive on SQ given the strong growth within both Cash App and Seller ecosystems, the market share gains, and secular trends driving growth in digital payments. We believe that the recently announced Afterpay acquisition will help further round out the rapidly scaling payments and financial ecosystem."
With a 64% success rate and 23.6% average return per rating, Tandon has secured the #119 spot on TipRanks' list of best-performing analysts.
Following a strong beat-and-raise quarter for ZoomInfo, RBC Capital analyst Rishi Jaluria assumed coverage of the stock with a Buy rating. In addition, he boosted the price target from $60 to $70, suggesting that 16% upside potential could be in the cards.
Jaluria wrote in a recent note, "We came out of the quarter incrementally positive on ZI's market positioning (bolstered by the recent acquisition of Chorus.ai) and growth prospects… Stepping back, we like ZoomInfo for its market leadership position and strong financial profile."
Taking a closer look at the second quarter print, non-GAAP revenue came in at $174.4 million, growing 57% year-over-year and beating the $162.4 million consensus estimate. On the bottom-line, non-GAAP EPS was $0.14, also surpassing analysts' $0.12 forecast. That being said, Jaluria believes the "main highlight" was organic growth reaching 54% year-over-year, versus 50% in the first quarter.
Another key takeaway for Jaluria was the strength in net customer adds, with the company adding 150 new $100,000-plus annual contract value customers during the quarter, which is the highest the analyst has ever tracked. He added, "Management also noted that Q2 was the best quarter in terms of customer retention, leading us to expect some improvement in the company's annually disclosed net revenue retention metric."
As for full year top-line guidance, it was bumped up roughly $32 million at the midpoint, with this now including an $8.5 million contribution from Chorus.ai, implying an extra four points of revenue growth. "Impressively, 2021 guidance implies a score of 80-plus on a 'Rule of 40' basis," Jaluria said.
On top of this, Jaluria told investors the "Chorus.ai acquisition is already off to a strong start," with the company disclosing a "number of closed deals despite the acquisition closing only three weeks ago."
Expounding on this, the analyst said, "While it is early days, we expect the inclusion and cross-sell of Chorus will help drive improved retention/expansion among ZoomInfo's customer base. Additionally, as part of the ZoomInfo platform, we would expect that Chorus.ai should meaningfully accelerate its own growth (already at 100%-plus year-over-year growth) post-integration."
Currently, Jaluria has a 68% success rate and 23% average return per rating.
After two years of being on the sidelines, Needham analyst Quinn Bolton is joining the KLA Corporation bulls. To this end, he upgraded the semiconductor process control equipment name from Hold to Buy and set a $390 price target.
Looking at the previous quarter, Bolton told clients when KLAC reported first-quarter results, he pointed out that this could be the first time the company is "growing in-line with its process equipment peers in an industry upcycle, a departure from the historical pattern through the 2010s when Lam Research and Applied Materials outperformed ASML Holding and KLAC."
Expounding on his current optimistic stance, Bolton stated, "We now believe KLAC, which has historically underperformed in past WFE upcycles, will be an outperformer in the current WFE upcycle, and will continue to outperform in the next WFE downcycle. We believe the WFE mix shift to foundry/logic, EUV proliferating to DRAM, and Intel returning to an annual process technology cadence disproportionately favor KLAC."
Considering the WFE cycle from 2011 to 2018, Bolton noted that the most significant difference between KLAC and its peers in the process equipment space is that the former's performance is stronger during downcycle years and weaker in upcycle years.
"Although through the entire cycle, KLAC's growth may be largely in-line with peers, as WFE enters the current super cycle, we believe investors are as concerned as we were about KLAC's ability to outperform. So far, KLAC has proven us wrong," Bolton said. Therefore, he concluded, "the company can outperform in the upcycle."
On top of this, in the last few months, KLAC has taken a dip and is now trading at a discount to Lam Research and Applied Materials on a price-earnings basis, which is an "aberration rather than the norm from a historical perspective," in Bolton's opinion. So, the analyst is calling for a "mean reversion in relative valuation to come KLAC's way."
Bolton is the second best-performing analyst on Wall Street thanks to his 78% success rate and 46.2% average return per rating.
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