Investing

Top Wall Street analysts expect strong earnings results from these stocks

Co-founder and director of Netflix Reed Hastings delivers a speech as he inaugurates the new offices of Netflix France, in Paris on January 17, 2020.
Christophe Archambault | AFP | Getty Images

As second-quarter earnings season kicks into gear, Wall Street analysts are highlighting the stocks that are poised to deliver impressive quarterly performances.

The companies mentioned below fall into this category. Most noteworthy, though, is that the analysts identifying these names boast a proven track record of success. TipRanks analyst forecasting service attempts to pinpoint 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 account.

Here are five stocks that top Wall Street analysts expect to post strong earnings results.       

Netflix

When it comes to streaming giant Netflix, JPMorgan analyst Doug Anmuth is still “positive into earnings,” thanks to its solid content slate for the second half of 2021.

To this end, the five-star analyst kept a buy rating and $600 price target on the stock, ahead of its July 20 earnings release. This target puts the upside potential at 10%.

“While there has been increased discussion around the company toward earnings, we believe overall expectations and sentiment around NFLX remain fairly muted. However, we remain positive on the shares into earnings and 2H21 as we believe NFLX could have its strongest six-month content slate ever, it gets greater distance from the pandemic pull-forward, and NFLX should make more progress in under-penetrated international markets,” Anmuth said.

Based on the analyst’s analysis of global downloads, he expects net adds for the second quarter to be roughly 2 million, versus his previous estimate of 1.6 million. He does, however, acknowledge that this is “still small on an absolute basis, especially on a base of 200 million-plus subscribers.”

That being said, the content line-up is fueling Anmuth’s optimism. Some of these titles include “The Kissing Booth 3,” “Red Notice” and “Don’t Look Up,” with new seasons of “Money Heist,” “Sex Education,” “The Witcher” and “You” also set to be released.

What’s more, for the second half of 2021, Anmuth is projecting 14.25 million net adds, with year-over-year gains in both the third and fourth quarters.

Given his 70% success rate and 26.8% average return per rating, Anmuth is ranked #65 on TipRanks’ list of best-performing analysts.

Etsy

In a show of confidence, Oppenheimer’s Jason Helfstein just increased his price target for Etsy from $200 to $225, bringing the upside potential to 23%, before its Aug. 5 earnings release. Additionally, the top analyst maintained a Buy rating.

Despite “difficult Q2 comps,” Helfstein tells investors that based on third-party data, he is expecting to see impressive conversion trends and buyer retention.

According to SimilarWeb, gains in outgoing visits from Etsy to payment sites are strongly correlated to year-over-year marketplace revenue growth. “Given Q2 outgoing visits 27%-plus year-over-year, we believe conversion trends remain strong, with the regression indicating Q2 marketplace revenue 34%-plus year-over-year, compared to Street’s 17%-plus estimate year-over-year and Opco’s 23%-plus estimate,” Helfstein said.

On top of this, SimilarWeb data points to a 21% year-over-year rise in second-quarter desktop and mobile web traffic, which gives Helfstein “confidence in sustained buyer retention, even after the U.S. economy has largely reopened.”

He also highlights the fact that traffic is up 76% compared to pre-pandemic average levels, “highlighting that Etsy has done an effective job of educating buyers on the breadth and depth of the marketplace,” in the analyst’s opinion.    

All of this prompted Helfstein to comment, “The elevated traffic data gives us confidence that Q2 results should meet or slightly exceed the high end of revenue guidance (25%-plus year-over-year).” As such, he projects second-quarter revenue growth of 26%-plus year-over-year, while the Street is calling for 22%-plus.

It should be noted that Helfstein’s updated price target implies a 10% premium to some of its peers in the space. That being said, he believes “a premium to the group is justified given higher expected growth, expansion into international markets, and EBITDA support versus peers yet to reach EBITDA B/E.”

One of the top 20 best-performing analysts, Helfstein boasts a 71% success rate and 41.3% average return per rating.  

Radware

On the heels of Radware’s major deployment and contract wins, Needham analyst Alex Henderson gave the application delivery and cybersecurity solutions provider a thumbs up. In addition to upgrading the rating from Hold to Buy, the analyst set a $40 price target (28% upside potential).

In 2021, the company revealed nine development and partnership wins, which according to Henderson, sets up “an acceleration in business as these projects ramp.”

He added, “Most of these projects look like material Revenue contributors once they ramp, though the exact timing of their contribution to growth is unclear. We think this not only suggests accelerating Revenue growth, but also punctuates the differentiated approach to market penetration through partnerships. This has become a core strength of the Radware model.”

As a result, Henderson argues “Radware is likely to beat conservative guidance and offer a stronger than forecast CY2H outlook,” when it releases its quarterly print at the end of this month.

Although the company doesn’t offer guidance for its Cloud Subscription segment, Henderson notes that “it sounds like it expects comparable growth over the rest of the year with strong bookings momentum.” Total annual recurring revenues for the business jumped 10% year-over-year to $176 million, with this including Service Maintenance contracts from the traditional business.

When it comes to enterprise demand, Henderson’s field checks “pretty clearly suggested an improving demand environment.” Even though he doesn’t dispute that “supply constraints on components are an impediment to near-term upside,” overall, the trajectory is getting stronger.

So, after a strong first quarter in which Enterprise growth increased to 20% year-over-year, the analyst thinks “the stage is set for accelerating growth.”

Earning the #58 spot on TipRanks’ ranking, Henderson has delivered a 69% success rate and 29.3% average return per rating.

Johnson & Johnson   

As Johnson & Johnson gears up to deliver its quarterly numbers on July 21, Wells Fargo analyst Larry Biegelsen is sticking to his Buy rating. He also kept his $190 price target as is, which suggests that 11% upside potential could be in the cards.

It should be noted that the analyst reduced his forecast for second quarter total sales by $300 million to $22.7 billion, or 20.7% adjusted operational growth, as a result of lower Covid-19 vaccine sales. Meanwhile, the consensus estimate has total sales landing at $22.5 billion. However, Biegelsen says that “despite lower sales, our Q2 EPS estimate increases by $0.04 to $2.28 (consensus $2.29) on lower OpEx and tax rate assumptions.”

When it comes to the Street’s projections, the analyst is expecting Johnson & Johnson to at the very least meet expectations for both the top- and bottom-lines as the tone of the investor conferences in the second quarter was positive.

While there’s no change to Biegelsen’s second-quarter Consumer or Pharma estimates, he gave his second-quarter EPS estimate a $0.04 boost, with the figure now coming in at $2.28.

Turning to its Medical Device (MD) segment, this part of the business has seen an impressive turnaround. At the beginning of the pandemic, MD recorded a 33% decline in sales. Now, management believes that the second quarter could be the highest sales growth quarter due to “easy” comps.

Biegelsen stated, “Additionally, on a dollar basis, management expects MD sales to grow sequentially (on a dollar basis) from the $6.58 billion in Q1. We raised our Q2 MD sales forecast from $6.27 billion to $6.73 billion (2%-plus sequentially), which is now ahead of consensus of $6.46 billion. Our forecast implies 54% year-over-year MD sales growth in Q2, or ~3.4% growth over 2019.”

What else could investors see in the JNJ print? “We see potential for JNJ to raise its 2021 guidance,” Biegelsen commented, with the company providing a guidance range of $9.42 to $9.57. Currently, the analyst is calling for 2021 EPS of $9.57, versus Wall Street’s $9.56 estimate.  

Supporting his top position on TipRanks’ list, Biegelsen has achieved a 71% success rate and 22.1% average return per rating.       

WalkMe

After making its public market debut on June 16, big things could be in store for WalkMe, says Needham analyst Scott Berg.

The five-star analyst kicked off his coverage of the cloud-based digital adoption platform provider with a Buy rating and set a $40 price target (37% upside potential).

WalkMe is the early leader in the nascent Digital Adoption Platform space, which we expect to develop into a massive end market over time. We believe tools like WalkMe solve one of the most critical corporate challenges of the 21st century: how to drive better adoption and productivity of the ever-increasing number of software solutions employees are asked to use for their jobs,” Berg said.

For the June quarter, Berg expects total revenue to land at $45.04 million, a year-over-year gain of 23.3%, and thinks his estimate of 28% year-over-year subscription revenue growth could “prove conservative” based on “industry checks indicating strong demand for the platform in all market segments.” That being said, non-GAAP EPS could come in at -$0.21, according to Berg. For fiscal year 2021, the analyst thinks that total revenue will land at $187.7 million, which would reflect 26.6% growth.

He added, “We do note the level of conservatism built into our current estimates implies an acceleration in growth in the 2H/21 and FY22. We believe the company is making the sales and marketing investments along with the partner ecosystem to support these estimates and growth trends.”

What is the outlook for demand? Berg believes “as the number and complexity of applications grows, companies will increasingly demand solutions like WalkMe to more effectively bridge the adoption gap.” He also argues “WalkMe’s product strategy and investments position the company as the leader in the DAP market.”

As for the valuation, Berg sees it as “attractive,” given “its shares trade at a discount to the 15x average multiple of a peer group of 30%-40% growth companies.”

Currently, the top 10-ranked analyst is tracking a 76% success rate and 33.2% average return per rating.

Articles You May Like

Gautam Adani indicted in the US for alleged bribery scheme
D.C. arena deal hits headwinds
Weekly mortgage demand inched up, despite higher interest rates. Here’s why
Dental supply stock rallies on theory RFK’s anti-fluoride stance will prompt more dentist visits
Processed food stocks fall as investors brace for increased scrutiny under Trump, RFK Jr.