Investors seem trapped in uncertainty due to recent banking crises, persistent macroeconomic headwinds, and the potential risk of a recession. In times like these, identifying stocks with strong long-term potential can be beneficial. According to TipRanks, a platform that ranks analysts based on past performance, here are five stocks favored by Wall Street’s top analysts.
Nvidia
At the recent GTC event, semiconductor giant Nvidia (NVDA) discussed partnerships with major companies to advance artificial intelligence (AI), simulation, and collaboration capabilities across various industries.
Based on the event, Mizuho analyst Vijay Rakesh noted that demand for Nvidia’s AI solutions has strengthened over the past month, driven by the continued momentum of OpenAI’s ChatGPT and large language model (LLM) processing. Rakesh highlighted two new Nvidia products: the L4 Tensor Core GPU and the H100 NVL, both focused on improving inference scalability, throughput, and performance.
Rakesh expects Nvidia’s DGX Cloud AI supercomputing service to drive additional sales. He also pointed to Nvidia’s “major victory” in the automotive sector, as leading EV manufacturer BYD expands its use of the Nvidia Drive Orin platform to a broader range of vehicles. Along with collaborations with other EV makers, this supports Nvidia’s $14 billion automotive design-win pipeline.
Calling Nvidia his top pick, Rakesh reiterated a Buy rating and raised his price target from $230 to $290. Despite short-term investor concerns about a slowdown in consumer and data center demand in 2023, he views Nvidia as a dominant force in generative AI training, inference, gaming, and accelerated computing.
Rakesh ranks 94th among more than 8,000 analysts tracked by TipRanks, with a 58% success rate and an average return of 17.3% per rating. (See Nvidia’s stock chart on TipRanks).
Nike
From semiconductors, we move to athletic apparel and footwear giant Nike (NKE), which recently reported better-than-expected results for its fiscal third quarter (ended February 28). However, its gross margin declined significantly due to increased markdowns aimed at clearing excess inventory. Margins were also pressured by rising input costs and higher transportation expenses.
Baird analyst Jonathan Komp, ranked 290th among 8,300 analysts on TipRanks, noted that while Nike’s inventory increased 16% year-over-year, it declined about 5% sequentially in Q3. He emphasized that the company now aims for “steep” inventory clearance in Q4.
Komp also highlighted management’s positive comments on recovery in China. He expects strong margin expansion in the next fiscal year, driven by a recovery from temporary margin pressures and growth in Nike’s direct-to-consumer (D2C) sales mix.
Reiterating a Buy rating, Komp raised his price target from $130 to $138, writing:
“NKE remains attractive given its positive brand momentum, strong competitive positioning, high operating margins (low earnings sensitivity), and reasonable valuation (next 12-month P/E premium vs. S&P at +82%, 5-year average at +71%).”
Komp has a 54% success rate, with an average return of 14.1% per rating. (See Nike’s insider trading activity on TipRanks).
Lululemon
Another name in the athletic space is Lululemon (LULU). The company recently impressed investors with strong Q4 fiscal 2022 results (ended January 29, 2023) and solid guidance. However, markdowns impacted margins in the quarter.
Nevertheless, management expects gross margin expansion in Q1 FY2023, supported by moderating inventory growth and lower air freight costs. (See Lululemon’s hedge fund trading activity on TipRanks).
Guggenheim analyst Robert Drbul raised his price target from $400 to $440, reiterating his Buy rating and calling Lululemon one of his favorite growth stories for 2023. He believes demand for Lululemon’s products remains strong and considers concerns over competition from emerging sportswear brands “overstated.”
Drbul also expects Lululemon to benefit from China’s reopening, predicting significant growth in the region, which will help the company achieve its goal of quadrupling international revenue by 2026. He also highlighted Lululemon’s limited seasonality, minimal wholesale exposure, and strong e-commerce business.
“We also see ample runway for growth in menswear, digital, and international expansion, while LULU continues to show strong growth in its core categories (womenswear, stores, and North America),” Drbul said.
Drbul ranks 439th among more than 8,000 analysts on TipRanks, with a 61% success rate.
Dave & Buster’s Entertainment
Restaurant and entertainment chain Dave & Buster’s (PLAY) delivered strong results for Q4 FY2022 (ended January 29, 2023), supported by robust walk-in sales growth and a continued recovery in its special events business.
Management noted that Q1 FY2023 comparable-store sales were in the low single-digit percentage range. Jefferies analyst Andy Barish attributed this trend to the strong demand surge after Omicron in the prior-year quarter and spring break schedule shifts.
Despite these factors, Barish remains optimistic, stating that underlying momentum from January has continued and that sales trends remain above pre-pandemic levels.
He also expects strong short-term performance due to consumer demand for experiences, reasonable pricing, promotions, and other factors.
Reiterating a Buy rating, Barish maintained his $60 price target, concluding:
“PLAY is well-positioned to ride an upward growth trajectory in the coming years, even amid economic downturns.“
Barish ranks 465th among over 8,000 analysts on TipRanks, with a 58% success rate and an average return of 9% per rating. (See Dave & Buster’s financial statements on TipRanks).
