The word on Wall Street - from the mouths of several top analysts - is that the market still has some serious room to run. And quality stock picks should be much better rewarded going forward than they have on average through the first half of 2018.
For instance, Tony Dwyer, chief market strategist at Canaccord Genuity, believes earnings will rise to record levels by the end of the year. He has upped his 2018 operating-earnings forecast for the Standard & Poor's 500-stock forecast to $160 per share, from $155 previously.
"Throughout this cycle, each intermediate-term correction feels like the fundamental and tactical backdrop is at risk, only to ultimately realize that positive influences that drive our core thesis still exist," he wrote in a recent report.
We turned to TipRanks' revamped Stock Screener to see which stocks top analysts are betting on right now. These stock picks tend to feature big growth potential over the coming months. We specifically filtered for stocks with a "Strong Buy" consensus rating from the best-performing analysts. By looking at analyst ratings since 2009, we can pinpoint the outperforming analysts with the highest success rate and average return.
The following 10 stocks stood out as particularly compelling top analyst stock picks. Let's take a look.
Market value: $774.0 billion
TipRanks consensus price target: $113.86 (14% upside potential)
TipRanks consensus rating: Strong Buy
Software giant Microsoft (MSFT, $100.13) already has significant backing from Wall Street's top analysts. And Morgan Stanley's Keith Weiss (view Weiss' TipRanks profile) has just pointed out another (potentially major) source of revenue.
"We see Microsoft building out the 'Netflix of Gaming,'" Weiss told clients on June 8. "We think that gaming has historically been largely ignored, misunderstood, and undervalued by analysts and investors."
In terms of numbers, Weiss sees Microsoft's gaming business revenue soaring to $10 billion in fiscal 2018 - a $1 billion improvement from the previous year. He believes software and subscription services will generate 70% of this figure.
"With the gaming ecosystem expanding from the console to the PC and Mobile device, a shift from hardware and one-time video game sales to subscription services, and a future which includes streaming, broadcasting, and mixed-reality, we see Microsoft well positioned for the future of Gaming" Weiss wrote. For example, Microsoft's Azure cloud service "allows for developers to scale and customize gaming infrastructure on a reliable cloud."
On a longer-term basis, gaming could just be the driver that tips Microsoft over the $1 trillion market cap milestone. For Weiss, his estimate of a 45% gaming unit gross margin by 2021 is an essential part of the "path to $50 billion in earnings-before-interest-and-tax and a $1 trillion market cap for Microsoft."
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Copyright 2018 The Kiplinger Washington Editors