The surge in stocks has investors hoping that the general bullish market sentiment we’ve experienced since the end of March may still be with us; there was some worry in June as the markets appeared to hit a plateau. We’ll see what happens in the next few weeks, as the S&P tests its 3,200 resistance levels.
The best advice for stock pickers right now: stay selective. There are still compelling investing opportunities out there if you know where to look.
Investors can find interesting stock choices by following some of Wall Street’s top analysts. These are the analysts with the sharpest stock picking ability — and we can use their price targets as a key indication of how far these stocks can climb in the coming months.
With this in mind, we’ve used the TipRanks database to highlight two such stocks; each has received ‘top pick’ status from a 5-star analyst. Here are the details.
Avid Technology (AVID)
We start in the technology sector, with Avid, a Massachusetts-based multimedia tech company specializing in digital non-linear editing systems for audio and video. The company’s video and audio editing software are held in high regard, as are its music notation products. The company’s flagship product is Media Composer, which got its start in the Apple Mac segment. Avid has expanded since then, and in May announced a five-year working agreement with Microsoft Azure.
Avid tackled the coronavirus economic crisis head-on, with a $40 million cost savings plan put in place to help mitigate the business effects of the pandemic. The company was helped along in Q1 by a surge in subscription revenues, which grew 50% year-over-year and pushed recurring revenues to double digit growth. That was the good news. In the bad news, the company still saw a steep quarterly loss due to the recessionary pressures of economic measures put place against the virus, and reported EPS of minus 12 cents per share.
Northland’s 5-star analyst Nehal Chokshi explains why this stock remains a top pick: “AVID has 2 layers of loyalty from their largest customers, the professional video & audio editors and the IT staff that ensures the technology is available, which has led to dominant share in high end post-production content creation technology enablement. The dominant share at the high end leads to influencing aspiring creators to adopt AVID software, which is driving market share gains in the company’s high growth high margin subscription business…”
To this end, Chokshi rates AVID shares a Buy, and his $14 price target implies a robust 103% upside potential. (To watch Chokshi’s track record, click here)
With a share price of only $6.89, AVID is particularly affordable for a 'top pick' stock, and the average price target of $10.38 suggests it has room for a 51% in the coming year. AVID's Strong Buy analyst consensus rating is based on 3 Buys and 1 Hold set in recent months. (See Avid stock analysis on TipRanks)
Wells Fargo (WFC)
Next up is a name you’ll recognize, Wells Fargo. Long a major player in the banking industry, Wells Fargo offers residential and commercial customers a full range of banking services. WFC is a poster child for ‘too big to fail;’ the company is the fourth-largest bank, both globally and in the US, and even after recent share depreciation in the corona crisis, it still boasts a market cap exceeding $104 billion.
Being ‘too big to fail’ might be a bigger asset than is at first apparent. WFC shares are down 44% from February, and the company announced last week that it is cutting its dividend in half. That’s an important development, as the stock’s dividend had been yielding over 8%. The move comes after the bank reported Q1 EPS of just 1 cent, far below the forecast 33 cents. Net income for the quarter, hit hard by the coronavirus, was down 89%.
Matt O’Connor, 5-star analyst with Deutsche Bank, has named the stock a 'top pick,' noting: "Regulatory issues will eventually get resolved, so the real long term question is what is the EPS power of WFC--which will be mostly driven by improved efficiency [...] Mgmt expects to improve WFC's long-term efficiency ratio from the high 60s currently and bring it closer to peers. Our guess is that they hope to bring the efficiency ratio to below 60% in 3-5 years. We expect this to be driven by several billion of cost cuts and revenue growth (including recapture of revenue lost due to ongoing regulatory issues)."
Based on his assessment, O’Connor maintains his Buy rating here. His $34 price target suggests the stock has room for 41% upside growth in the next year. (To watch O’Connor’s track record, click here)
Where O’Connor is cautiously bullish, Wall Street is simply cautious. The analyst consensus rating on WFC shares is a Hold, based on 3 Buy ratings, 11 Holds, and 5 Sells. O’Connor describes the current share price of $24.04 as an opportunity, and there is some evidence that he is not alone. The average price target, of $29.03, indicates a 21% one-year upside potential. (See Wells Fargo stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.