Wall Street's top analysts recommend these buy-rated stocks as earnings season rolls on

A selection of food that is on the menu at the Jack in the Box on Campus Drive in Irvine, Calif.

Glenn Koenig | Los Angeles | Getty Images

First-quarter earnings season is well underway, with several tech heavyweights reporting their financial results for the most recent quarter this past week.  

There's more to come, though. Plenty of companies are preparing to release their quarterly numbers. Ahead of these upcoming earnings releases, Wall Street analysts are taking stock of the names they cover, highlighting plays that appear compelling.

The buy-rated stocks mentioned below have been deemed just that, by analysts with a proven track record of success. TipRanks' analyst forecasting service attempts to pinpoint the best-performing Wall Street analysts.

These analysts have achieved the highest average return per rating as well as success rate, taking the number of ratings made by each analyst into consideration.

Here are the best-performing analysts' top stock picks right now:

Global Payments

Ahead of its first quarter earnings release on May 4, Deutsche Bank analyst Bryan Keane remains optimistic about Global Payment's long-term growth prospects. With this in mind, the five-star analyst reiterated a buy rating on April 26. Reflecting an additional bullish signal, he bumped up the price target to $235 (8% upside potential).

It should be noted that due to "conservatism in Merchant," Keane trimmed his first-quarter estimates, with the analyst now calling for revenue of $1.754 billion and EPS of $1.76.

That said, he left his forecasts for full year 2021 as is. For the full year, revenue growth is expected to land at roughly 12% on a constant currency basis, and upside could possibly come from improving spend and easy comps during the year.

"With 60%-plus of the business coming from tech enablement, we expect GPN to benefit from improving volumes and trends in the integrated and vertical markets businesses as well as continued strength in eComm/omni-channel, which accounts for ~25% of total revenue. GPN should also benefit from new wins and partnerships ramping up such as Truist and AWS/GOOG as well as strong revenue synergies across the businesses," Keane explained.

On top of this, the company's guidance doesn't account for any benefit from the most recent stimulus package, "which could drive upside along with accelerated repurchases and potential for accretive acquisitions," in Keane's opinion.

Delivering a stellar 78% success rate and 24.8% average return per rating, Keane is ranked #182 out of over 7,000 financial analysts tracked by TipRanks.

Lyft

Lyft announced on April 26 that like its peer Uber, it is leaving its self-driving car unit, Level 5, in the rear-view mirror, selling it for $550 million to a subsidiary of Toyota.

For BTIG's Jake Fuller, this deal is a major positive for the ridesharing company. As such, the top analyst maintained a Buy rating before it reports earnings on May 4. In addition, he gave the price target a lift, with the figure moving from $70 to $80 (26% upside potential).

"The pursuit of self-driving cars has been a drag on rideshare profitability and it was unclear that either Uber or Lyft was positioned to absorb the investment it would take to get to the finish line," Fuller commented.

As for the implications of the deal, the sale of Level 5 should eliminate about $100 million in OpEx, according to the company. This prompted Fuller to give his 2021 EBITDA estimates a boost, with the analyst now expecting Lyft to deliver an EBITDA profit of $7 million in 3Q21 (versus the previous -$23 million estimate).

On top of this, Fuller increased his bookings estimates from $9.6 billion to $10.1 billion for 2021 and from $14.3 billion to $14.9 billion for 2022.

Expounding on the estimate increase, Fuller noted, "We went into the downturn assuming a significantly slower recovery than the Street did. That proved to be the right call for 2020, but we now expect rides to be back close to 2019 levels by early-2022. With a quicker topline rebound, Level 5 sale and reduction in Lyft's break-even point, we now sit well ahead of consensus on 2022 EBITDA ($682 million vs. $298 million)."

According to data from TipRanks, Fuller is currently tracking a 68% success rate and 24.6% average return per rating.

Jack in the Box

Year-to-date, fast food chain Jack in the Box is up 27%, versus the S&P 500's 11% gain. Despite this outperformance, Oppenheimer's Brian Bittner argues "the stock is still undervalued."

"We believe the ~30% valuation discount to peers underappreciates JACK's above-average fundamentals, elevated earnings power and identifiable path for accelerating unit growth. In our view, this enhances the stock's risk/reward at current levels and we raise estimates through F22E," Bittner wrote in an April 26 note.

Taking this into consideration, Bittner kept his buy rating as is. What's more, the analyst increased the price target from $115 to $135, bring the upside potential to 14%.

Bittner believes that Wall Street is overlooking two key factors when it comes to JACK. First and foremost, the analyst tells clients that the company's annual EPS power has improved from around $4.50 before the pandemic's onset to roughly $6.50, "with legs for continued revisions." Looking ahead to the second quarter earnings release on May 12, Bittner estimates that JACK will post EBITDA of $67.6 million.

As for the second, Bittner sees a case for unit growth being built. Based on the analyst's calculations, in 2020, franchisee EBITDA per unit increased by over 29%. "This, combined with 18% to 23% lower build costs and new development capabilities, drives management's confidence existing markets can add 950 to 1,200 units, vs its ~2,200 base. New territories would represent further upside, exposing an attractive setup, as Street models just 1%-plus unit growth [compound annual growth rate]" Bittner stated.

When it comes to the company's cash position, Bittner expects $285 million worth of share buybacks through F22E, which would support a $100 million-plus cash balance and suggest "the current repurchase authorization of $200 million could be easily exhausted/replenished." The analyst added, "Assuming the current EBITDA run-rate, net debt is less than 4x and [free cash flow] continues to outpace EPS, as we believe FCF/share could surpass $7.50 next year (implies 6.5% yield)."

A top services sector analyst, Bittner has achieved an impressive 69% success rate.

SailPoint Technologies

Given the positive partner checks that showed legacy displacement and upsell within its customer base, RBC Capital analyst Matthew Hedberg is expecting SailPoint Technologies to beat consensus estimates (revenue of $91.2 million and EPS of $0.00) when it reports its first-quarter results on May 10.

So, with SAIL remaining one of Hedberg's "favorite SMID-cap ideas," the top analyst left his buy rating and $71 price target unchanged. Based on this target, shares could surge 41% in the year ahead.

Hedberg acknowledges that sentiment soured on the enterprise identity governance solutions provider after its fourth-quarter earnings release but notes that the tides could be turning.

"2021 is expected to be a year of transition as management is reorienting the business to focus on subscription-based pricing regardless of deployments. While [software as a service] remains ratable, we should see increasing amounts of term-based deals as well," Hedberg commented.

In 2020, 33% of IdentityIQ new sales were term, with the company expecting this to grow to 50% in 2021 and to roughly 100% in 2022. It should be noted that the current pipeline and up-sells will have a "perpetual option for now," according to the analyst.

"The impact of the transition is a 12-point headwind to revenue growth in 2021 and 10-11 points in 2022 with expectations for growth to normalize after three years with long-term benefits including best-in-class SaaS gross margins and 25%-plus operating margins. Management also highlighted their AI/ML capabilities to extend its value proposition vs. competitors and are investing in the opportunity including GTM investments to capitalize on the benefit from security transformations as management noted the ability for normalized top-line growth of 20% to 30% with internal aspirations that are higher," Hedberg added.

In addition to its quarterly results, investors will be watching for insights from SAIL's management team on Okta's foray into IGA in 2022.

For Hedberg, a 73% success rate and 30.2% average return per rating result in a #54 ranking on TipRanks' list.

Monolithic Power Systems

Leading up to its first quarter earnings release on May 4, Oppenheimer analyst Rick Schafer points out that although tight supply may impact near-term upside for Monolithic Power Systems, "demand remains broadly strong."

This prompted Schafer to reiterate his buy rating and $420 price target. This target puts the upside potential at 11%.

Based on Schafer's recent supply chain checks, there are significant constraints when it comes to 8" wafers/PM ICs. That said, management's early investments in capacity are helping Monolithic Power to better capture demand.

Expounding on this, Schafer said, "MPWR grew capacity 20% to 25% in 2020, adding a new 12" fab in 4Q with a new 8" fab planned for 2021. We see order delinquencies steady near-term but improving into end of year as capacity increases."

It should be noted that Auto grew 63% year-over-year in the fourth quarter, with this area of the business potentially fueling MPS upside in 2021.

"IHS projects 2021 SAAR growth 14%-plus, perhaps optimistic as chip constraints reduced 1Q global auto production by ~1.3 million units. Despite constraints, we see MPWR 2021 auto growth nearing 50% led by ADAS, supporting ~10x content jump to $50/ vehicle. ADAS, smart-lighting, BMS and body-control drive richer mix and 30-40% long-term growth," Schafer commented.      

Notably, Schafer sees 5G RAN as "MPWR's next major growth pillar beginning 2022, led by QSMod/BMS content gains to $100s/BTS from less than $50/BTS." Additionally, the company received a Huawei license at the end of 2020, possibly helping revenue at the beginning of 2Q, according to the Oppenheimer analyst.

Among the top 35 analysts followed by TipRanks, Schafer boasts an 81% success rate and 24.9% average return per rating.   

Read More
Source