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Is the market gearing up for a pullback? A correction for stocks could be on the horizon, says strategists from Bank of America, but this isn’t necessarily a bad thing.
“We expect a buyable 5-10% Q1 correction as the big ‘unknowns’ coincide with exuberant positioning, record equity supply, and ‘as good as it gets’ earnings revisions,” the team of Bank of America strategists commented.
Meanwhile, Jefferies’ Desh Peramunetilleke echoes this sentiment, writing in a recent research note that while stocks aren’t due for a “prolonged unwinding,” investors should take advantage of any weakness if the market does experience a pullback.
With this in mind, how are investors supposed to pinpoint compelling investment opportunities? By paying close attention to the activity of analysts that consistently get it right. TipRanks analyst forecasting service attempts to identify the best-performing analysts on Wall Street, or the pros with the highest success rate and average return per rating.
Here are the best-performing analysts’ top stock picks right now:
Shares of networking solutions provider Cisco Systems have experienced some weakness after the company released its fiscal Q2 2021 results. That said, Oppenheimer analyst Ittai Kidron’s bullish thesis remains very much intact. To this end, the five-star analyst reiterated a Buy rating and $50 price target.
Calling Wall Street’s expectations “muted”, Kidron tells investors that the print featured more positives than negatives. First and foremost, the security segment was up 9.9% year-over-year, with the cloud security business notching double-digit growth. Additionally, order trends improved quarter-over-quarter “across every region and customer segment, pointing to gradually declining COVID-19 headwinds.”
That being said, Cisco’s revenue guidance for fiscal Q3 2021 missed the mark thanks to supply chain issues, “lumpy” cloud revenue and negative enterprise orders. Despite these obstacles, Kidron remains optimistic about the long-term growth narrative.
“While the angle of recovery is difficult to pinpoint, we remain positive, viewing the headwinds as temporary and considering Cisco‘s software/subscription traction, strong BS, robust capital allocation program, cost-cutting initiatives, and compelling valuation,” Kidron commented
The analyst added, “We would take advantage of any pullbacks to add to positions.”
With a 78% success rate and 44.7% average return per rating, Kidron is ranked #17 on TipRanks’ list of best-performing analysts.
Highlighting Lyft as the top performer in his coverage universe, Wells Fargo analyst Brian Fitzgerald argues that the “setup for further gains is constructive.” In line with his optimistic stance, the analyst bumped up his price target from $56 to $70 and reiterated a Buy rating.
Following the ride sharing company’s Q4 2020 earnings call, Fitzgerald believes the narrative is centered around the idea that the stock is “easy to own.” Looking specifically at the management team, who are shareholders themselves, they are “owner-friendly, focusing intently on shareholder value creation, free cash flow/share, and cost discipline,” in the analyst’s opinion.
Notably, profitability could come in Q3 2021, a quarter earlier than previously expected. “Management reiterated EBITDA profitability by Q4, also suggesting Q3 as a possibility if volumes meter through (and lever) ’20 cost cutting initiatives,” Fitzgerald noted.
The analyst added, “For these reasons, we expect LYFT to appeal to both fundamentals- and momentum-driven investors making the Q4 2020 results call a catalyst for the stock.”
That being said, Fitzgerald does have some concerns going forward. Citing Lyft’s “foray into B2B delivery,” he sees it as a potential “distraction” and as being “timed poorly with respect to declining demand as the economy reopens.” What’s more, the analyst sees the $10-$20 million investment in acquiring drivers to meet the growing demand as a “slight negative.”
However, the positives outweigh the negatives for Fitzgerald. “The stock has momentum and looks well positioned for a post-COVID economic recovery in CY21. LYFT is relatively cheap, in our view, with an EV at ~5x FY21 Consensus revenues, and looks positioned to accelerate revenues the fastest among On-Demand stocks because it is the only pure play TaaS company,” he…