Wall Street analysts with solid track records like Netflix, these other stocks into February

A woman is reflected in a puddle as she passes a Bank of America branch in New York’s Times Square.

Brendan McDermid | Reuters

The Democrats officially control the Presidency, Senate and House, yet Wall Street appears to be largely unphased.

According to data from LPL Financial, the S&P 500 delivered its highest Inauguration Day return since 1985, when Ronald Reagan was sworn in for the second time. What’s more, since November 3, the index has surged 14%.

But can this momentum be sustained? “Many investors worry that the equity market has rebounded too far and too fast and that there are signs of excess starting to emerge in parts of the financial system… This is a reasonable concern given that the rebound in equities since the bear market trough in March of last year has been remarkable,” Goldman Sachs’ chief global equity strategist Peter Oppenheimer wrote in a recent note.

Given the uncertainty as to whether or not the market can continue charging forward, how are investors supposed to find compelling plays? By turning to the experts with a proven track record of success. TipRanks analyst forecasting service uses in-depth market data to pinpoint Wall Street’s best-performing analysts. These are the analysts with the highest success rate and average return per rating.

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

Bank of America

Following Bank of America’s fourth quarter earnings release, RBC Capital analyst Gerard Cassidy noted that the company rounded out 2020 “well positioned to deliver higher earnings in 2021.” In line with this optimistic take, the five-star analyst lifted the price target to $37 from $28 and reiterated a Buy rating on January 19.

Looking at the print, BAC reported EPS of $0.59, with this figure factoring in a net DVA loss of $56 million. Additionally, net interest income came in at $10.37 billion, which bested Cassidy’s forecast by 1.6%. However, this was 16% lower than the prior-year quarter.

Regardless, Cassidy continues to view the long-term growth narrative as being strong. “The company’s diversified business model is positioned to benefit from an economic recovery in the U.S in 2021-2022. Additionally, a steepening in the yield curve will provide a tailwind to earnings growth over the next 12-18 months,” the analyst explained.

What’s more, Cassidy points to the leadership team as a key point of strength for Bank of America. “Under the leadership of CEO Moynihan for the last 10+ years, BAC has been very focused on delivering ‘through the cycle’ better than peer results in terms of credit quality, balance sheet strength and profitability. We believe in 2023 when investors look back at the 2020-2022 period they will see BAC delivered on those results,” he stated.

As for its valuation, when compared to peers in the space, Cassidy sees “the shares as an attractive longer-term risk-reward play, particularly given the current discounted multiples.”

Based on his 79% success rate and 28.7% average return per rating, Cassidy lands among the top 20 analysts tracked by TipRanks.

Netflix

For top Monness analyst Brian White, streaming giant Netflix remains an exciting play post-earnings, with the company posting “excellent” quarterly results and “strong” guidance for Q1 2021. To this end, White kept a Buy rating on the stock. To back up his even more optimistic stance, the analyst increased the price target to $650 from $600.

Sales for the fourth quarter were $6.644 billion, reflecting a gain of 22% year-over-year and beating White’s estimate of $6.571 billion. EPS, however, did fall short of the analyst’s expectations thanks to a $258 million non-operating item. Having said that, operating income of $954.2 million exceeded his $887.1 million prediction.

Most noteworthy, though, was the total paid global streaming net additions of 8.5 million, which easily beat White’s 5.9 million call.  

Looking ahead to Q1 2021, management guided for revenue of $7.129 billion (versus $7.021 billion consensus estimate), operating income of $1.780 billion and EPS of $2.97 (compared to Street estimate of $2.10), while paid global streaming net additions are expected to be 6 million.

Commenting on the performance, White stated, “In our view, Netflix continues to execute well on a large secular trend and increasingly demonstrate the improving economics of its mode.” What’s more, the company also left the door open for potential buyback programs in the future.

It should be noted that “Netflix has not lost sight of the difficult year-over-year comparison for paid global streaming net additions in H1:2021 and the challenges this has created in forecasting 2021,” according to White, with the analyst also arguing that “competition will remain a topic of conversation and the pace of content production volatile.”

Scoring the #32 spot on TipRanks’ list, White boasts an 80% success rate and 33.6% average return per rating.

Gritstone Oncology

On January 19, Gritstone Oncology unveiled its CORAL program to develop a second generation COVID-19 vaccine, with the company joining forces with the La Jolla Institute, the Bill and Melinda Gates Foundation and the National Institute of Allergy and Infectious Diseases (NIAID) to jointly develop this vaccine.

H.C. Wainwright analyst Sean Lee tells clients that this announcement reaffirms his bullish thesis, and thus, the analyst kept a Buy rating on the stock. He also gave the price target a boost, with the figure moving from $16 to $24.

Part of Lee’s excitement is related to the fact that the vaccine is second generation. Unlike first generation vaccines that only target the COVID spike protein, CORAL uses the company’s EDGE platform to identify a wide range of new potential target epitopes, “which could make the vaccine effective against the virus even if it continues to mutate,” in the analyst’s opinion. The candidate also uses the same chimpanzee adenovirus primer plus self-replicating RNA as Gritstone’s GRANITE and SLATE programs.

“In our view, the currently available COVID-19 vaccines are unlikely to fully satisfy the differing needs across all demographics and geographies. With new strains being reported around the world, we believe the likelihood that available vaccines may become ineffective against a future strain is high. Therefore, we believe that CORAL has the potential to deliver significant upside in the next 18-24 months,” Lee explained.

The CORAL vaccine is set to enter into a Phase 1 study in Q2 2021, with preliminary results potentially coming by mid-year. If everything goes according to plan, Lee believes a Phase 2/3 study could kick off before the end of 2021, with the data release from this study reflecting a major possible catalyst.

As Lee’s calls, on average, have returned a whopping 117.9%, he takes the #143 spot on TipRanks’ ranking.

Progress Software

On the heels of Progress Software’s Q4 2020 earnings release, Wedbush analyst Daniel Ives told investors that the estimate-beating performance “speaks to a company that is gaining some nice growth momentum into FY2021 in our opinion.” As a result, the top analyst maintained a Buy rating and raised the price target from $45 to $55 on January 15.

Progress reported GAAP earnings of 39 cents per share, compared to a loss of 11 cents in the prior-year quarter. The figure also surpassed the 37-cent consensus estimate. Additionally, revenue clocked in at $122.4 million, reflecting a 5% gain.

Ives, however, highlights its acquisition of Chef as the driving force behind his continued optimism. Expounding on this, the analyst said, “We believe the Chef acquisition could be a potential ‘game changer’ for Progress over the next few years as the strategy and financial upside around this deal is impressive and starting to playing out in the field. The acquisition of Chef looks like a deal that was well executed and is in PRGS’s wheelhouse, satisfying management’s parameters for 10%-20% of PRGS revenues and potential to reach 35%+ operating margins (Chef expected to reach 35%+ operating margin 1 year after close).”

It should be noted that management has altered its strategy, with the company focusing on accretive and aggressive M&A that targets companies boasting “stable and profitable revenue streams with a goal of doubling revenues and cash flow in 3-5 years.” To this end, Ives believes that the Chef acquisition will help Progress zero in on the dev-ops space.

Summing it all up, Ives stated, “In a nutshell, we are bullish on the prospects for Progress over the next 12 to 18 months as Yogesh & Co. navigate the company into its next gear of growth and M&A success.”

To support his #26 ranking, Ives has delivered a 78% success rate and 36.6% average return per rating.

Lumentum Holdings

Needham’s Alex Henderson is an “aggressive Buyer” on Lumentum weakness related to its $5.7 billion acquisition of Coherent. With this in mind, Henderson reiterated a Buy rating and $115 price target on January 20.

“We like the acquisition as it brings scale to LITE‘s fiber laser business, provides additional end market diversification and creates vertical integration opportunities,” Henderson wrote in a note to investors.

Offering further explanation, the analyst points out that even though both companies target different products and markets, “the underlying technologies, manufacturing and fundamental materials used are very similar.” To this end, over the next two years, synergies are expected to reach $150 million, with $100 million coming from COGS and $50 million from OPEX.

On top of this, Henderson argues that Coherent could help Lumentum’s valuation. “Prior to the deal announcement, Coherent was trading at a EV/E of 21.1x the CY21 consensus, while LITE was trading at 16.4x our estimate. Coherent has $1.75 Net Debt, while Lumentum currently has $5.95 net cash,” he explained.

What’s more, issues with China approvals shouldn’t arise, according to Henderson, as both companies are “key suppliers in China.”

Based on his 68% success rate and 31.2% average return per rating, Henderson is positioned among the top 75 best-performing analysts tracked by TipRanks.    

  

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