Chip Bergh, CEO of Levi Strauss & Co., rings the opening bell of the New York Stock Exchange (NYSE) during the company’s IPO in New York, United States, March 21, 2019.
lucas jackson | Reuters
More than two weeks into the third quarter, the economic environment and short-term outlook continue to be tense and troubled.
However, bear markets are followed by bull markets. When the rally begins, many investors will regret sitting on the sidelines instead of buying the good stocks earlier.
To that end, top Wall Street pros picked out four stocks with long-term potential, according to TipRanks, which ranks analysts based on their performance.
Levi Strauss & Co.
Levi Strauss & Cie (LEVI) second-quarter results earlier this month gave us some insight into how he’s handling macroeconomic pressure. The results were better than expected and the company even reiterated its guidance for 2022.
Strong operational capabilities help the retailer manage challenges effectively. After the second quarter print, Guggenheim analyst Robert Drbul dove into Levi’s performance and emerged with a boosted Buy rating and $33 price target. (See Levi Strauss & Co’s dividend date and history on TipRanks)
“We continue to believe that the Levi’s brand remains strong and that the company’s principles of allocating capital to strategic priorities will continue to drive market share gains,” said Drbul, who is ranked No. 607 among nearly 8,000 analysts tracked on TipRanks. Drbul assessments were successful 58% of the time, with an average return of 6.9% per assessment.
The analyst also noted that Levi actually benefited from increases in retail prices, which were reflected in its revenue and gross margins. Additionally, the company’s low-end businesses (Walmart’s Signature business and Target’s Denizen and red-tab businesses) are also poised to benefit from a shift in consumer buying trends due of inflation.
Palo Alto Networks
Palo Alto Network (PANW) is a big name in the world of cybersecurity and has been one of the companies that has managed to stay strong in the face of market headwinds. Its efficiency measures have helped the company deal with higher costs resulting from supply chain issues and stay profitable.
BTIG analyst Gray Powell, who also ranks 793rd out of nearly 8,000 analysts tracked on TipRanks, is very confident about the traction of Palo Alto’s primary firewall, which accounts for more than 75% of total sales. (See Palo Alto Networks stock chart on TipRanks)
During an investor call held with Palo Alto management, Powell noted that the company did not disclose any updates mid-quarter. However, when asked if the security industry was facing a downturn due to the broader market turmoil, Palo Alto management said the company did not yet perceive a slowdown in demand as of mid -may.
“Given the transition to the next-generation security (NGS) segment and the improved performance of connected services over the traditional firewall business, we believe PANW can sustain revenue growth. business by more than 20% and increase margins longer term,” said Powell, who sees several benefits to share performance over the next 12 to 18 months.
Notably, Powell was successful with 55% of his ratings, each generating 9.1% returns on average.
Another of Gray Powell’s favorite stocks is the standalone cybersecurity platform SentinelOne (S). Although it was part of a market sell-off spurred by numerous macroeconomic pressures, SentinelOne pointed out that the company did not face any significant slowdown in demand.
In a fireside chat, SentinelOne management emphasized that because security is a very sustainable part of the IT budget (due to the growing need for stronger, ever-evolving security solutions), the business is protected against headwinds. Also, in the security space, SentinelOne believes they are operating in the most sustainable zone, which is a bonus. (See SentinelOne Hedge Fund Trading Activity on TipRanks).
Powell believes that SentinelOne has several long-term growth opportunities ahead of it and should grow significantly and steadily over the next five years or more.
“In our view, S’s primary enterprise endpoint security target market is unique in that it is simultaneously experiencing high demand trends and moving away from legacy solutions,” Powell said.
The analyst is also optimistic about SentinelOne’s strategic expansion into adjacent markets, which will help expand its total addressable market.
Citizens Financial Group
The banking sector has come into the limelight as the Federal Reserve raises its key rate. In this environment, commercial banking service provider Citizens Financial Group (CFG) is benefiting from higher interest rates in the form of higher net interest income, despite lower fee income (due to geopolitical tensions) and a possible slowdown in loan demand.
Ahead of the company’s second quarter earnings release on July 19, RBC Capital Markets analyst Gerard Cassidy commented on the company’s developments and fundamentals and reiterated his buy rating.
However, with near-term headwinds in mind – including mortgage-sensitive citizen and capital market activity – the analyst cut his price target from $58 to $55. (See Citizens Financial insider trading activity on TipRanks)
Nonetheless, Cassidy observed that in previous rounds of monetary policy updates, basic citizen deposits had increased. Also, during such cycles, these deposits seem to be stickier than expected. In addition, deposit costs are expected to stay lower for longer, leading to above-normal profitability in the early stages of this year’s monetary tightening cycle.
Additionally, despite investor wariness about how an economic downturn could affect Citizens’ credit quality, Cassidy remains optimistic about the current strength of credit quality. “We recognize that CFG and the industry have been ‘outperforming’ on credit, and a normalization in credit trends may begin to materialize in the second half of 2022, which we believe will be manageable for the company,” said the analyst.
Cassidy currently ranks 28th among nearly 8,000 Wall Street analysts tracked on TipRanks. He hit his grades 66% of the time, and each of his grades returned 22.2% on average.