Wall Street’s Top Picks: Three Stocks Poised for Growth Amid Earnings Season
As earnings season unfolds, tech giants and industry leaders paint a picture of the market’s trajectory. However, investors should remember that a single quarter’s results shouldn’t solely drive their investment decisions. Seeking guidance from top Wall Street analysts who delve deep into a company’s fundamentals can provide valuable insight into stocks with substantial long-term growth potential. TipRanks, a platform that evaluates analysts based on their historical performance, highlights three companies currently favored by the Street’s top pros.
Key Takeaways:
- Earnings season offers a glimpse into the market’s direction, but focusing solely on one quarter’s results can be misleading.
- Seeking guidance from top Wall Street analysts helps identify stocks with promising long-term growth prospects.
- TipRanks ranks analysts based on their past performance, providing valuable insight into their reliability and expertise.
- Alphabet, ServiceNow, and Travel + Leisure stand out as top picks from leading analysts.
Alphabet (GOOGL): Riding the AI Wave in Search and Cloud
The first stock grabbing attention is Alphabet, the parent company of Google. Their recent second-quarter results showcased strength in Search and Cloud businesses. However, YouTube advertising revenue growth slowed during the quarter, falling short of analysts’ expectations.
Following the announcement, BMO Capital analyst Brian Pitz reiterated a buy rating on GOOGL stock with a price target of $222. Pitz believes Alphabet’s Search business is benefiting from AI tailwinds. He stated, "The combination of higher query volume and lower incremental costs implies that AI benefits to Search will be a multi-year event."
Pitz further raised his 2024 and 2025 estimates for the Cloud business to reflect AI-driven gains. He emphasizes that Google’s AI infrastructure and generative AI solutions for cloud clients have been adopted by over 2 million developers and are already generating "billions" in revenue.
Despite the YouTube revenue miss in Q2, Pitz remains confident in its long-term potential. He anticipates YouTube’s positioning to benefit from a shift of $150 billion in global linear TV ad dollars to the digital realm. Pitz also expects YouTube’s AI Creator tools to significantly impact its future prospects.
Pitz ranks No. 189 among over 8,900 analysts tracked by TipRanks. His ratings have proven successful 74% of the time, delivering an average return of 17.1%.
ServiceNow (NOW): Continued Momentum in Cloud Workflow Automation
Next in line is ServiceNow, a cloud-based software company that impressed investors with its strong second-quarter results. The workflow automation platform witnessed better-than-expected net new annual contract value (NNACV) and contributions from generative AI, leading ServiceNow to raise its 2024 subscription revenue outlook.
Reacting to the impressive results and guidance, Goldman Sachs analyst Kash Rangan increased the price target for NOW stock to $940 from $910 while reaffirming a buy rating.
Shares of ServiceNow surged 13% in the days following the earnings report. Rangan attributes this rally to investors’ "renewed conviction in ServiceNow’s GTM [go-to-market] execution and the quality and breadth of its platform that is clearly resonating with IT buyers irrespective of choppier macro conditions."
Rangan highlights that the 22.5% growth at constant currency in ServiceNow’s current remaining performance obligation (an indicator of future revenue) was primarily driven by robust NNACV and early renewals. He believes the acceleration to 31% in Q2 2024 indicates the adaptability of NOW’s platform across the enterprise. Rangan is optimistic about the company’s ability to sustain a growth rate exceeding 20%, fueled by continued AI momentum and an accelerating backlog.
Rangan ranks No. 579 among over 8,900 analysts tracked by TipRanks. His ratings have been profitable 57% of the time, delivering an average return of 8.7%.
Travel + Leisure (TNL): A Thriving Vacation Ownership Market Drives Growth
The third stock on this list is Travel + Leisure, a membership and leisure travel company. While TNL surpassed analysts’ earnings expectations for the second quarter, it fell short of revenue estimates. The company raised its full-year adjusted earnings before interest, taxes, depreciation, and amortization guidance to reflect robust consumer demand for vacation ownership or timeshares.
On July 29, Tigress Financial analyst Ivan Feinseth reaffirmed a buy rating on TNL stock and raised his price target to $58 from $54. Feinseth’s bullish view is underpinned by the strong demand for vacation ownership. He also expects TNL to benefit from lower interest rates in the second half of this year and additional rate cuts in 2025.
Feinseth anticipates TNL’s revenue and cash flows to be driven by "a combination of property development, membership sales, and increases in subscription and resort operating fees" amid robust travel trends.
He believes TNL’s strategic partnership with Sports Illustrated Resorts and the launch of the Ultimate Sports-Themed and Active Lifestyle Resort Network are significant growth catalysts. He also expects the company to benefit from technology investments, marketing partnerships, and acquisitions, including the purchase of Accor Vacation Club.
Feinseth ranks No. 235 among over 8,900 analysts tracked by TipRanks. His ratings have been successful 60% of the time, delivering an average return of 12.8%.
These three companies represent strong examples of how analysts can provide investors with valuable insights into companies with significant growth potential. While earnings season offers a snapshot of the market, seeking guidance from experienced analysts can offer a more comprehensive view of a company’s long-term prospects and help investors make informed decisions.
