When the first half of 2022 comes to an end, investors can be sure of at least one thing: This year is likely to continue to be difficult.
Economic risk is top of mind for investors as investment banks — including UBS, Citigroup and Goldman Sachs — are raising their expectations of the likelihood of a recession.
Analysts look at the immediate period wave and pick stocks they think could be solid bets over the long term. Here are five stocks picked by some of Wall Street’s top professionals, according to TipRanks, which ranks the most influential analysts.
KLA Corporation
KLA Corporation (KLAC) is a semiconductor company specializing in the manufacture of wafer equipment. Global supply chain issues are limiting the company’s potential, and shares are down about 21% year over year.
However, KLA’s leading position in the specialty process management market can act as a buffer in times of recession. Needham analyst Quinn Bolton, who recently reiterated a buy rating with the company’s price target of $395, remained bullish on KLAs’ improved balance of foundry/logic and memory processes.
Bolton emphasized the UÇK’s consistent dividend policy. “The company expects to continue increasing dividends with the rate of youth growth,” he said. (View KLA dividend date and history on TipRanks)
The analyst believes that KLA will continue to outperform the wafer equipment industry and continue to gain greater market share in the process control market.
Bolton ranks second among nearly 8,000 analysts tracked on TipRanks. Additionally, 65% of stock valuations were successful, with an average return of 41.7% per valuation.
Broadcom
Broadcom (AVGO) designs, develops, manufactures and supplies various semiconductor and infrastructure software products. Like most major semiconductor companies, Broadcom faced supply chain inconveniences and depreciation that coincided with a sell-off in the broader technology sector. AVGO shares are down 23% so far this year. (See Broadcom stock chart on TipRanks).
However, Deutsche Bank analyst Ross Seymore isn’t overly concerned about the company’s prospects. At a recent investor meeting, the analyst interviewed members of Broadcom’s C-suite. When asked how the company intends to cope with the recession, management replied during the interview that the company prefers transportation based only on actual demand rather than full reservation. This is done to ensure a “relatively soft landing if/when cyclical concerns are met.”
Additionally, Broadcom is known for its post-acquisition growth strategy, which has helped the company reduce competition and enter untapped markets earlier. This time, Broadcom is poised to adopt the VMWare cybersecurity player (VMW). Broadcom has admitted it is facing near-term impacts on its accounting revenue due to the move of VMWare’s business to a subscription-based model. However, after the initial drop, yields are likely to accelerate.
“We continue to see a combination of critical semiconductors and AVGO products that are infrastructure intensive and provide the required stability in an environment of increased macro/sector volatility,” Seymore said.
Ross Seymore is ranked 19th among nearly 8,000 analysts on TipRanks. His reviews produced an average return of 23.6% and were successful 73% of the time.
Adobe
One of the most famous software companies, Adobe (ADBE) has built a brand supported by a strong product line that spans Photoshop, Illustrator and InDesign. However, recent times have not been good for the company as it recently issued a weak FY22 guidance which has caused the shares to fall.
Adobe has halted all sales of new software to Russia and Belarus, which could result in a $75 million loss in revenue. Additionally, the forex partner is expected to take home $175 million in the third and fourth fiscal quarters. (See Adobe’s Risk Factors at TipRanks)
Deutsche Bank analyst Brad Zelnick, however, isn’t as concerned as other investors. In fact, he was impressed that the company has given due consideration to the impact of the headwinds. He also believes this weak expectation will help Adobe negotiate deals with large companies more effectively. Additionally, lukewarm policies will also help companies capitalize on the “seasonality of F4Q renewal that comes with the associated creative price increase.” This means more customers are likely to renew their subscriptions under the new pricing plans.
Additionally, given Adobe’s total address market is a staggering $205 billion, the analyst doesn’t see much trouble recovering from the current bear market.
Bolton has reiterated his bullish stance on buy ratings for Adobe shares. However, he updated his estimates of the company’s results for the current quarter and fiscal year, and accordingly reduced the price target to $500 from $575.
According to TipRanks, Zelnick has a 68% success rate and an average return on reviews of 16.5%. Especially at Adobe, it has a 78% success rate and an average return of 19.1%.
Suncor
Integrated energy company Suncor (THEY ARE) produces synthetic oil from petroleum sands. Needless to say, energy companies have benefited tremendously this year, up almost 38%.
RBC Capital analyst Greg Pardy is optimistic about the sustainability of stock growth. He noted that due to intense scrutiny from activist investors like Elliott Management, Suncor has made several management changes to improve its operational reliability and security.
Pardy speculates that Suncor will maintain stable levels of oil sands production and optimize its resource base to help reduce carbon emissions in the oil production process over time. (See Suncor Energy Insider Trading Activity on TipRanks)
The analyst reiterated SU’s Buy rating and raised the price target to $53 from $47. “Our recent series of institutional meetings with Suncor in London has encouraged us to take a closer look at the steps needed to regain best-in-class status as an oil sands operator,” he said.
Pardy ranks 64th out of around 8,000 analysts tracked on TipRanks. Additionally, 60% of the previous ratings were successful, yielding an average return of 27.1% per rating.
Imperial Oil
RBC’s Pardy believes integrated oil producer Imperial Oil (In my opinion) can be a great measure to protect your portfolio from the uncertainty the markets are facing this year.
Notably, Imperial is working tirelessly on a plan to steer society toward a zero-emission future. With the support of advanced technologies, the company is making rapid progress toward its goal. Imperial anticipates these technologies will reduce carbon intensity in its upcoming oil sands projects by 25% to 90%. (See Trading Imperial Oil Hedge Funds on TipRanks)
Pardy believes Imperial has “a capable leadership team, favorable long-term operating prospects, a strong balance sheet and a commitment to shareholder returns.” In addition, the analyst notes that the high production rate at Imperial’s Kearl property in northern Alberta is increasing the Company’s overall operating momentum, further supported by its improving cost structure.
Pardy reiterated a Buy rating on the stock and raised the price target to $78 from $66 reflecting significant commodity price declines and Imperial’s commitment to continuing shareholder returns,” the analyst wrote.
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