Top Wall Street analysts say buy these stocks in a challenging 2023

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Shoppers line up outside a Costco to buy supplies after the Hawaii Department of Health on Wednesday advised residents they should stock up on a 14-day supply of food, water and other necessities for the potential risks of novel coronavirus in Honolulu, Hawaii, U.S. February 28, 2020.
Courtesy of Duane Tanouye via REUTERS

As we near the end of 2022, plenty of uncertainty looms ahead in 2023 – and the challenges faced by this world are far from over.

This year, investors have faced a sharp selloff in equities, spiking yields in bonds and dramatic swings in oil prices. Though market tumult is only a temporary event, there’s no saying how long it might last.

A long-term focus allows investors to tune out the noise from daily volatility and focus on building a strong portfolio.

Here are five stocks chosen by Wall Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.

Nova Measuring

Nova Measuring (NVMI), a metrology solutions provider for the semiconductor manufacturing industry, has benefited from lower exposure to the memory market, which has suffered major setbacks this year. About 70% of Nova’s products are for the foundry market, which has not been drastically affected by the slowdown in the semiconductor industry this year.

Benchmark analyst Mark Miller, who hosted a virtual meeting with Nova management recently, pointed out that the company has gained at a compound annual growth rate of 15% to 20% over the past five years, surpassing its growth in WFE (wafer fab equipment) spending. The analyst is also upbeat about Nova’s prospects in this area. “While a softer 2023 is expected, Nova expects to once again outpace WFE spending,” said Miller.

Miller notes that the longer-term outlook for Nova is bright, given the demand runway that will be created when the U.S., Europe, and China ramp up internal chip manufacturing over the next five years. (See Nova Measuring Stock Investors sentiments on TipRanks)

Further, the second half of 2023 is expected to be stronger due to a possible rebound in the memory market and increased orders from its major customer, Taiwan Semiconductor Manufacturing (TSM).

The analyst reiterated a buy rating on the stock with a price target of $100.

Miller, who is ranked No. 276 out of more than 8,000 analysts on TipRanks, has delivered 51% profitable ratings in the past year. Moreover, each of his ratings has generated average returns of 14.2%.

Costco

Costco (COST) has a unique business that offers food and general merchandise in bulk at discounted prices through membership warehouses. Strategic investments, customer-centricity, and a focus on membership growth have helped the business survive a tumultuous year.

Recently, Tigress Financial Partners analyst Ivan Feinseth said that he sees consumer spending trends improving later in 2023, and this will be a catalyst for Costco’s top-line growth. Also, the retailer’s ongoing store growth and international expansion are expected to push business performance trends upward. (See Costco Dividend Date & History on TipRanks)

The analyst also believes that Costco’s dominance in the warehouse-based retail market is driving its competitive advantage. Feinseth cut his price target to $635 from $678 but reiterated his buy rating on the stock. The analyst views “the recent pullback as a major buying opportunity” and expects Costco’s loyal customer base and resilient business model to continue to drive growth.

Feinseth stands at the 271st position among more than 8,000 analysts. Remarkably, 58% of his ratings have been successful, with each rating delivering average returns of 10.7%.

Amazon

Technology expert analyst Brian White of Monness Crespi Hardt has always been bullish on Amazon (AMZN). The analyst has his eyes set on the long-term prospects of the company in the rapidly advancing digital transformation.

White is upbeat about the growth runway ahead of Amazon in the areas of e-commerce, Amazon Web Services, digital media, advertising, Alexa, robotics, AI and others. Despite a challenging macroeconomic environment in the near-term, the lingering pandemic is expected to push digital transformation further, “benefiting the company’s long-term business model.”

The analyst reiterated his buy rating on Amazon with a price target of $136. (See Amazon Hedge Fund Trading Activity on TipRanks)

White’s convictions on Amazon have been 46% successful. Moreover, 54% of his overall ratings have been profitable, with each rating generating average returns of 8.1%. The analyst has been ranked No. 716 among over 8,000 analysts tracked on TipRanks.

Meta

Coming to yet another one of White’s favorite stocks, Meta Platforms (META), the analyst remained bullish with a buy rating and a $150 price target. The company is wrapping up a difficult year full of challenges, which are expected to carry over into 2023.

However, in the long run, the analyst sees Meta gaining from the secular growth opportunities in digital ads and advancing in innovations in the metaverse. White expects the Facebook-parent’s valuation to move up significantly over time. (See Meta Platforms Website Traffic trends on TipRanks)

“With sales up 34% per annum over the past five years, EPS turning in a 32% CAGR and generating an attractive operating margin, we believe Meta Platforms should trade at a premium to the market and tech sector in the long run; however, the expect the current macroeconomic and geopolitical environment will weigh on advertising spending in the coming quarters,” said White. 

Ambarella

Recently, Stifel analyst Tore Svanberg reinforced his bullishness on chip company Ambarella (AMBA), which specializes in the development and marketing of video compression and image processing solutions. As a player in the battered semiconductor industry, AMBA’s stock has fallen sharply this year. Nonetheless, here’s a look into the positives that Svanberg pointed out.

The analyst views the company as a leader in the video processing technology market, which is growing rapidly and secularly. (See Ambarella Blogger Opinions & Sentiment on TipRanks)

Svanberg highlighted Ambarella’s flow of deal wins. The latest deal was with Bosch Mobility Systems, the largest global automotive Tier 1 original equipment manufacturer.

The analyst said that the company now has deals with two of the top three global Tier 1 automotive original equipment manufacturers. Svanberg also said that AMBA is “positioning ‘CV3’ well to realize AMBA’s ambitious automotive aspirations, w/ a 6-year design win funnel estimated at $2.3 billion.” For context, CV3 is Ambarella’s flagship domain controller SoC (System on a Chip).

“In sum, we believe AMBA is well-positioned to be a key, long-term beneficiary of CV/Edge Processing, especially coupled with the company’s highly strategic acquisition of Oculii (giving it a unique edge in vision/radar sensor fusion technology), and therefore maintain our Buy on AMBA shares,” said Svanberg, who also raised the price target to $100 from $88.

Svanberg is ranked 32nd among more than 8,000 analysts on TipRanks. Sixty-five percent of his ratings have been profitable and each has garnered an average return of 20.7%.

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