Top Wall Street analysts are betting on stocks like Tesla and Uber for the third quarter

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View of the phone company QUALCOMM technology 5G in the Mobile World Congress.

Ramon Costa | SOPA Images | LightRocket | Getty Images

How to find compelling stocks primed to outperform during the third quarter of 2020? Here are a few of the names the best-performing Wall Street analysts are betting on right now.

With the stock market looking particularly volatile, it could make sense to follow the stock picks of analysts with a proven track record of success. On the one hand the U.S just added a surprisingly strong 4.8 million jobs in June. On the other hand, a renewed surge in coronavirus cases has left investors feeling jittery.

We used TipRanks analyst forecasting service to pinpoint Wall Street’s best-performing analysts. These are the analysts with the highest success rate and average return measured on a one-year basis- and factoring in the number of ratings made by each analyst.

With that in mind, here are the best-performing analysts’ six favorite stocks:

Gilead Sciences

RBC Capital’s Brian Abrahams has just selected Gilead Sciences as his top stock pick for the third quarter of 2020. This five-star analyst has a buy rating on GILD with a stock price forecast of $88, indicating 16% upside potential from current levels.

So far year-to-date, Gilead shares have soared 17%, boosted by optimism over the company’s investigational coronavirus treatment remdesivir. However, Abrahams believes the company has much more to offer than just remdesivir. He highlights the underappreciated potential for Gilead’s Biktarvy, a complete regimen for the treatment of HIV.

“We believe Biktarvy’s strong profile and robust launch, along with favorable demographic and pricing dynamics, will underpin good HIV franchise sustainability through at least 2025” the analyst told investors on July 2. With nearer-term competitive threats overblown, he expects this to maintain a strong foundation for GILD’s valuation going forward.

What’s more, Abrahams sees the company’s selective JAK1 inhibitor filgotinib for inflammatory diseases as a ‘potential blockbuster’ in the pipeline. “Overall, we expect sentiment to remain more positive, with continued strong commercial execution and… pipeline diversification helping drive share appreciation” the RBC analyst concludes. 

Qualcomm

On July 1, Canaccord Genuity’s Michael Walkley reiterated his Qualcomm buy rating while ramping up the stock price forecast from $102 to $115 (24% upside potential). This Top 100 analyst finds the current share price ‘compelling’ and sees multiple catalysts ahead.

With smartphone volumes starting to recover and expected to improve during the rest of the year, Walkley argues that Qualcomm is well-positioned to benefit from the long-term 5G investment cycle. “We anticipate recovering earnings in F2021 as 5G smartphones ramp, Apple re-enters the model for QCT shipments, and global demand for smartphones improves” the analyst explains.

In fact, Walkley believes that Qualcomm has a strong leadership position for 5G that should not only result in strong share gains with leading smartphone manufacturers but also provide an opportunity of up to 1.5x the dollar content of a similar 4G customer smartphone. According to the analyst, this is due to a combination of increased RF content and higher pricing for 5G basebands versus premium-tier 4G solutions.

Walkley is ranked #62 out of over 6,700 analysts tracked by TipRanks, and boasts an average return per rating of 19.9%. Shares in Qualcomm are up 5% year-to-date.

Uber

RBC Capital analyst Mark Mahaney is betting on transport giant Uber as his top stock pick for the third quarter. Indeed, Mahaney’s $52 price target suggests investors could benefit from significant upside potential of 68%.

“We believe investors largely agree that Uber faces very large TAMs, has a leading competitive position, and benefits from an experienced management team” the analyst wrote in a July 2 report. The controversy for Uber is around profit potential following the largest loss profile of almost any initial public offering (~$3B EBITDA loss in 2019).

However, over the last three years, Mahaney notes that each of Uber’s four operating expense lines have declined as a percentage of revenue (from 99% in 2016 to 66% in 2018), while driver and rider subsidies as a percentage of bookings have also decreased materially (from 13% to 9% in the same period).

Looking ahead the analyst sees four key paths to profitability: 1) Better competitive dynamics leading to fewer subsidies; 2) long-term pricing power; 3) insurance leverage from a shift in business to non-ridesharing verticals and international; and 4) expense leverage as the company scales.

Due to a strong 20.3% average return per rating, TipRanks places Mahaney at #93 out of over 6,700 tracked analysts.

Activision Blizzard

Top Needham analyst Laura Martin is growing increasingly bullish on video game leader Activision Blizzard. “We believe video game play and viewing are beneficiaries of COVID-19 “shelter at home” rules, and that post-pandemic engagement levels will remain elevated compared to January 2020 (ie, pre-coronavirus) levels” cheers Martin.

She bumped up her 12-month ATVI stock price forecast from $75 to $90 while reiterating a buy rating on July 2. Given the stock’s 31% year-to-date rally, Martin’s new price target suggests 15% upside potential lies ahead.

Video game industry upside is being driven by mobile games, genre expansion (51% of “gamers” are now women), and esports (i.e., competitive gaming for money). For Martin, eSports is a key upside driver and ATVI has now launched its second pro league, based on its Call of Duty game (the first was Overwatch League).

“What we like most about ATVI’s strategic position is that it owns all of its IP [intellectual property] and manages large, global, super-fan communities” she says. Additionally, it has diverse revenue streams with big barriers to entry based on hit franchises and ‘outstanding’ shooter games that attract a global audience.

Martin scores a five-star rating on TipRanks, with a ranking of #100 out of 6,742 analysts.

Tesla

Five-star Oppenheimer analyst Colin Rusch has just reiterated his buy rating on Tesla after the company reported stellar second quarter vehicle delivery and production numbers. TSLA announced total 2Q deliveries of 90,650, ahead of FactSet consensus of 68,380. Meanwhile total production came in at 82,272 with 6,326 ModelS/X and 75,946 Model 3/Y.

“With TSLA posting deliveries well ahead of bull’s hopeful possibilities, we believe there are two initial takeaways” the analyst commented on July 2. First, he notes that production re-ramp went as well as could be expected during the quarter. Second, delivery cycle times were much shorter than expected, leading Rusch to conclude: “We believe the company focused on customers near its factories to facilitate this result, but are still impressed.”

The analyst now expects that investors will begin to focus on gross margin performance in the quarter, especially in China, to determine Tesla’s long-term cost structure. And although depth of demand remains a question for bearish investors, Rusch believes TSLA is unlocking new customers and expanding pools of buyers, while making ongoing cost improvements.

Looking forward, the analyst recommends watching out for additional information on Tesla’s advanced technology initiatives, notably battery/powertrain configuration and performance advantages as well as self-driving functionality and algorithm learning cycles.

Rusch, who is ranked at #89 out of over 6,700 analysts on TipRanks, has a $968 stock price forecast on the electric-vehicle company- which has seen shares explode a whopping 189% year-to-date.

Wix

Web developer Wix has just received the thumbs up from SunTrust Robinson analyst Naved Khan. With the stock more than doubling year-to-date, Khan boosted his price target from $215 to a Street-high $290 on June 29. Thanks to his strong stock picking record, Khan is ranked #150 out of over 6,700 analysts tracked by TipRanks.

“We’re incrementally positive on Wix following conversations with several Web development agencies, including an expert call we hosted last week with an early Wix adopter” the analyst explained. Following several years of focused efforts, he believes Wix is finally gaining traction with agencies and professionals. According to the analyst, this can help unlock a potentially meaningful opportunity (5-8x TAM vs core).

Indeed, Khan notes that the company’s Editor X (in beta) for agencies and designers is receiving favorable reviews and is likely to further drive agency adoption/usage, with premium pricing helping monetization.

At the same time, Wix has now launched an expanded e-commerce solution, with several ‘must have features’ including native payments processing using Wix Payments. “We are impressed by Wix’s speed of innovation and believe that the latest move will also help drive usage with Web agencies for ecommerce site creation” Khan commented on June 30.

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