The US stock market saw a sharp rise in the first quarter of 2024, but uncertainty looms as investors await interest rate cuts and anticipate the upcoming US election.
Wall Street analysts ignore short-term noise and remain focused on companies that have strong fundamentals and can generate attractive long-term returns.
With that in mind, here are three stocks favored by the Street’s top professionals, according to TipRanks, a platform that ranks analysts based on their past performance.
Micron technology
This week’s top stock pick is the memory chip maker Micron technology (UM), which impressed investors with its strong quarterly performance. The company also offered strong guidance, thanks to demand stemming from the artificial intelligence boom.
After the beat-and-raise quarter, Needham analyst Quinn Bolton reiterated a Buy rating on MU stock and increased the price target from $100 to $120. The analyst said the company’s high-bandwidth memory (HBM) trends significantly increase revenue estimates.
Bolton noted that Micron’s HBM3E memory solution generated revenue in the fiscal second quarter and is already sold out for the 2024 calendar year.
He highlighted management’s comments on generating several hundred million dollars in revenue from HBM3E in fiscal 2024 and driving fiscal 2025 revenue to record levels. Additionally, the analyst expects Micron’s gross margins to increase in fiscal 2024 and fiscal 2025, driven by favorable pricing and product mix.
Bolton expects the company to benefit from the memory cycle rebound in 2024 and said: “Long term, we see MU as a key beneficiary of strong data center (AI/ML) demand, semi-automotive content, graphics and industrial automation. “
Bolton ranks 17th among more than 8,700 analysts tracked by TipRanks. Its ratings have been profitable 66% of the time, each providing an average return of 30.7%. (See technical analysis of Micron on TipRanks)
Lululemon
The next step is the sportswear manufacturer Lululemon (LULU). The company recently reported better-than-expected results for the fourth quarter of fiscal 2023. However, shares fell as investors were disappointed by the company’s guidance, which reflected weak U.S. sales in due to the impact of macroeconomic pressures on consumer spending.
Following this publication, Guggenheim analyst Robert Drbul slightly lowered his earnings per share estimates for fiscal 2024 to reflect the macroeconomic environment in the United States and increased marketing investments. The analyst also cut LULU’s stock price target from $550 to $525, but reiterated a Buy rating on the stock, calling it his company’s “preferred growth scenario in 2024” .
Despite a slower start to the first quarter in the United States, Drbul noted that management remains optimistic about the potential for LULU’s domestic business to grow this year and gain market share.
The analyst also highlighted the continued robust momentum of LULU’s international business in the fourth quarter. He is optimistic that Lululemon will achieve its goal of quadrupling its international revenue by the end of fiscal 2026 from fiscal 2021 levels. He believes this would lead to an overall increase in revenue and operating margins, justifying the premium multiple of the security.
“We remain BUY rated as we believe LULU should benefit from long-term tailwinds (health, wellness, precariousness and fitness, including at home),” Drbul said.
Drbul ranks 574th among more than 8,700 analysts tracked by TipRanks. Its ratings have been successful 58% of the time, each providing an average return of 8%. (See Lululemon stock buybacks on TipRanks)
Broadcom
This week’s list includes another tech giant: a semiconductor company Broadcom (AVGO). The company is widely seen as one of the biggest beneficiaries of the generative AI wave. At a recent investor meeting, the company discussed its innovations, which will help it achieve its goal of generating $10 billion in AI chip sales in 2024.
After the event, Susquehanna analyst Christopher Rolland reiterated a Buy rating on AVGO stock with a price target of $1,650. Among the key takeaways from the event, the analyst highlighted that the company is on track to achieve its annual AI sales target, supported by its strong portfolio of AI accelerators and products networking.
Contrary to industry expectations that the InfiniBand network communications standard would dominate the market, Rolland noted, Broadcom management continues to have confidence in Ethernet over InfiniBand. The company is optimistic about the ability of its Ethernet products to compete in AI applications.
Rolland also highlighted how Broadcom’s custom chips drive savings in consumer AI applications. The company works with its customers to co-design the architecture of their AI accelerators, which helps improve performance efficiency and hardware optimization.
Commenting on Broadcom’s strategic acquisitions, including Symantec and VMware, Rolland said: “Broadcom is one of the best integrators in the industry, continuing to prove that economies of scale are a viable driver of earnings power for those who can intervene in the semiconductor industry. “
Rolland ranks 15th among more than 8,700 analysts tracked by TipRanks. Its ratings have been profitable 69% of the time, each providing an average return of 25.7%. (See Broadcom stock charts on TipRanks)
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