Mr. Market is in the midst of third-quarter earnings season. The coming week will see a slew of earnings releases, and with it important news flow and needed insight for investors seeking a profit edge.
Perusing TipRanks' Stock Screener, below are three stocks that rate highly in terms of a mix of favorable analyst consensus ("strong buy"), analyst price target (upside of 20% or more from the current share price), and in the mega market capitalization (above $200 billion) space. There is certainly potential for an earnings bump in a couple of fast growers, while another has plenty of capacity to cut costs as it continues to consolidate and dominate the media industry. Let's take a closer look.
Analysts project another strong quarter from Amazon when it reports its latest results after the market close on October 24. Amazon’s dominant online retailing (91% of sales) unit and its innovative cloud-computing unit Amazon Web Services (AWS) (9% of sales) are expected to post nearly 22% quarterly top line growth to approximately $69 billion on a consolidated basis. The consensus earnings estimate for the quarter ended September is $4.60 per share.
Few firms in the world have grown as briskly as Amazon over the past decade. Over this period, annual sales are up 26.5% and earnings are nearly as strong, growing 26% annually. Over the past five years, profitability has catapulted higher at a nearly 68% annual rate. Double-digit growth in both the top and bottom line are projected for at least the next five years.
5-star Monness analyst Brian White projects very robust 22% year-over-year sales growth and total sales of $68.93 billion, which is slightly ahead of the average quarterly analyst estimate. His earnings estimate stands at $4.33 per share, or slightly below consensus due to the aggressive roll out of one-day Prime shipping, which should be a long-term positive in fending off the competition, but could dent near-term profitability.
White’s three key drivers for Amazon include the continued secular trend of consumers shifting to online retail purchases. Competition in cloud computing will also remain fierce, should be antitrust rhetoric for giant tech firms, including Amazon.
Overall, White rates AMZN a Buy, while his 12-month price target of $2,300 per share implies a return of nearly 30% from the current share price of $1,757. (To watch White's track record, click here)
Wedbush analyst Michael Pachter also cites Amazon’s cloud computing as driving long-term profitability while Prime fulfillment trends should boost retail over the long haul. The analyst models total quarterly sales of $69 billion and earnings of $5.09 per share, both of which are ahead of analyst consensus targets.
Bottom line: Wall Street loves Amazon stock, considering most voices are betting on this retail titan. TipRanks analytics exhibit AMZN as a Strong Buy. Based on 33 analysts polled in the last 3 months, 32 rate the stock a "buy" while only one rates it a "hold." The 12-month average price target stands tall at $2,289, marking about 30% upside from where the stock is currently trading. Any earnings outperformance from Amazon could send the stock firmly higher. (See Amazon stock analysis on TipRanks)
Salesforce leads the market in offering customer relationship management to 150,000 clients in 70 countries. Its average annual sales growth of 24.5% over the past decade rivals Amazon’s, but its annual earnings advances of 31% bests the online retailing giant. CRM’s top line is projected to grow “only” 14.5% in the coming five years, but analysts expect annual profits increases could continue at the 30%+ pace.
5-star JMP analyst Patrick Walravens detailed that salesforce shares are lagging the Nasdaq’s 20% annual gain and have only grown 8% so far this year. The top analyst sees the current weakness as a great potential entry point for prospective investors. His price target is $191, or nearly 33% above the current share price of $144.09. (To watch Walravens's track record, click here)
Salesforce’s current quarter ends October 31 and it plans to hold its Dreamforce user conference just before Thanksgiving. Walravens sees strong sales growth for the fiscal third quarter and continued momentum into the user conference. The completion of the $16 billion Tableau acquisition and final approval in the United Kingdom should also remove an overhang on the stock.
Turning to TipRanks for further insight, the average analyst price target is $188.18, or just ahead of JMP’s target. Every one of the 22 analysts offering price targets rates salesforce a "buy." Fiscal third quarter results will be on November 26, which will be quite timely as management should be able to provide a detailed summary of the Dreamforce conference. Again, expect a share price bump higher on any better-than-expected profit results. (See Salesforce stock analysis on TipRanks)
Walt Disney (DIS)
Entertainment giant Disney will report its latest quarterly results after the market close on November 7. The consensus profit estimate currently stands at $0.94 per share, which would represent a decline of 36.5% from the $1.48 reported in the same quarter last year.
Despite the expected reported fall in profits, there is little concern that Disney investors won’t live happily ever after. The dilutive effect of the gargantuan merger with Twenty First Century Fox should prove only temporary and brought more dominance in the competitive media space. For example, the merger brought a controlling stake in online streaming leader Hulu, which, along with the imminent release of Disney+, is expected to lead Disney into an immediate competitive position with the likes of Netflix and Amazon Prime’s stable of films and original programming. Disney also offers ESPN+ to sports fans.
Morgan Stanley's recent analyst report on Disney estimates a sum-of-the-parts valuation of $160 per share -- about 22% upside from current levels. The analyst behind the call is Benjamin Swinburne, and you can find his impressive track record here.
Swinburne's current estimate is for $5.30 of adjusted EPS in FY20, growing to nearly $11 by FY24. This growth comes from fading DTC losses, full Fox synergy capture, a return of share repurchases in mid-FY2020, and the assumption of a continued healthy economy supporting growth at the Parks segment.
"We see Disney as unique among peers with the brands and scale to build a global, profitable streaming business. We are raising our Disney Plus estimates, although lowering nearterm EPS. We see shares offering unique exposure to a diversified portfolio of growth assets anchored by Disney's IP," the top analyst concluded.
Most analysts back Swinburne's confident take on the media giant, as TipRanks analytics showcase DIS as a Strong Buy. Based on 15 analysts polled in the last 3 months, 12 rate the stock a "buy," while 3 say "hold." The 12-month average price target stands at $153.33, marking a 17% upside from where the stock is currently trading. (See Disney stock analysis on TipRanks)