In the face of economic uncertainty and a cautious Federal Reserve, the beginning of the year presents both challenges and opportunities for investors. As inflation concerns dominate discussions, now is the time to critically evaluate portfolio strategies. Selecting stocks that are underpinned by robust financial health and promising growth potentials is essential for enhancing returns during turbulent times.
With the assistance of tools like TipRanks, which evaluates analyst performance, discerning which stocks might weather the storm is more feasible. Analysts rely on an intricate understanding of macroeconomic factors while analyzing company performance metrics to guide their recommendations. Below, we delve into three stocks currently garnering interest from eminent Wall Street professionals.
The first stock in focus is Uber Technologies (UBER), which recently surprised the market with revenue and earnings that exceeded expectations for the third quarter of 2024. However, not all indicators shone bright, as gross bookings did not meet forecasts, prompting some investor skepticism. Nevertheless, Mizuho analyst James Lee remains optimistic, maintaining a buy rating with a price target of $90.
Lee anticipates that 2025 will be a pivotal year where Uber significantly invests in its growth. While such expenditures may temporarily impact earnings before interest, taxes, depreciation, and amortization (EBITDA), they are poised to stimulate long-term growth. He predicts a compound annual growth rate (CAGR) of 16% in core gross bookings from fiscal year 2023 to fiscal year 2026, aligning with the company’s own projections of mid- to high-teen growth.
Moreover, Lee’s analysis dispels fears regarding the deceleration of Uber’s Mobility business, suggesting that projected gross bookings for fiscal year 2025 could experience an upward trend. He notes that, according to Mizuho’s proprietary checks, order frequency is at record highs and there is growing user penetration in grocery services across North America. His track record, marked by a 60% profitability rate and an average return of 12.9%, lends credibility to his bullish stance on Uber.
Next on the list is Datadog (DDOG), a premier provider of cloud monitoring and security services. The company delivered impressive results in November for Q3 2024, prompting Monness analyst Brian White to reassert a buy rating with a target price of $155. White praises Datadog’s calculated approach to the burgeoning generative artificial intelligence (AI) sector, commending the company for not subscribing to the unrealistic promises that some of its competitors have made.
Despite some challenges within the software landscape in 2024, Datadog has shown relative resilience and outperformance. Importantly, White believes that the demand for AI solutions will catalyze substantial growth in the upcoming year or two. The numbers reflect this optimism: AI-native customers now represent 6% of Datadog’s annual recurring revenue, up from earlier quarters.
Notably, White highlights the firm’s significant advancements in AI capabilities, ranging from LLM observability solutions to its innovative Bits AI assistant. With analysts like White achieving a profitable rating 69% of the time and an impressive average return of 20%, Datadog is viewing robust growth opportunities into the foreseeable future.
Rounding out this analysis is Nvidia (NVDA), a semiconductor powerhouse at the forefront of the AI revolution. Positioned as a beneficiary of the surge in generative AI, this company is witnessing soaring demand for its advanced graphics processing units (GPUs). A reaffirmed buy rating from JPMorgan analyst Harlan Sur, coupled with a price target of $170, underscores the confidence in Nvidia’s path forward.
Sur points to the recent assurance from Nvidia’s CFO regarding the ongoing ramp-up of their Blackwell platform, reassuring investors that production levels remain steady despite supply chain complexities. Additionally, the expectation of sustained capital expenditure in data centers throughout calendar year 2025 further signals a promising operational landscape for Nvidia.
Apart from securing its foothold in accelerated computing, Nvidia is also eyeing opportunities in nascent markets like AI PCs, an expansion from its traditional gaming base. With a solid competitive edge reflected in Sur’s successful track record—67% profitability and an average return of 26.9%—the future looks bright for Nvidia as it continues to innovate and dominate in the tech sector.
Amid macroeconomic challenges, strategic stock selection is vital for enhancing investment portfolios. Analysts like James Lee, Brian White, and Harlan Sur are guiding investors toward Uber Technologies, Datadog, and Nvidia, respectively, highlighting each company’s unique growth narratives and market positions. Their insights provide compelling reasons for optimism, offering avenues for investors to stay ahead of the curve in uncertain times.