Despite turbulent economic conditions, these 2 stocks could double
Clearly, Wall Street did not like Fed Chair Jerome Powell’s Jackson Hole speech. Markets tumbled after Powell stressed that the central bank is committed to taming inflation and will make another 75 basis point hike if it takes it to get the job done.
Markets may have thrown the toys out of the pram, but while aware of a bearish scenario, Goldman Sachs chief economist Jan Hatzius is not overly concerned, preferring to focus on Powell’s less aggressive commentary.
“We continue to expect FOMC to slow the pace from here, making a 50 basis point hike in September and a 25 basis point hike in November and December for a 3.25-3.5% finishing rate. However, additional CPI and employment reports will be available by the September meeting, and Powell stressed that the decision “will depend on the totality of data coming in and the evolving outlook,” the economist explained. “We see risks to both the near-term pace and our end-rate forecast as tilted to the upside.”
One pair of stocks that Goldman Sachs is bullish on right now certainly has an upside in store — the company’s analyst Kash Rangan has spotted two names he believes will grow at least 100% in the coming months. have on the menu. We used the TipRanks platform to find out how other Wall Street experts see the next year for these stocks.
The first Goldman pick we’ll look at is Splunk, a big data analytics company. Splunk gives organizations the tools to extract insights from vast amounts of data. The data can be used to make business decisions and support smooth operations. The company is a recognized leader in IT operations and security, has an installed base of more than 20,000 customers and boasts differentiated technology and a strong track record of innovation.
All of that may be true, but Splunk wasn’t immune to the economic downturn, as demonstrated when the company recently reported its FQ2 (July quarter) results.
That’s not to say the report itself was a dud. The company’s revenue rose 32% year over year to $798.75 million, beating analysts’ expectations of $747.7 million. Earnings per share of $0.09 also fared better than Wall Street’s forecast loss of $0.35 per share.
However, shares suffered in the post-earnings session due to the company’s disappointing outlook. Annual recurring revenue (ARR) — a key software metric — is expected to reach $3.65 billion this year, down from the previous forecast of $3.9 billion. Soothing sentiment further, the company now sees annual recurring revenue from the cloud to reach $1.8 billion this year, also down from the previous $2 billion forecast.
Investors were quick to show their disappointment that Goldman’s Kash Rangan considers “valid.” However, the lowered outlook does not change the long-term thesis.
“We are bullish on Splunk’s rapidly scaling cloud business, significant renewal opportunity for perpetual licenses and non-cloud ARR, long-term fundamentals, and improved value proposition following the COVID exit. Additionally, Splunk is an attractive asset with a unique and strategic value proposition,” said Rangan
“We remain positive on the long-term upside as the company successfully navigates the cloud transition under the leadership of the new CEO. Additionally, coming closer to the rule of 40 (sales growth + free cash flow margin) in FY23 could propel the stock into higher valuation territory,” Rangan added.
These comments support Rangan’s buy rating, while his $200 price target leaves room for one-year gains of a whopping 114%. (To see Rangan’s track record, click here)
Splunk gets a lot of coverage on Wall Street; In the last 3 months, there have been 27 analyst ratings with a bias of 18 to 9 in favor of buy over hold, all resulting in a moderate buy consensus rating. Measured by the price target of $131.79, the stock is expected to post ~41% growth over the following months. (See Splunk Stock Prediction on TipRanks)
In the field of cloud-based customer relationship management software, Salesforce is the market leader and builds and develops its products for companies. The product portfolio includes sales, marketing, analytics, artificial intelligence, e-commerce, customer applications, integration and collaboration. Rather, it covers practically all facets of the ongoing trend of digital transformation. According to the company, the TAM (Total Addressable Market) for its combined businesses should reach $26.284 billion by the fiscal year.
Salesforce delivered another set of strong results that has come to be taken for granted in its recently released fiscal 2023 second quarter (July quarter) report.
Revenue came in at $7.72 billion, a 22% improvement over the prior-year period while beating the consensus estimate of $7.69 billion. The company also exceeded expectations on the bottom line, as adj. Earnings per share were $1.19 before Street asked for $1.02 per share.
However, despite the strong headlines, the report failed to please investors; Like many others in the current environment, Salesforce has had to tame expectations for the remainder of the year. The company reduced its full-year revenue guidance to $30.9 billion to $31 billion. The company previously forecast sales of between $31.7 billion and $31.8 billion.
While stocks trended lower in the post-earnings session, Goldman’s Rangan thinks the reaction was undeserved and sees plenty of reasons to remain optimistic.
“Salesforce remains positioned to benefit from a number of secular trends driving growth within the company’s large and expanding TAM,” the analyst wrote. “In our view, the company remains poised to benefit from digital transformation as companies seek to form a more holistic view of their customers. We continue to see room for improvement in unit economics as the company’s large installed base and extensive portfolio across multiple product categories enables the company to expand the share of wallet within customers’ overall IT budgets.”
To that end, Rangan rates CRM as a buy along with a price target of $320. What do investors get out of it? The top of a robust 100%.
Tech stocks tend to draw a lot of attention, and Salesforce is no exception — the stock has 35 analyst ratings on record, including 30 buys versus just 4 hold and 1 sell to give the company its consensus “strong buy” recommendation. While the average target of $227.67 isn’t quite as optimistic as Rangan’s, investors could be sitting on a 42% return a year from now. (See Salesforce Stock Prediction on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.
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