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Wall Street analysts named a list of stocks this week that they say could offer protection for investors as market tension rises. These companies are firing on all cylinders at just the right time, the analysts say. CNBC Pro combed through the top research to find analysts’ favorite stocks to buy. They include Urban Outfitters , Toast, NetEase , TransDigm and ZScaler. Toast Bank of America analyst Jason Kupferberg is gushing over shares of the restaurant payment tech company. He recently began coverage of the stock, calling it a “restaurant’s best friend.” In sum, Toast does it all, the analyst said. “Beyond POS (point of sale), the innovative TOST platform integrates payment processing, restaurant operations, digital ordering and delivery, team and table management, payroll, lending, and reporting/analytics,” he wrote. Further, Kupferberg said Toast has a unique ability to capture market share. “TOST has captured only ~10% of the estimated 860K US restaurants, and forecasts US [total addressable market] may hit $55B by ’24,” the firm said. Additionally, Kupferberg sees free cash flow turning positive at some point later this year, while margins have improved over the last several quarters. Meanwhile, shares of Toast are up 11% this year, ahead of the company’s earnings report on Aug. 8. “We are bullish on Toast’s best-in-class, cloud-native integrated platform,” he said emphatically. Zscaler In his recent upgrade of Zscaler, BTIG analyst Gray Powell pointed to “improving field checks.” Powell lifted his rating on the cloud security company to buy from neutral to go along with a newly established $185 per share price target. Previously, the firm didn’t have a price target applied to the stock. “Over the last couple of months, we have spoken with seven contacts with a view on ZS, and feedback has been consistently positive,” he wrote. Powell notes that a major reason for the upgrade is that previously paused projects have to begun to move again. “Contacts consistently argue that spending in the segment is improving,” he said. Competition remains high, but Powell is confident Zscaler is up to the challenge. “We think ZS is sitting in front of large secular growth opportunity as network security architectures migrate towards cloud environments over the next five years,” Powell said. Meanwhile, momentum is also growing for new products, and the firm feels confident its forecast will be achieved by the company. “We view Zscaler as a best-in-class, next generation cybersecurity company built for the distributed cloud world,” he added. Shares are up almost 31% in 2023. TransDigm Group Citi analyst Jason Gursky is pounding the table on shares of TransDigm Group. Earlier this week, the firm initiated coverage of the aerospace and defense components company with a buy rating. “The company’s focus on proprietary products and lean operations affords pricing power and margin expansion potential,” according to the firm. Gursky also said surging air traffic is good news for TransDigm as new aircraft are ordered and put into production. TransDigm is also a beneficiary of growing defense budgets, he said. The stock is up 42% this year, but shares are still attractive. The firm called the stock’s valuation “undemanding.” Other catalysts include a “well-proven” M & A strategy, along with clear earnings and revenue visibility. “Best in class aftermarket supplier with room to run,” Gursky said. TransDigm is scheduled to report earnings next week. Urban Outfitters – Barclays, overweight rating “For 2H23 defensive positioning, sticking with our recessionary beneficiaries As we move through 2H23 and prepare for 2024 recovery we continue to recommend Off-Price retailers BURL, ROST, TJX; highly desirable brands NKE, LULU; best-in-class branded retailers DKS, PET.TO, URBN, ULTA; and in branded apparel PVH and RL. Based on our promo tracker, we are more confident in URBN’s turnaround and positive momentum, driven by Anthropologie and Free People.” Zscaler – BTIG, buy rating “Over the last couple of months, we have spoken with seven contacts with a view on ZS, and feedback has been consistently positive. … Contacts consistently argue that spending in the segment is improving. … We think ZS is sitting in front of large secular growth opportunity as network security architectures migrate towards cloud environments over the next five years. … We view Zscaler as a best-in-class, next generation cybersecurity company built for the distributed cloud world.” TransDigm Group – Citi, buy rating “The company’s focus on proprietary products & lean operations affords pricing power and margin expansion potential. … Further, the company has a well-proven M & A strategy & ability to manage its capital structure to drive both organic & inorganic investments. All this is set against undemanding valuation relative to the company’s historic premium to the market. … Best in class aftermarket supplier with room to run.” NetEase – Morgan Stanley, overweight rating “NetEase’s three blockbuster titles YTD have driven 45% YTD performance. We think the positive earnings revision cycle will continue, driven by longevity of those three titles and a more exciting pipeline in the next 6-9 months. At 17x/14x 2023/24E P/E, reiterate as Top Pick. … NetEase enjoys sustainable game revenue and profit growth driven by its best-in-class development capabilities and global expansion.” Toast – Bank of America, buy rating “Beyond POS, the innovative TOST platform integrates payment processing, restaurant operations, digital ordering and delivery, team and table management, payroll, lending, and reporting/analytics. … TOST has captured only ~10% of the estimated 860K US restaurants, and forecasts US TAM may hit $55B by ’24. … We are bullish on Toast’s best-in-class, cloud-native integrated platform.”
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