Top Wall Street Analysts Reveal 5 Stocks with Strong Return Potential Despite Market Uncertainty

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October 2, 2023

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The stock market has had a rough September, leaving investors uncertain about the path forward. However, every market environment also presents opportunities for compelling returns.

To identify stocks that could generate robust gains even amidst the current volatility, we analyzed recent stock picks from Wall Street’s top-rated analysts, based on data from TipRanks. These analysts have proven track records of rating stocks accurately, allowing investors to have confidence in their recommendations.

Below we reveal 5 stocks that top analysts believe have strong upside potential. For each stock, we’ll provide an overview of the business, the bullish analyst commentary, and analysis on the stock’s growth prospects.

Adobe — Software Leader Enhanced by AI

Cloud software giant seeing strong growth in Creative Cloud subscriptions
Recently released AI-powered generative design and video tools
Deutsche Bank analyst sees pricing power and new monetization opportunities

Adobe (ADBE) is the leader in digital creativity software, including famous products like Photoshop, Illustrator, and Premiere Pro. The company has successfully transitioned to a subscription-based model, with revenue surging during the pandemic as remote work fueled demand for its cloud-based Creative Cloud suite.

Adobe recently held its annual MAX conference, where it announced the launch of new AI-powered features. This includes Photoshop and Illustrator integration with Adobe’s Sensei AI, as well as the release of Adobe Express for AI-powered video creation.

But the biggest announcement was Adobe’s new generative AI product called Firefly. This tool can create and edit images, videos, and text content based on natural language prompts.

Deutsche Bank analyst Brad Zelnick believes Adobe’s embrace of AI will drive long-term growth. He points out that Adobe has wisely chosen to incorporate the new AI capabilities directly into core products like Photoshop.

Zelnick says this “should enable creatives to better appreciate the productivity benefits of generative AI more quickly, and make Firefly-powered generative AI offerings a critical part of their workflows.”

The analyst sees further monetization potential in new standalone AI products like Firefly Generative Studio. He recently boosted his price target on ADBE to $610 while keeping a Buy rating.

We concur that Adobe is brilliantly leveraging AI to enhance its creative software tools. With the company dominating among creative professionals and students, AI integration gives users more reasons to subscribe and continue paying each year. Adobe stock looks poised for further gains.

Salesforce — Cloud Software Giant Boosted by AI CRM

Global leader in cloud-based CRM software
Seeing strong demand for AI-enhanced Sales Cloud
Partners optimistic on Salesforce’s data and AI capabilities

Salesforce (CRM) pioneered the cloud CRM software category and remains the undisputed industry leader. The company’s Sales Cloud delivers leads, contacts, and opportunity management for sales teams.

At the recent Dreamforce conference, Salesforce emphasized how its CRM tools are being augmented by artificial intelligence capabilities. For example, the new Sales Cloud Genie provides real-time recommendations to optimize sales interactions.

Deutsche Bank’s Brad Zelnick attended investor meetings following Dreamforce and heard universally positive commentary. He says partners are seeing “real demand and ongoing implementations” for Salesforce’s various data cloud products.

Zelnick believes Salesforce’s access to enormous amounts of customer relationship data gives it a major competitive advantage in integrating AI. The analyst is confident Salesforce can sustain rapid growth while expanding profit margins.

We agree that Salesforce has cultivated a network effect, whereby its large customer base contributes data that continuously improves its AI-powered products. This self-reinforcing dynamic will be hard for competitors to replicate.

With CRM spending recovering strongly from the pandemic, Salesforce looks poised to deliver excellent returns for investors in the years ahead.

Pinterest — Visual Search Perfect for Ecommerce

Popular platform with over 400 million monthly active users
96% of searches are unbranded, revealing purchaser intent
Ramping up shopping capabilities via channels like Amazon affiliation

Pinterest (PINS) operates a visual search and recommendations platform with a massive user base. The site is essentially digital window shopping — users browse inspirational photos and search for products or ideas.

This gives Pinterest unique value for advertisers. At the company’s recent investor day, it revealed 96% of searches are unbranded. This means users are in the ideation phase, revealing genuine purchasing interests.

Pinterest is rapidly improving its shopping capabilities to capitalize on this opportunity. For example, the company now shows Amazon product listings alongside relevant pins, earning fees when users make purchases.

Analyst Colin Sebastian at Baird notes this Amazon affiliation is already exceeding expectations. He sees a long growth runway as Pinterest captures more ecommerce ad budgets.

We concur that Pinterest’s visual search model is unmatched in allowing brands to reach high-intent users. With the company forecasting revenue growth in the mid-high teens, its stock offers an attractive risk/reward profile.

Microsoft — Tech Giant Capitalizing on AI Advances

Cloud and productivity software leader
Leveraging advances in generative AI via partnership with OpenAI
Quickly deploying AI-enhanced products across Microsoft 365 and Bing

As a tech giant with $200 billion in annual revenue, Microsoft (MSFT) has scale to drive rapid product development. This is evidenced by the company’s speed in deploying new AI capabilities.

At a recent event, Microsoft unveiled AI enhancements to its Microsoft 365 productivity suite. The new Designer and Copilot tools leverage OpenAI’s GPT technology to generate content for documents, presentations, and code.

Microsoft also announced an AI-powered Bing chatbot and Edge web browser upgrades. Analyst Kash Rangan at Goldman Sachs notes how Microsoft’s strong cloud infrastructure and developer reach position it to proliferate AI broadly across its product line.

We agree that Microsoft’s alliance with OpenAI gives it an advantage in commercializing generative AI. With dominant market shares in productivity software and cloud platforms, Microsoft can drive rapid adoption of AI technologies. The company appears poised for strong growth amidst swelling demand for AI capabilities.

FedEx — Logistics Company Cutting Costs Amid Weak Demand

Global delivery services leader
Struggling with macroeconomic challenges
Making good progress on cost-savings initiatives

FedEx (FDX) is facing headwinds from reduced industrial demand and overseas shipping slowdowns. But the logistics leader is responding well by controlling costs.

FedEx recently reported lower quarterly revenue but beat earnings estimates through its cost-reduction efforts. The company’s DRIVE program is on track to save $1.8 billion annually by 2024.

Jonathan Chappell at Evercore ISI notes how FedEx is capturing market share gains from competitors. With pricing power in short supply, the company’s cost discipline provides confidence it can navigate through the demand slowdown.

Once macro conditions improve, FedEx appears positioned for an upswing. The analyst has a $291 price target on the stock, seeing a path for potential gains of over 20%.

Our view is that FedEx will leverage its vast logistics infrastructure and service quality to gain share in the delivery market over time. Its proactive cost-cutting measures demonstrate management’s operational excellence. For investors with a long-term horizon, FedEx stock offers an attractive risk/return scenario.

Summary: High-Upside Stocks According to the Top Analysts

While the markets face uncertainty in the near-term, top Wall Street analysts have identified stocks they see offering strong return potential:

Adobe — Dominant creative software leader strengthened by AI integration
Salesforce — Cloud CRMjuggernaut empowered by enormous data advantage
Pinterest — Visual search expertise creates shopping opportunity
Microsoft — Tech giant rapidly deploying AI across software portfolio
FedEx — Logistics leader cutting costs and gaining share amid demand weakness

The analyst commentary provides helpful insights into the bullish thesis on each stock. While risks always exist, these companies appear to have solid foundations and strategies for continued growth.

For investors comfortable with the market’s ongoing volatility, these stocks offer attractive upside potential over a long-term investment horizon. The views of analysts with proven track records give confidence these companies are poised to deliver compelling returns for shareholders in the years ahead.