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The Spotify logo hangs on the facade of the New York Stock Exchange with U.S. and a Swiss flag as the company lists its stock with a direct listing in New York, April 3, 2018.
Lucas Jackson | Reuters

Stocks were volatile in the past week as investors digested the Federal Reserve’s plans to tighten monetary policy.

Investing in the near term looks precarious as investors weigh recession risk, supply chain disruptions and the conflict in Eastern Europe. Further, the Fed’s plans, detailed in its March meeting minutes last week, shed more light on how the central bank will shrink its balance sheet.

Wall Street’s top pros have set aside short-term stock gyrations. Instead, they’ve chosen the companies they believe have the most long-term potential, according to TipRanks, which tracks the best-performing analysts.

Here are five names to look at this week.

Disney  

Disney (DIS) recently experienced a massive rebound in revenues brought in by its theme parks as the pandemic and its restrictions waned.  

Ivan Feinseth of Tigress Financial Partners is upbeat on Disney’s outlook, noting that the company managed to generate 100% year-over-year gains in revenue from its theme parks. (See Walt Disney Company Stock Charts on TipRanks) 

Feinseth rated the stock a buy, and he provided a price target of $229 per share.  

In addition to the strong spending seen at its physical theme park locations, the entertainment giant has been churning out popular content for its movie franchises and its streaming platform, Disney+.  

The top-ranked analyst went to write that “Content is King, and DIS is the King of Content,” arguing that its “strong brand equity, innovative entertainment development capabilities, and ongoing investments in new digital media development initiatives” will continue to drive gains for the entertainment behemoth.  

While Disney had previously halted dividend payments and share repurchases in order to shield itself from uncertain pandemic-induced economic fluctuations, Feinseth expects these shareholder value activities to resume in the near future.  

TipRanks has almost 8,000 analysts in its database, and Feinseth is ranked as No. 67. He has been correct when picking stocks 68% of the time, and he has returned an average of 30.8% on each of his ratings.  

Apple 

Apple (AAPL) is constantly innovating on different fronts. One of which is its growing payments business, in which it operates its Apple Pay platform, and some have speculated that the firm may intend to become a chartered bank. Amit Daryanani of Evercore ISI doesn’t expect this, noting that Apple’s current path is far more beneficial.  

Daryanani argued that AAPL will most likely continue scaling its fintech segment, concentrating its efforts on building a closed-loop payments system. The technology company would most likely prefer to increase its consumer penetration and the stickiness of its ecosystem over the intense regulatory oversight which comes with obtaining a bank charter. (See Apple Hedge Fund Activity on TipRanks) 

The analyst rated the stock a buy, and he calculated a price target of $210.  

Apple recently acquired British fintech firm Credit Kudos, a move which Daryanani believes enhances its open-banking infrastructure capacities. Moreover, Apple and Goldman Sachs (GS) are reportedly working together to bring “buy now, pay later” services to the tech giant’s users. The project, dubbed Apple Pay Later, is yet another piece of the financial puzzle which AAPL is creating.  

Daryanani went on to add that Apple is moving several other tools in house, including “payment processing, risk assessment for lending, fraud analysis, credit checks and additional customer-service functions such as the handling of disputes.”  

Out of nearly 8,000 analysts, Daryanani maintains a position of No. 161. His success rate stands at 68%, and he has averaged returns of 29.7% on each of his stock picks.  

Zscaler  

Cybersecurity is an industry with huge potential, and Zscaler (ZS) may be a choice that can continue to beat analysts’ estimates and raise its guidance.  

This is at least in accordance with the opinions of Alex Henderson of Needham, who expects the firm to “drive robust growth, improving margins, and ultimately facilitate a changing architecture for Enterprises to a Cloud Direct model.” The analyst went to say that while near-term consolidation in the stock’s valuation may be possible, the company itself has “exceptional long-term value.”  

Henderson rated the stock a buy and assigned a price target of $418.  

The analyst specified the company’s history of strong operating margins, and he anticipates ZS to maintain a 20% to 30% rate of that metric for a prolonged period. (See Zscaler Earnings Data on TipRanks) 

Henderson highlighted several nascent products driving growth, including Zscaler Cloud Protection and Zscaler Digital Experience, which are enhancing user experiences and complement its older Zscaler Internet Access and Zscaler Private Access offerings.  

Henderson called the company “one of the top growth names in our coverage” and said that investors should buy shares and “add on any weakness.”  

Out of almost 8,000 analysts in TipRanks’ database, Henderson maintains a rank of No. 43. When picking stocks, he has been correct 71% of the time, and he has an aggregated average return rate of 39.3% per rating.  

Spotify  

Grabbing shares when they’re down is easy, but finding the stock with the potential to rebound is where investors get tripped up. In the case of Spotify (SPOT), the stock has been weighed down by not only the fourth quarter’s tech and growth sell-offs, but also by investor worries over the streaming company’s actual business model.  

The firm has yet to prove its ability to generate dominating gross margins, although one analyst believes the answer lies within a key feature of Spotify’s services: its two-sided marketplace.

In his recent bullish report, Mark Mahaney of Evercore ISI asserted that Spotify is reaching an inflection point. (See Spotify Risk Analysis on TipRanks) 

Mahaney rated the stock a Buy, and offered a price target of $300 per share.  

The two-sided marketplace, which Spotify calls its “paid promotional tools it offers to artists and labels,” is essentially a content-boosting option that integrates into algorithmic playlists and pop ups on users’ accounts. These tools have shown success, and Mahaney believes they can add substantially to the music streaming service’s margins over the next two years.  

He believes that the tools could triple their current contribution, reaching 30% or more of SPOT’s gross margins by 2024, and representing about 15% to 20% of the total industry marketing spend. This would be a year ahead of Wall Street’s consensus on the matter, and it would result in a “material re-rating in SPOT shares,” undoubtedly boosting valuation, the analyst noted. 

Mahaney is ranked at No. 372, out of almost 8,000 professional analysts on TipRanks. He has found success when rating stocks 55% of the time, and he has returned an average of 25.3% on each.  

Netflix

Due in part to increasing competition in the industry, Netflix (NFLX) has recently seen investors fleeing its shares, causing a significant sell-off from its 2021 highs. The streaming platform still holds a considerable market share, although one analyst sees a high potential for further subscriber penetration.  

That hypothesis comes from Doug Anmuth of JPMorgan, who analyzed the company’s global subscriber penetration and found several large markets which can see growth moving forward. According to Anmuth’s calculations, Netflix currently holds about a third of all global broadband subscribers, and far less in regions like Asia-Pacific and Europe, the Middle East and Africa. (See Netflix Website Traffic on TipRanks) 

Anmuth rated the stock a buy, and he provided a price target of $605. This target would bring the stock closer to its 2021 valuation.  

The analyst said that “Within EMEA, we view pockets of Eastern and Southern Europe, as well as the Middle East & Africa as largely under penetrated, & Japan, India, & South Korea as Key growth opportunities in APAC.” Moreover, he said that APAC represents the fastest growing, yet largest untapped market, which Anmuth believes will be focused on localized content.  

When discussing his broader bullish stance on the firm, the analyst wrote that “We believe NFLX is a key beneficiary and driver of the ongoing disruption of linear TV, with the company’s content performing well globally and driving a virtuous circle of strong subscriber growth, more revenue, and growing profit.”  

Out of nearly 8,000 analysts, Anmuth stands at position No. 227. He has been correct on his stock picks 58% of the time, and he has returned an average of 28.6% on each of them. 

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