Most investors seeking shelter from the turbulent market conditions of 2022 have no refuge. Most corners of the market have had a rough time, fueled by a combination of soaring inflation, the aggressive interest rate hikes undertaken to tame it, and the global macro environment. The bridge was rocked by Russia’s invasion of Ukraine and China’s Covid-19 zero war. policy.
The current fear is that a 2023 recession is almost inevitable – mild or prolonged and painful.
So investors are in a precarious position and it can be difficult to know which stocks are suitable to invest in in such an environment. This is where some help from analysts at top investment firms like Goldman Sachs can come in handy.
The company’s stock analyst has pinpointed two names that they feel are ripe to pick right now. Even amid a weak economic backdrop, analysts see both delivering returns above 70% next year. Do other Street analysts agree? This we can learn with help from TipRanks database, a tool that tracks and measures the performance of Wall Street analysts. So let’s dive into the details and see why Goldman analysts think these stocks could soar from here.
Braze, Inc. (CLOCK)
The first Goldman pick we’re reviewing is Braze, an American cloud-based software specialist. This SaaS company’s customer engagement platform helps customers automate and analyze their marketing activities, with the goal of improving communication channels between consumers and brands. Its main functions include data entry, classification, personalization, orchestration, and enforcement.
The company has operations in the US, UK, Germany, Japan and Singapore and boasts over 1,700 clients, including some big names; Burger King, HBO Max, Skyscanner, PureGym, Grubhub, NASCAR and CleanChoice Energy, are all on its list of customers.
Software vendors have been hit by the slowing economy, but Braze still showed some stellar revenue growth in its recently released Q3 report. Revenue rose 45.6% year-over-year to $93.13 million, beating Street’s $2.53 million forecast. Over the past 12 months, the company has achieved a dollar-based net retention ratio of 126%.
On the bottom line, adj. EPS of -0.15 also comes ahead of analysts’ forecast of -0.22. While the company still regularly loses money, it has surpassed profit expectations in every quarter since going public late last year.
The entry into the public market comes at an unfortunate time. Stocks are by no means immune to market troubles in 2022, down 65% since the start of the year.
However, Goldman Sachs’ Gabriela Borges see a lot to like about the company. She writes, “Despite the macro disparity through 2023, we remain positive about Braze’s long-term opportunities for sustainability by underpinning spending on existing customers and Gaining new business is important to organizations looking to upgrade their marketing technology systems. In our view, Braze’s technology is fundamentally architected in a way that will enable the company to reap the benefits of physical equity in the years to come.”
Accordingly, Borges rates Braze stock as Buy, while her $48 price target offers the opportunity for a 77% gain in 12 months. (To see Borges’ achievements, click here)
The Street is clearly confident that this is a stock to own; it has received 13 analyst reviews in the last 3 months and all have been positive, making the consensus here to be Strong Buy. At $40.75, the median target suggests the stock is likely to gain ~50% over the next year. (View BRZE stock forecast on TipRanks)
Splunk Co (SPLK)
The next name endorsed by Goldman is Splunk, a big data analytics company. Businesses use Splunk’s advanced machine learning technology to mine massive amounts of data to provide insights. The information can then be used to support company decisions and ensure efficient operations. With a customer base of more than 20,000, Splunk is a recognized leader in IT security and operations, and is known as an innovator in its field.
With a focus on big data, cloud and cybersecurity, Splunk operates at the intersection of some strong secular trends and the company delivered excellent financial results in the third quarter of the fiscal year. 2023. Driven by strong license revenue that grew 54% year-over-year, revenue came in at $930 million, up 40% year-over-year, and came in at $83.47 million against dong estimates. favorable. Cloud revenue also grew 54% to $374 million year-over-year, although that marked a deceleration from +59% in Q2 and +66% in Q1.
Finally, adj. EPS moved from -0.37 in the same period a year ago to $0.83, easily beating the $0.25 level predicted by forecasters. The company also raised its revenue outlook for the full year from $3.35 billion to $3.4 billion to $3.455 billion to $3.485 billion. Consensus has $3.38 billion. Additionally, operating margins are predicted to be between 12% and 13%, up from 8% previously.
Among the bulls is a Goldman Sachs analyst Kash Ranganpeople like the look of what’s on offer.
“Despite the slowdown in cloud growth, we are encouraged by the support to overall revenue growth from a strong license renewal base. This provides a stepping stone to gross revenue growth in the current macro environment, with potential upside in a recovery scenario fueled by an increase in ASP as the trend shifts to the cloud. of normalized customers. We remain positive about Splunk’s underappreciated cloud story, as the company successfully navigates the transition under the direction of its new CEO. Furthermore, a company operating under the Rule 40+ (revenue growth + free cash flow margin) in 2023 could put the stock in higher valuation territory,” commented Rangan.
Ultimately, Rangan rates SPLK as a Buy, supported by a high target on the Street of $173. Investors can pocket a ~105% profit if Rangan’s thesis plays out as expected. (To see Rangan’s achievements, click here)
How does Rangan’s bullish bet affect the Street? It seems the Goldman Sachs analyst isn’t the only one excited about Splunk’s prospects. With 18 Buy vs 10 Hold (i.e. Neutral) ratings, the stock has a consensus rating of Buy Moderate. The median price target among these analysts is $109.83, implying a ~30% increase from current levels. (View Splunk stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. Content is used for informational purposes only. It is very important that you do your own analysis before making any investment.