Analysts give these upgraded stocks for June the green light.
The S&P 500 continued its disappointing start to 2022 with another down month in May. Heading into June, investors are concerned about the ongoing impact of Russia’s invasion of Ukraine, aggressive Federal Reserve interest rate hikes, persistently elevated U.S. inflation and a broad-based investor rotation out of growth stocks. Despite the year-to-date market volatility, analysts remain mostly optimistic about the 2022 U.S. economic outlook. In fact, analysts say the early-year stock market volatility and the chaotic macroeconomic environment have created a handful of fresh investment opportunities. Here are nine recently upgraded stocks to buy, according to independent research firm CFRA.
Copart Inc. (ticker: CPRT)
Copart operates an online vehicle auctioning and remarketing platform. Analyst Garrett Nelson has upgraded Copart twice since February and says he is bullish on the stock’s risk-reward balance given the company’s strong execution and the stock’s valuation. Nelson says the stock trades at a valuation premium to other auto retailers, but that premium is warranted given its high-margin business model, strong balance sheet and limited competition in the salvage auction business. Nelson projects 29% revenue growth for Copart in fiscal 2022 and 5% growth in 2023. CFRA has a “strong buy” rating and $145 price target for CPRT stock, which closed at $114.53 on May 31.
Alexandria Real Estate Equities Inc. (ARE)
Alexandria Real Estate Equities is an office real estate investment trust, or REIT, that specializes in properties containing life sciences laboratory space. Analyst Kenneth Leon upgraded the stock and says life sciences laboratory real estate is more recession-resistant than other property types. In addition, he says Alexandria’s startup tenants are generally well-funded by venture capital investors and large global pharmaceutical companies. Leon projects between 12% and 14% revenue growth for Alexandria in both 2022 and 2023, and the stock pays a 2.7% dividend yield. CFRA has a “strong buy” rating and $210 price target for ARE stock, which closed at $165.95 on May 31.
Take-Two Interactive Software Inc. (TTWO)
Take-Two Interactive Software is a leading video game developer and owner of franchises such as Grand Theft Auto, Red Dead and NBA 2K. Analyst John Freeman upgraded Take-Two and says the stock has an attractive valuation, a strong pipeline of games and exposure to secular growth trends in gaming. Freeman says Take-Two will benefit from expanding player engagement, rising global disposable income levels, increasing video game immersion and growing virtual reality technology. Unfortunately, Freeman says, Take-Two faces elevated near-term headwinds associated with its Zynga Inc. acquisition. CFRA has a “buy” rating and $171 price target for TTWO stock, which closed at $124.53 on May 31.
Electronic Arts Inc. (EA)
Electronic Arts is another top video game publisher and owner of key franchises Madden, Apex Legends and Battlefield. Freeman also upgraded EA and says the company’s fiscal fourth-quarter earnings report was particularly impressive given what appears to be a recent lull in video game spending. He says a combination of inflation and tight console supplies are contributing to the lull. Freeman says EA has demonstrated particular strength in mobile gaming as of late, an area in which the company has historically been weak. CFRA has a “strong buy” rating and $184 price target for EA stock, which closed at $138.65 on May 31.
Paycom Software Inc. (PAYC)
Paycom provides software-as-a-service human capital management solutions. Analyst David Holt upgraded Paycom and says the stock’s recent pullback has made him increasingly bullish on its valuation upside. Holt says Paycom’s internally developed database and upmarket expansion potential give the company structural advantages and put it in an “enviable position” following the pandemic. He says Paycom should grow its payroll processing market share in the long term and rising interest rates should boost client fund interest revenues and gross profits. Holt projects 26% revenue growth in 2022. CFRA has a “strong buy” rating and $371 price target for PAYC stock, which closed at $284.34 on May 31.
Tapestry Inc. (TPR)
Tapestry designs and markets luxury accessories, including handbags, fragrances and footwear. Tapestry owns the Coach, Kate Spade and Stuart Weitzman brands. Analyst Zachary Warring upgraded Tapestry and says the company is finally returning to steady growth as it executes its strategy across multiple brands, expands its online sales business, reinvests its cash flow in digital marketing and leverages its pricing power. In addition, Tapestry has an aggressive capital return program. Warring anticipates a sharp rebound in international travel in the next 12 months, providing a favorable environment for Tapestry. CFRA has a “strong buy” rating and $40 price target for TPR stock, which closed at $34.50 on May 31.
Dillard’s Inc. (DDS)
Shares of Dillard’s and other U.S. department store operators have been hammered in recent weeks, but Warring upgraded Dillard’s because of its exposure to the U.S. Southeastern region, its operational efficiency, and its aggressive share repurchase program. Warring says he is bullish on Dillard’s despite consumers shifting away from large department stores and toward e-commerce. However, he says fiscal 2023 will likely be a peak year for Dillard’s earnings and revenue in the current cycle, and investors should be prepared for some lackluster growth numbers in the near term. CFRA has a “buy” rating and $400 price target for DDS stock, which closed at $301.48 on May 31.
RingCentral Inc. (RNG)
RingCentral provides software-as-a-service solutions for business communication. Analyst Keith Snyder upgraded the stock based on the company’s strong growth outlook and the stock’s significant 2022 pullback. He says the post-pandemic hybrid workplace environment is good news for RingCentral, increasing sales momentum and reducing churn. RingCentral is expanding its product portfolio, and Snyder says its partnerships with companies like AT&T Inc. (T), Vodafone Group PLC (VOD) and Alcatel-Lucent will create value for investors and drive future growth. Snyder is projecting nearly 26% annual revenue growth in 2022 and over 24% in 2023. CFRA has a “buy” rating and $125 price target for RNG stock, which closed at $63.14 on May 31.
Arlo Technologies Inc. (ARLO)
Arlo Technologies produces smart connected devices, including security cameras, baby monitors and outdoor lights. Analyst Keven Young is bullish on Arlo’s shift toward service revenue, and he says the stock trades at an attractive valuation. Young says he is encouraged by Arlo reaching $101 million in annual recurring revenue in the first quarter while growing average revenue per unit to $9.35 per month. In addition, Arlo’s current customer acquisition cost is $0. Young projects 15.5% revenue growth in 2022 and 29% growth in 2023. CFRA has a “buy” rating and $13 price target for ARLO stock, which closed at $7.08 on May 31.
Top 9 upgraded stocks to buy in June:
— Copart Inc. (CPRT)
— Alexandria Real Estate Equities Inc. (ARE)
— Take-Two Interactive Software Inc. (TTWO)
— Electronic Arts Inc. (EA)
— Paycom Software Inc. (PAYC)
— Tapestry Inc. (TPR)
— Dillard’s Inc. (DDS)
— RingCentral Inc. (RNG)
— Arlo Technologies Inc. (ARLO)
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Update 06/01/22: This story was published at an earlier date and has been updated with new information.