2022 has been a tough year for equity investors so far. The headwinds stemming from record-high inflation, rising interest rates, and supply shortages have increased volatility, making investing a challenge.
In these uncertain times, retail investors need all the help they can get to make sense of the stock market. This is where TipRanks’ Smart Score comes in handy. The data-driven, proprietary, quantitative stock scoring system makes stock analysis easy and quick, thus helping investors form investment strategies for potential gains in the future.
TipRanks’ Smart Score system uses eight major parameters to allocate a score to the stocks between 1 to 10, with 10 being the best.
We’ve used TipRanks’ data-driven Smart Score system and zeroed in on two stocks that have recently received “Perfect 10” Smart Score ratings, implying that they have a higher chance of outperforming the broader market averages.
Lululemon Athletica (NASDAQ:LULU)
Regardless of the ongoing macro and geopolitical concerns, Lululemon continues to deliver stellar financial and operating performances. It ended FY21 on a solid note and achieved a new milestone of $6 billion in annual revenue. Notably, revenue increased from $3.3 billion in FY18 to $6.25 billion in FY21.
What’s more encouraging is that this performance apparel and footwear company is on track to achieve its 2023 revenue growth targets well ahead of schedule.
Thanks to the ongoing momentum in its business, Lululemon announced a new five-year growth plan wherein its plans to double its revenue by 2026 (from 6.25 billion in FY21 to $12.5 billion in FY26). This includes doubling men’s and digital revenues and quadrupling international revenues. Product innovation, market expansion, and focus on enhancing the guest experience will likely accelerate its growth.
Guggenheim analyst Robert Drbul is impressed with LULU’s performance despite the headwinds. The analyst highlighted the “continued broad strength across LULU’s product portfolio and expect the brand to deliver strong results throughout FY22, as active/casual and health/wellness trends remain firmly intact.”
Drbul added, “We continue to view LULU as one of the strongest brands in retail, with favorable secular tailwinds and a quickly growing, high-margin digital business to justify the shares’ premium valuation, in our view.”
Including Drbul, LULU stock has received 14 Buy recommendations, with five analysts rating it a Hold. The average analyst price target of $425.32 indicates 20.1% upside potential over the next 12 months.
LULU stock has positive signals from TipRanks’ investors, hedge funds, and bloggers. Overall, it has a maximum Smart Score of 10 out of 10.
Amazon (NASDAQ:AMZN)
Amazon stock is trading in the red this year. The deceleration in growth, cost inflation, and increase in labor rates weighed on its stock. Nevertheless, Amazon is well-positioned to benefit from the ongoing digital shift.
Further, the e-commerce giant’s CFO, Brian Olsavsky, is optimistic about a solid innovation pipeline and several growth businesses. Olsavsky further added that the fundamentals of the retail business remain strong.
Another key highlight is the acceleration in its high-margin AWS business. In Q4, AWS revenue grew 40% year-over-year, marking the fourth successive quarter of revenue growth rate acceleration. Further, Amazon announced an increase to its Prime membership fee, which will support its subscription revenues and margins.
In response to Amazon’s Prime membership fee hike, Wedbush analyst Michael Pachter stated, “Amazon’s Prime annual membership fee will increase from $119 to $139 for new and renewed U.S. members, resulting in an additional $20 of annualized revenue per member in Q2.”
The analyst added, “Amazon’s business fundamentals remain unchanged and we expect the supply chain crisis to continue easing as we approach 2023. Lastly, strong momentum across the company’s cloud, third-party, advertising businesses should drive a steady margin expansion.”
Including Pachter, AMZN stock has received 35 Buy, one Hold, and one Sell recommendations for a Strong Buy consensus rating. Meanwhile, the average Amazon price target of $4,100.26 implies 48.4% upside potential to current levels.
Besides analysts, AMZN has positive signals from hedge funds and TipRanks investors, who have increased their exposure to the stock. Overall, AMZN has a maximum Smart Score rating of 10 out of 10.
Bottom Line
Both Lululemon and Amazon have multiple catalysts that position them well to deliver strong growth. Further, TipRanks’ maximum smart score indicates that both these companies have a higher probability of outperforming the broader market averages in the long run.
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