The Q3 reporting season is fast approaching, so it's time to start picking potential winners and losers. Today I’m looking at the five hottest upgrades coming out of the 2nd quarter earnings reporting cycle and what to expect when they report.
1. Palo Alto Networks
Palo Alto Networks (NASDAQ:PANW) offers a two-pronged approach to IT in that it provides cyber security solutions of all forms, including cloud-based. That gives it exposure to all verticals of the cyber-security universe, especially the cloud, which is growing the fastest.
The company produced strong results in the 2nd quarter and provided a healthy outlook that attracted 18 price target increases and one new coverage with a target on the consensus's weak side. As it is now, the company is pegged at a Moderate Buy, which has held firm over the past year and the price target is trending higher in the 12, 3, and 1-month comparisons.
The company will report Q3 earnings in early November and may outpace the consensus. The current consensus is for revenue to hold flat on a sequential basis, but the industry channel checks point to strength. Palo Alto Networks is the most upgraded stock coming out of the Q2 season.
2. Snowflake
Snowflake (NYSE:SNOW)offers a cloud-based data solution for clients, and it is the second most upgraded stock coming out of the Q2 reporting season. The company’s growth slowed to the high 80% range over the past two quarters, but it is still performing well above expectations, and the outlook is favorable as well.
The company snagged 17 analyst commentaries following Snowflake (NYSE:SNOW), including one price target reduction, which was in line with the consensus. The takeaway from the chatter is that demand for products is sustaining growth, and there is at least a 15% of upside available.
3. Foot Locker
Foot Locker (NYSE:FL) Q2 results weren’t stellar, and the guidance was trimmed, but it was far better than what the market was anticipating. The news sparked a minimum of 17 analysts' commentaries, including six upgrades and one downgrade.
The resulting sentient is a Moderate Buy that firmed slightly on a month-to-month basis and a price target that appears to be bottoming after a few months of downtrending. The real news, however, is the new CEO, hailed as a game-changer. Mary Dillon increased Ulta's revenue at a 16% CAGR and tripled the value of the stock.
4. Walmart
Walmart (NYSE:WMT) takes a surprising 4th place in the lineup of most upgraded stocks despite the prospect of increased discounting later in the year. The company reported strong demand and raised its guidance while also indicating a 25% increase in YOY inventories which could lead to bloat later in the year.
Regardless, the analysts issued 17 boosted price targets and no reductions, which have the price target firming again and more than 10% above the current action.
5. Dick’s Sporting Goods
Dick’s Sporting Goods (NYSE:DKS) reported solid results for Q2 and issued favorable guidance, which drew enough price target increases to land it in the 5th position. The company scored 11 commentaries in the wake of the results on top of a string that came out before the release, and they all include upgrades or price target increases.
Going into the q3 season, the consensus is a Moderate Buy with a price target of 10% above the current price action and trending higher.