Stocks to buy

While the biggest analyst calls garner the most attention, “buy,” “sell” and “hold” ratings from analysts are not always a good source for investors.

The reason is simple. The biggest analyst calls are often late in warning investors to sell a stock. For example, after a company reported a weak quarter, analysts rush in, after the fact, to downgrade the stock.

Readers need to question the motivation behind analyst buy calls. The analyst’s brokerage may have many clients who hold the stock. The bullish report would benefit them.

Despite the risks, analysts are influential. Their ratings can move the stock. In the last week, Tipranks tracked the biggest analyst calls that might interest investors.

AMZN Amazon.com $143.18
DKNG DraftKings $20.80
META Meta Platforms $180.89
RIVN Rivian Automotive $37.28
RBLX Roblox $48.96
TSLA Tesla $927.96
DIS Walt Disney $124.26

Amazon.com (AMZN)

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Amazon.com (NASDAQ:AMZN) attracted a reiterated “buy” rating from analysts in the last two weeks. Although Telsey Advisory’s Joe Feldman set a $150 target, that wasn’t one of the biggest analyst calls this week. In fact, the average price target is $176.00.

Recently, Amazon agreed it would acquire iRobot (NASDAQ:IRBT) for $1.7 billion. iRobot makes innovative cleaning products for the home. Its automated vacuum will complement Amazon’s suite of home solutions. For example, Amazon has Fire TV, Amazon Echo, Alexa and Just Walk Out Technology.

Before it announced the deal, iRobot reported revenue of $255.4 million. This is down from the $365.6 million posted last year. The firm lost 35 cents a share on a non-GAAP basis.

Investors should expect Amazon’s smart home to integrate well with iRobot’s Roomba.

Amazon is building its in-house products. As a result, it does not need to rely on third-party sellers to make a profit on its e-commerce site. Instead, those sellers will attract customers. They may browse for Amazon’s television, Kindle, or smart home solution.

DraftKings (DKNG)

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DraftKings (NASDAQ:DKNG) is worth at least 21% higher, according to analysts. Optimism improved after the online sports gambling site posted revenue rising by 56.4% to $466 million.

Analysts and investors are ignoring the weak fundamentals. Optimistic investors responded positively when DraftKings raised its fiscal year 2022 revenue guidance. It expects revenue of between $2.08 billion to $2.18 billion. This is only slightly higher than the previous range of $2.055 billion to $2.175 billion.

For the year, the company will lose between $765 million and $835 million. Still, the loss is smaller than the previous guidance of an $810 million to $910 million.

Monthly unique payers grew by 30% from last year to 1.5 million. DraftKings bucked the seasonally weak period. It benefited from a favorable sports schedule.

In addition, its marketing and promotion are attracting more users. Chief Executive Officer Jason Robins said that years of optimizing its marketing are paying off. Its business will fare better as it reaches at least 35% of the population.

Meta Platforms (META)

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Meta Platforms (NASDAQ:META) earned many “buy” ratings over two weeks ago. More recently, Needham reiterated a “sell” on META stock.

Meta is selling around $10 billion worth of debt in a jumbo deal. This corporate bond sale is Meta’s first.

In the last year, the stock fell sharply. Investors dumped the stock when Apple (NASDAQ:AAPL) introduced IDFA. This protected consumer privacy but destroyed the ability for advertisers to get customer behavior and interests on Meta Platforms.

Meta did not say what it would do with the $10 billion. It could use the funds to support heavy capital expenditures. For example, the metaverse will cost billions annually for the next 10 years.

The company’s cash flow growth is slowing as user growth declines and advertising revenue dries up. Meta needs to sustain a rising cash burn rate to support its metaverse developments.

It could buy back its inexpensive shares. Management may bet that the market is undervaluing its stock. Still, the company must post user growth to justify a higher share price.

Rivian Automotive (RIVN)

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Rivian Automotive’s (NASDAQ:RIVN) Q2 results impressed Wedbush Securities. The firm believes that Rivian will capture the current and future electric vehicle demand.

Analyst Dan Ives cites a unique global total addressable market, thanks to Rivian’s core engineering and design.

Rivian has a nicely designed product. The engineering of its EV is not sufficiently unique to EV trucks offered by competitors.

In the last quarter, Rivian lost $1.89 a share on a GAAP basis. It posted revenue of $364 million. Citing headwinds in the supply chain environment, the company reaffirmed its production guidance of 25,000 units in output. It will cut its capital expenditure guidance to $2 billion while its annual EBITDA guidance is negative $5.45 billion.

Chief Financial Officer Claire McDonough sees 2024 as a pivotal year. Gross margins should pivot to the positive. It will achieve economies of scale by ramping up production to 150,000 units. At that output rate, its fixed overhead will fall per unit. Costs will fall as Rivian leverages its large-scale production facility.

Roblox (RBLX)

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Roblox (NYSE:RBLX) fell after posting a fall in bookings. Analysts questioned its scalability.

Morgan Stanley’s Brian Nowak set a $32 price target. He said that the firm’s scale and profitability will take longer to achieve. Margins are still following.

Roblox posted revenue growing by 30% year over year to $591.2 million. Bookings fell by 4%, despite average daily active users rising by 21% year over year to 52.2 million. Hours engaged also increased by 16% year over year to 11.3 billion.

CEO Dave Baszucki said that the company has a responsive developer community. They are producing sophisticated, high-quality content.

The firm appreciates the developers are responding to the developer economy. This will lead to a rich pipeline of experiences. For now, the younger players who are 13 and younger are Roblox’s core business. However, the product pipeline might target older players.

Roblox needs to widen its revenue potential with the older game player. It cannot depend on parents to fund their children’s gaming credits.

Tesla (TSLA)

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Tesla (NASDAQ:TSLA) rebounded sharply in recent weeks. This attracted a buy rating from analysts.

Recently, two members of Congress asked the National Highway Traffic Safety Administration for a briefing regarding the ongoing probes over Tesla crashes.

The NHTSA is investigating Tesla’s AutoPilot and advanced driver assistance systems. The EV giant could damage its brand if the Administration found that Autopilot caused too many crashes.

CEO Elon Musk said that Tesla deployed its FSD beta to over 100,000 owners. It has now driven over 35 million miles with FSD beta. CEO Musk said that Tesla is on track to release the FSD beta to all North American customers before the end of the year.

The company is waiting for Europe to approve the technology.

Tesla is managing cost inflation well. It procured around 1,600 unique pieces of silicon from 43 semiconductor companies. Fortunately, it has strong margins for those inputs. Furthermore, the company increased its cell production. It also has long-term contracts with all of its partners for key battery metals.

Walt Disney (DIS)

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Walt Disney (NYSE:DIS) bottomed in the low $90 during the market’s summer downturn.

DIS stock perked higher after analysts cited the strong theme park performance. KeyBanc analysts raised their target to $154. Analyst Brando Nispel liked Disney’s strong TV and parks business. The analyst noted that churn remained low despite the company increasing streaming prices by 38% year over year.

Jessica Reif Ehrlich, a Bank of America analyst, sees a path to profitability for Disney’s streaming service. The unit will benefit from price hikes and a strong content plan. More importantly, the analyst does not think that Disney is relying on Marvel and Star Wars, their core brands.

Disney’s theme park is rebounding. Demand is not abating at all, according to CFO Christine McCarthy. The park has days when people cannot even get reservations.

The company’s parks have room to grow. The international business is recovering. It is still below past profit margins. Management is cautiously optimistic that international countries will not impose a lockdown in response to a future outbreak of Covid.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.

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