Wall Street's top analysts say stocks like Qualcomm and Spotify have compelling upside potential

A majority of companies has now reported their earnings, revealing the winners and losers from the ongoing coronavirus pandemic.

Although many companies failed to meet analyst expectations, there are some notable exceptions. And with these fresh insights, analysts are reviewing their short-term and long-term take on the stocks they cover.

In this unprecedented time, it makes sense to follow the stock picks of analysts with a proven track record of success. We used TipRanks analyst forecasting service to pinpoint Wall Street's best-performing analysts. These are the analysts with the highest success rate and average return measured on a one-year basis — factoring in the number of ratings made by each analyst.

Here are the best-performing analysts' six favorite stocks right now:

Qualcomm

Qualcomm has just posted strong third-quarter fiscal 2020 results with revenue of $4.9 billion and earnings per share of $0.86, on a non-GAAP basis, easily beating consensus estimates. Crucially, the company also revealed a new licensing agreement with Huawei, with a $1.8 billion one-time payment in the September quarter settling prior Huawei missed payments.

As a result, Canaccord Genuity's Michael Walkley is now predicting 47% upside potential for Qualcomm after taking his stock price forecast from $115 to $137 on July 30. "We believe the share price is compelling," the analyst told investors as he reiterated his buy rating on the stock.

"With smartphone volumes starting to recover and expected to improve in 2H/C20, Qualcomm is well-positioned to benefit from the long-term 5G investment cycle and anticipate recovering earnings in F2021" says Walkley. That's as 5G smartphones ramp, Apple re-enters the model for QCT shipments, Huawei returns to the model for licensing payments, and global demand for smartphones improves.

What's more, Walkley notes that Qualcomm has a strong leadership position for 5G that should not only result in strong share gains with leading smartphone manufacturers but also provide an opportunity of up to 1.5x the dollar content of a similar 4G customer smartphone.

Thanks to his strong stock-picking skills and 20% average return per rating, Walkley is ranked No. 64 out of all the analysts tracked by TipRanks.

United Therapeutics

Biotech United Therapeutics has just received the thumbs up from Oppenheimer's Hartaj Singh. The five-star analyst reiterated his buy rating on United Therapeutics on July 29 while taking his stock price forecast from $155 to $165. Despite shares already climbing 28% year to date, his price target suggests 46% further upside potential for the next 12 to 18 months.

On July 29, United Therapeutics reported second quarter sales and earnings that beat consensus revenue expectations by about 10% and adjusted earnings per share by  about 40%. "While most BioPharma companies are reporting declines in Q/Q sales, UTHR reported an increase, highlighting management's execution focus" commented Singh.

Currently, Singh is keeping a close eye on vasodilator Treprostinil for pulmonary arterial hypertension, sold as Remodulin for infusion, Orenitram for oral, and Tyvaso for inhalation. With product sales trajectory accelerating and multiple launches in 2021 potentially turbo-charging sales, the analyst believes that his P&L [profit and loss] modeling could be conservative.

"Our conviction is growing that UTHR is transitioning from a valuation story to a growth story," Singh writes. "With Orenitram already growing due to FREEDOM-EV label expansion and potential launches for Remodulin pumps and Tyvaso PH-ILD in 2021 potentially further boosting revenue growth, the stock is poised for a sustained re-rating." He concludes: "We advise investors to pay heed."

O'Reilly Automotive

Top 100 Wells Fargo analyst Zachary Fadem is betting on auto parts retailer O'Reilly Automotive right now. After an epic second quarter earnings beat, Fadem bumped up his price target from $475 to $525.

"Despite a slow start to Q2 (1H April -13%), ORLY delivered historic Q2 results with +16.2% comps, all-time high EBIT margins (23.8%) and a +62% EPS beat (vs. Consensus)" he commented on July 29, noting that the results exceeded even the most bullish buyside expectations

In particular, as government stimulus benefits took hold in the second half of April, O'Reilly cited 'immediate and dramatic' acceleration that continued through the second quarter on the back of local re-openings, a miles-driven recovery and likely shift away from mass transit and/or ride share, says Fadem.

Net-net, O'Reilly's defensive characteristics, non-discretionary assortment and clear evidence of quality execution in a challenging environment keep Fadem on-side. "ORLY shares are +4% YTD (vs. +1% SPX), but in our view, have lagged other recent winners (i.e. HD/LOW up 20%+) and deserve to play catch up" the analyst told investors, adding that he sees ORLY as a stable profit compounder.

With a 78% success rate and 26% average return per rating, Fadem comes in at #52 out of over 6,800 analysts tracked by TipRanks.

Hologic

Hologic is a medical tech company primarily focused on women's health; but currently all the focus is on Hologic's Panther Fusion SARS-CoV-2 test, which identifies the coronavirus virus and has received Emergency Use Authorization in the US.

"Play it cool, don't raise your numbers too high," is what we're telling ourselves, but it's hard to contain our excitement as revenue and EPS surpassed Street estimates by ~33% and ~93%, respectively," top BTIG analyst Ryan Zimmerman exclaimed after Hologic reported stellar earning results.

On July 29 he reiterated his Hologic buy rating while ramping up his stock price forecast from $63 to a bullish $84, a 31% upside potential. Zimmerman notes that management reinstituted  fourth-quarter guidance, which implies about 92% year-over-year growth in diagnostics following about 80% year-over-year growth in the third quarter, but he believes these estimates seem too low based on his coronavirus analysis.

Looking ahead, Zimmerman sees meaningful upside as testing continues to ramp into the fall and Panther placements head towards 500 for fiscal year 2020 up more than two times from fiscal year 2019 with coronavirus sales potentially exceeding $430 million in the fourth quarter from a production standpoint —1.5 million tests per week week at $22 per test.

"While we're 'playing it cool' by conservatively modeling coronavirus sales for FY21, could HOLX do greater than $400M in coronavirus sales per quarter in FY21?" the analyst asks. For now, he believes "EPS could move meaningfully into a mid-$4.00 per share range for FY21 as HOLX sees both a recovery in its base business combined with the benefit from COVID."

Spotify

RBC Capital's Mark Mahaney reiterated his bullish call on Spotify after the music-streaming giant reported its second-quarter earning results. Encouragingly, net premium subscriber additions of 8 million was ahead of Street at 7 million and at the high end of guidance.

Alongside the buy rating, Mahaney also boosted his stock price forecast from $320 to $330. From current levels, that indicates significant upside potential of 26%, despite shares already surging 75% year-to-date.

The "long thesis" on Spotify is very much intact, says Mahaney. "Global Music/Audio is a Big TAM [total addressable market]. It is going Digital. Spotify is the Clear Global Streaming Leader and has Sustainable Competitive Advantages" he stated on July 29. Plus RBC Capital's recent Annual Music Survey was notably long-term bullish on Audio Streaming and on Spotify.

Near term, the RBC analyst sees European Union market launches (especially Russia), and new Podcast content such as The Joe Rogan Experience, as potentially generating accelerating user growth during the rest of the year. "Then with FX headwinds abating, Ad Revenue recovering and Premium ARPU [average revenue per user] possibly stabilizing, 2021 could see Revenue Growth Acceleration – i.e. we could see more SPOT re-rating" Mahaney concludes.

The analyst boasts a five-star rating on TipRanks with a 19% average return per rating.

PayPal

PayPal made a strong statement with second quarter results that easily topped expectations for revenues, margins, and overall earnings. Guidance was also upgraded as the firm anticipates a continuation of the robust trends seen in the second quarter.

A 'record quarter in difficult times' cheered top Rosenblatt analyst Kenneth Hill on July 29. Following the report, the five-star analyst reiterated his Paypal buy rating while increasing the price target to $204 from $196. Shares in PayPal have already surged 70% year-to-date, but his new price target suggests further upside lies ahead.

"Strategically … [we were] excited to hear about the company making an incremental $300mn of investment including areas like Honey, Venmo, improving the net new active experience, as well as perhaps a sharper focus on in-store and digital wallet" the analyst commented.

According to Hill, Paypal has taken steps to advance a focus on in-store for years now but the forced adoption of new technology and functionality as a result of coronavirus has significantly accelerated efforts: "We liked what we heard, and see areas like QR codes [a kind of matrix barcode] and an enhanced digital wallet as huge opportunities for the business."

Indeed PayPal will look to aggressively roll out integrated point-of-sale QR codes in Europe and the U.S. this quarter, ramping over the year to over 100 large merchants and 8,200 CVS retailers across the U.S.