The bear market is kicking back into gear. A few consecutive down days have investors questioning where they stand with their portfolios if markets leg lower into the fall. Although July proved to be resilient, and many saw a bounce in equities, markets are still a ways off their highs. There is a long way to go for a recovery, economically and technically. One major Wall Street brokerage house has a few picks to hold investors over for the time being, some to buy into and some to avoid.
Citigroup issued calls across industries where it sees significant potential upside. Considering the inflationary climate, finding upside is key to keeping pace with the recovery from the market lows this summer. However, the brokerage house also includes one company to steer clear of, because there appears to be much more downside.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Palo Alto Networks
Citigroup reiterated a Buy rating on Palo Alto Networks Inc. (NASDAQ: PANW). It also raised the $605 price target to $640, implying upside of 25% from the most recent closing price of $513.51.
Fatima Boolani made the call after the release of the firm’s fiscal fourth-quarter results. Boolani noted that Palo Alto Networks reported “across-the-board robust growth” and the institutionalization of 8-figure deals accentuate both its “flawless sales execution in one of the most fundamentally attractive and defensive areas of enterprise software, and its ‘cyber platform consolidation’ strategy taking tangible hold.”
Palo Alto Networks stock was last seen trading near $558, in a 52-week range of $419.40 to $640.90. Shares are actually down 9% year to date, excluding Tuesday’s move.
Zoom Video Communications
A Sell rating on Zoom Video Communications Inc. (NASDAQ: ZM) was reiterated, and Citigroup cut the $91 price target to $76. That implies downside of 24% from the most recent closing price of $99.50.
Tyler Radke released the research note after the firm reported its fiscal first-quarter numbers on Monday. According to the note, this was Zoom Video’s first revenue miss as a public company, as headwinds from currency and the online business offset steadier growth in the enterprise segment. Although operating income and earnings beat expectations, free cash flow missed, with annual free cash flow guidance 20% below Wall Street’s consensus, “making shares look much less cheap.” Radke concluded that he believes Zoom’s outlook, “while revised lower, may not be conservative enough.”
Shares of Zoom Video recently traded near $86 in a 52-week range of $79.03 to $357.93. The stock is down about 47% year to date, excluding Tuesday’s move.
ZIM Integrated Shipping
As Citigroup downgraded ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) to Neutral from Buy, it also slashed the $120 price target to $51.50. The implied upside from the most recent closing price of $49.12 is now 5%.
Sathish Sivakumar was the lead analyst on the call, and he sees freight rates peaking into the third quarter, considering the annualization of contract rates. Sivakumar continues that demand indicators point to a “deeper slowdown,” which will pressure supply/demand dynamics into 2023.
Shares of ZIM recently traded near $51, in a 52-week range of $40.67 to $91.23. The stock is down about 13% year to date.
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