2 Top Stocks to Buy Now, According to Wall Street

Stock market performance has become more mixed this year, with high-flying tech stocks leading the S&P 500 index soared to new highs, headwinds to consumer spending have weighed on the performance of leading consumer brands.

Two highly praised stocks that have underperformed are: Tesla (NASDAQ: TSLA) And Starbucks (NASDAQ: SBUX). But both stocks have recently surged as new growth catalysts have come into focus, and two Wall Street analysts believe now is the time to buy. Here’s why these top stocks are on the rise in the coming years.

1.Tesla

Tesla stock has delivered phenomenal returns for investors over the past decade, but the stock has been flat in recent years. Selling more electric cars has been a challenge, with higher interest rates making financing more expensive, and competition increasing. Despite the headwinds, Tesla stock has risen 16% over the past three months as investors have also turned their attention to other promising near-term opportunities.

Piper Sandler Analyst Alexander Potter believes the stock is a buy ahead of Tesla’s scheduled unveiling of its robotaxi on October 10. A robotaxi service should prove highly profitable for Tesla over time, but it also highlights opportunities in the company’s battery manufacturing business, which is intended to reduce production costs and improve margins.

Tesla’s battery production is ramping up rapidly. It produced 50% more 4680 cells in the second quarter than it did in the first quarter. This will support the rapid growth Tesla is experiencing in its energy storage business while potentially putting millions of electric cars on the road, especially robotaxis.

Ark Invest believes Tesla’s operating profit per kilowatt-hour deployed could be $466 for robotaxis, compared to just $60 for regular electric cars. This fits with the company’s forecast that Tesla will grow its profitability and take the stock to $2,600 by 2029.

CEO Elon Musk believes the optimistic prediction is possible. The world is shifting to electric and autonomous transportation. Tesla’s rapidly growing battery production highlights a manufacturing advantage that will become quite valuable. Transportation is a $10 trillion market, and Tesla is the disruptor.

2. Starbucks

Starbucks is the world’s best restaurant brand, according to Brand Finance, but like Tesla, its stock is being weighed down by sluggish consumer spending. Starbucks’ comp sales have fallen over the past two quarters, but its stock has soared 30% since the company announced it is hiring Brian Niccol from Chipotle Mexican Grill as CEO.

Niccol has led Chipotle to incredible growth over the past five years. It was already a high-performing business, but Niccol was able to squeeze higher margins out of its restaurants, helping the stock rise 232% in the past five years.

Evercore ISI analyst David Palmer sees a similar opportunity at Starbucks. Palmer recently upgraded the stock to an outperform (buy) rating. Niccol’s appointment increases the likelihood of a successful turnaround for Starbucks, Palmer said.

One factor that has benefited Chipotle is its digital ordering capabilities, which make up 35% of Chipotle’s business. Starbucks has also been great at implementing mobile ordering, but it should see more improvements under new management that can reduce wait times and improve store efficiency. Niccol’s previous track record leading similar initiatives at Chipotle should put Starbucks on a profitable growth path.

Palmer expects Starbucks’ annual earnings growth to be 15% or higher over the next three years. Assuming the stock continues to trade at a market average price-earnings ratio of 27, investors should see attractive returns on their investment.

Should You Invest $1,000 in Tesla Now?

Before buying Tesla stock, here’s what to consider:

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John Ballard has positions in Tesla. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Starbucks, and Tesla. The Motley Fool recommends the following options: short September 2024 $52 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

2 Top Stocks to Buy Now, According to Wall Street was originally published by The Motley Fool