Goldman Sachs sees gains of more than 70% in these 2 stocks – here’s why they could jump

There has been no hiding place for most investors seeking shelter from the stormy market conditions of 2022. Most corners of the market have been under a torrid spell, driven to the downside by a combination of rising inflation , aggressive interest rate hikes enacted to tame it, and a global macro environment rocked by the Russian invasion of Ukraine and the absence of Covid in China policies.

The fear now is that a recession in 2023 is all but inevitable, whether it be a mild one or a long and painful one.

So, investors are on shaky ground and it’s hard to know the right stocks to lean on in such an environment. This is where the help of analysts from major investment firms such as Goldman Sachs can come in handy.

The firm’s equity analyst singled out two names they believe are ripe for the picking right now. Even in a weak economic environment, analysts expect both to deliver returns above 70% in the coming year. Do other Street analysts agree? We can discover this with the help of the TipRanks database, a tool that tracks and measures the performance of Wall Street analysts. So, let’s dive into the details and see why Goldman analysts think these stocks can jump from here.

Braze, Inc. (BRZE)

The top Goldman pick we’re looking at is Braze, an American cloud-based software specialist. This SaaS company’s customer engagement platform helps its clients automate and analyze their marketing activities, with the aim of improving communication channels between consumers and brands. Its core capabilities include data ingestion, classification, personalization, orchestration, and execution.

The company operates in the US, UK, Germany, Japan and Singapore and boasts over 1,700 customers, including some big names; Burger King, HBO Max, Skyscanner, PureGym, Grubhub, NASCAR and CleanChoice Energy are all on his client list.

Software vendors were impacted by the economic slowdown, but Braze still showed excellent revenue growth in its recently released third-quarter report. Revenue increased 45.6% year over year to $93.13 million, topping Street’s forecast by $2.53 million. For the past 12 months, the company has achieved a net dollar retention of 126%.

After all, adj. EPS of -$0.15 also beat analyst projections of -$0.22. While the company is still a regular loss-making business, it has exceeded profit expectations in every quarter since it went public late last year.

The entry into public markets has come at an unfortunate time. The stock has been by no means immune to the market woes of 2022, down 65% year-to-date.

Still, Goldman Sachs’ Gabriela Borges sees a lot to like about the company. She writes, “Despite the macro cliff to 2023, we remain positive about Braze’s long-term opportunity to grow sustainably by consolidating spend at existing customers and gaining significant new business with organizations looking to upgrade their technology stacks. of marketing. In our view, Braze’s technology is fundamentally architected in a way that prepares the company to gain substantial share over the next few years.”

As a result, Borges rates Braze share a buy, while its $48 price target makes room for 12-month gains of 77%. (To look at Borges’ track record, click here)

The Street is evidently confident that this is a title to own; has garnered 13 analyst reviews in the last 3 months and all are positive, making the consensus opinion here a strong buy. At $40.75, the medium target suggests the stock is in line for gains of about 50% over the next year. (See BRZE stock forecast on TipRanks)

Splunk Inc. (SPLK extension)

The next name approved by Goldman is Splunk, a big data analytics company. Companies use Splunk’s advanced machine learning technology to mine vast amounts of data for insights. The information can then be used to support business decisions and ensure efficient operations. With a customer base of more than 20,000, Splunk is a recognized leader in IT operations and security and known as an innovator in its field.

With a focus on big data, cloud and cybersecurity, Splunk operates at the intersection of some strong secular trends and the company delivered strong financial results for the third quarter of fiscal 2023. Driven by strong license revenues growing by 54% year over year, revenue reached $930 million, a 40% increase over the same period last year, and coming in at $83.47 million above the consensus estimate. Cloud revenue also grew 54% to $374 million year-over-year, although this marked a deceleration from +59% in the second quarter and +66% in the first quarter.

After all, adj. EPS moved from -$0.37 in the year-ago period to $0.83, easily beating the $0.25 forecasts. The company also raised its full-year revenue outlook from $3.35 billion to $3.4 billion to $3.455 billion and $3.485 billion. The consensus had $3.38 billion. In addition, operating margin is expected to be in the range of 12% to 13%, up from 8% previously.

Among the bulls is Goldman Sachs analyst Kash Rangan, who likes the look of what’s on offer.

“Despite slowing cloud growth, we are encouraged by the support to overall revenue growth from the strong license renewal foundation. This provides a cushion to total revenue growth in the current macro environment, with potential upside in a recovery scenario driven by an increase in ASP as customer cloud conversion trends normalize. We remain positive on Splunk’s underrated cloud story as the company successfully transitions under the new CEO’s leadership. Also, the company operating on the 40+ rule (revenue growth + free cash flow margin) in AF23 could drive the stock into higher valuation territory,” Rangan said.

To that end, Rangan rates SPLK as a Buy, supported by a Street-high target of $173. Investors could pocket gains of around 105% if Rangan’s thesis goes as planned. (To watch Rangan’s track record, click here)

How does Rangan’s bullish bet weigh against the road? It seems the Goldman Sachs analyst isn’t the only one enthusiastic about Splunk’s prospects. With 18 Buy ratings versus 10 Holds (ie neutral), the stock claims a Moderate Buy consensus rating. The average price target among these analysts is $109.83, which implies an increase of about 30% from current levels. (See Splunk stock forecast on TipRanks)

Not to be missed: Billionaire David Rubenstein says recession is likely, but remains heavily invested in these 2 stocks

Disclaimer: The views expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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