Wall Street's top analysts see stocks like Microsoft and Etsy as work-from-home beneficiaries

This earnings season investors have to balance spiking coronavirus levels against encouraging vaccine progress, rising unemployment and China trade tensions.

That's on the macro level. On the micro level, some stocks look set to gain from current work-from-home trends, while for others, coronavirus-related disruptions spell disaster.

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- and factoring in the number of ratings made by each analyst.

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

RBC Capital analyst Matthew Hedberg advises keeping a close eye on cybersecurity stock Proofpoint. He has a buy rating on the stock and a $146 price target, a 19% upside potential.

"While there is Covid uncertainty in the 2H/20, we believe Proofpoint should be a long-term beneficiary of trends for people- centric security with increased levels of distributed workers" the analyst explained on July 21.

Based on checks, he believes Proofpoint should report solid second quarter results at the high-end of guidance on its July 30 earnings date. "We remain confident in trends of returning to +20% growth" Hedberg wrote.

What's more, 2021 should be a better year "given the SYMC replacement cycle, product bundles, normalized CapEx, easy comps and a long-term benefit from distributed employees as companies are seeing new attacks targeting Covid disruption."

In ProofPoint's favor is a strong and evolving product portfolio, a growing, diverse customer base for cross and up-sell opportunities, and a solid growth profile that should drive significant margin expansion through break-even and beyond.

Hedberg's 79% success rate and 27% average return per rating earn him a stellar Top 10 ranking on TipRanks.

Online marketplace Etsy is gearing up to report its second quarter earnings on Aug. 5. Heading into the print, Stifel Nicolaus analyst Scott Devitt has reiterated his support for the stock. That's with a buy rating and new $116 stock price forecast, up from $86 previously. Shares have more than doubled year-to-date, but Devitt's price target indicates further upside potential lies ahead.

"Consolidated GMS [gross merchandise sales] growth exceeded 130% year-over-year in April, and we expect growth remained meaningfully above pre-Covid levels through 2Q as the company continues to benefit from the sale of face masks and the broader pandemic-related shift to eCommerce" the analyst explained on July 22.

Indeed, third-party data and commentary from other eCommerce platforms indicate that trends supporting online shopping have remained largely in place, says Devitt, as coronavirus case numbers in the U.S. re-accelerate and health concerns drive consumes to e-commerce instead of traditional retail.

The analyst also raised his second quarter and long-term estimates citing "the growing opportunity for Etsy to retain new and lapsed customers brought to the platform as a result of the pandemic."

According to TipRanks, Devitt scores an impressive 70% success rate and 25% average return per recommendation.

Health-care giant Johnson & Johnson has just received the thumbs up from top Bank of America analyst Bob Hopkins. He reiterated his buy rating and $175 stock price forecast, with 17% upside potential, on July 20 after the company reported a beat-and-raise second quarter.

Overall, earnings topped Street expectations driven mainly by a notably robust performance in the medical devices segment — $4.29 billion compared to a $3.43 billion consensus estimate — while the pharma segment fell in-line with expectations and consumer fell slightly below — $3.3 billion compared to a $3.54 consensus estimate.

"JNJ's Q2 call confirmed what most believed heading into Q2 – that JNJ's [Covid-19] vaccine is on track and that JNJ's fundamentals remain very strong in an uncertain environment" cheered Hopkins. Currently the company is aiming to deliver over 1 billion doses of its coronavirus vaccine by the end of 2021. 

For the coming quarters management struck a cautiously optimistic tone, noting that many procedures are already approaching pre-coronavirus levels. The company now expects a third-quarter decline of 10% to 25%, up from its April estimate of negative 15% to 35%. As a result, Hopkins ramped up his 2020-2022 earnings per share estimates for Johnson & Johnson to $7.82, $9.09 and $9.73 from $7.72, $9.06 and $9.69.

"We continue to like the risk reward in JNJ. While visibility remains low with litigation, Covid's impact on the economy could well bring names like JNJ back into favor and goodwill from a successful vaccine could limit drug pricing risk" the analyst concluded.

Five-star Wedbush analyst Daniel Ives has a buy rating and Street-high price target of $260 on Microsoft, suggesting further upside potential of over 25%. Ives made the bullish call on July 22 following Microsoft's June results with headline numbers that came in above Street expectations.

Total revenues came in at $38 billion, up 13% year-over-year, compared to the Street at $36.5 billion. Non-GAAP earnings per share of $1.46 easily beat the Street's $1.34 estimate with operating margins of 35.3% versus Street estimates at 35.6%.

"Cloud continuing to rock & roll," exclaimed Ives, noting that "this current remote work from home (WFH) environment is further catalyzing more enterprises to make the strategic cloud shift with Microsoft the main beneficiary as evidenced by the solid results."

According to the analyst, while Microsoft has roughly a third of its revenue exposed to PCs and supply chain, the vast majority of its revenue and 80% to 90% of its valuation is based on its flagship Azure, Office 365, and core enterprise driven franchise.

And that's good news because Ives believes that this cloud shift and work-from-home dynamic is here to stay. With 33% of workloads in the cloud today poised to hit 55% by 2022, he calculates that the work-from-home shift could clearly accelerate the cloud trend by roughly a year. "In a nutshell, Nadella & Co. continue to lead a transformational cloud story narrowing the gap vs. Bezos and AWS into 2021" Ives said.

The analyst is ranked at No. 211 out of 6,813 analysts covered by TipRanks thanks to his strong stock picking skills.

RBC Capital's Mitch Steves has just boosted his stock price forecast on semiconductor stock AMD to a Street-high of $71 up from $66 previously, and he highlighted the potential for AMD to move even higher. "We wouldn't be surprised to see the $70 market eclipsed over the next 3-4 months in a bull case scenario but see $71 as more of a base case" the analyst told investors on July 23.

He cited the company's upcoming earnings report as a positive catalyst, writing "we think PCs and Servers could surprise to the upside relative to Street expectations."

Notably, for 2021 he also remains Street-high at $10.7 billion compared to the Street at $10.2 billion adding that the 15 or so hold/sell recommendations on the stock are likely dragging down the average estimates considerably.

For his part, Steves continues to like AMD into earnings, given the company's: 1) likely $400 million in server revenue in the second quarter; 2) clear demand for graphics processing units, or GPUs, as gamers continue to grow in a work from home environment; 3) positive results at Texas Instruments indicating personal electronics upside due to work from home initiatives; and 4) significant revenue growth and margin expansion potential over the next two to three years.

This Top 100 analyst boasts a 75% success rate and 27% average return per recommendation.

In June, Oppenheimer analyst Brian Nagel upgraded Dick's Sporting Goods from hold to buy, citing the retailer's discounted valuation and prospects to capitalize on a spending shift towards sports-related products during the pandemic.

Now with earnings fast approaching, the analyst has reaffirmed his positive take on the stock, with a buy rating and $52 stock price forecast. From current levels, this translates into upside potential of over 15%.

"Recent data clearly suggest strengthening trends in demand for sporting goods, which we believe could portend meaningful upside in Q2 (Jul.) trends at DKS," the analyst wrote on July 23. He pointed out that shares of Dick's have bounced from recent lows, but continue to lag peer equities and broader indices.

According to Nagel, Dick's current valuation under-appreciates its potential for improving near-term fundamentals- despite a slightly more challenging longer-term story.

"While we remain concerned with longer-term potential for direct-to-consumer (DTC) offerings at leading brands to, in part, undermine Dick's Sporting Goods as a distribution mechanism, we are increasingly optimistic, nearer-term, that DKS is well positioned to capitalize upon changing, if not strengthening, demand trends in sporting goods" the analyst concluded.

Nagel is currently tracking a 75% success rate and 21% average return per rating, placing him at No. 34 out of over 6,800 analysts ranked by TipRanks.