The list of Most Upgraded Stocks for October, those stocks with the most upgrades in September, is a surprising lot. The list includes five names with one thing in common: AI. The story is the same whether AI-powered security, AI-powered creative services, or AI-powered business efficiency. These companies are monetizing AI today, not tomorrow, next month or next year, but today and today, it drives results. Coincidentally, no chip stock is on the list.
Zscaler Holds On to the Top of the Ranks
This is the 2nd month in a row that Zscaler (NASDAQ: ZS) has been at the top of the monthly ranking. The stock received 23 positive revisions in September, and they are leading the market higher. The consensus price target is down compared to the 2022 peaks but trending higher than the previous quarter and month. The consensus is about 17% above the price action in early October, which puts the market well above the 1-year high.
The most recent analyst activity is a double upgrade from Neutral to Overweight from Piper Sandler. They peg the stock price at $190, about 500 basis points above consensus. The next visible catalyst for the market is in early December when it reports Q3 results. The analysts have been raising their targets for results and expect 32% revenue growth and significantly wider margins. The only downside is that growth is slowing, but that is offset by persistent outperformance.
Adobe Climbs Into the Top 5
Adobe (NASDAQ: ADBE) has been getting more and more attention and is now firmly ranked in the Most Upgraded Stocks list. The company rose to the #2 spot with 20 revisions since the Q2 release. The analysts rate this stock a Moderate Buy and see it gaining 15% at the mid-point consensus. The takeaway is that analysts' revisions are robust and leading the market; the most recent updates have the stock well above $600 and more than 50% above last year's high price target. Adobe has already reported for Q3 growing revenue by 10%, widening margin, outperforming on the top and bottom lines, and providing solid guidance.
FedEx - Applying AI to Business Automation and Processes
FedEx (NYSE: FDX) reported a mixed quarter, with revenue falling short, but internal efforts drove margin improvement and set the company up for leverage when the economy turns. The takeaway is that FDX stock is rated at Moderate Buy and received several positive revisions, including an upgrade following the release. The price target or rating has been revised 20 times over the past month, putting FDX in third position. Takeaways from the analysts' chatter is that management is executing well, and the long-term trajectory is bullish. Analysts see this 2% yielding stock advancing 7% to 30% over the next year.
Crowdstrike Using AI to Secure the Cloud
Crowdstrike (NASDAQ: CRWD) is another cyber security name that uses AI to secure the cloud, endpoint, data, and workloads. The company's Q2 results included top and bottom line strength, margin improvement, and increased guidance, resulting in a series of analyst revisions. The stock received 16 updates to put it in 4th position this month. The analysts rate the stock at Moderate Buy and see it advancing 15% at the consensus midpoint. The most recent targets are all above consensus and add another 15% to 25% to the upside potential. CRWD reports Q3 earnings at the end of November; the analysts are only raising their earnings and revenue targets.
Braze: Slips to 5th Position
Braze (NASDAQ: BRZE) slipped into fifth position on the Most Upgraded Stocks list, but it is still gaining momentum. The company received 15 positive updates since the Q2 results were released in early September; more are expected. The company's customer engagement platform engages clients and drives accelerating growth in fiscal 2024. The analysts rate the stock a Moderate Buy and see it advancing at least 18%, and the post-release targets are all well above that. A move up to the consensus level would put this market into reversal.