What a week! The Dow and the S&P 500 both lost 5.2%, while the Nasdaq shed 5.1% as rising interest rates left investors jittery. “When the nervousness hit, a lot of people who were thinking of quitting hit the exits,” Key Private Bank’s Bruce McCain told CNBC. “A lot of people want to let it settle out a bit and really make sure the worst has past … [but] for our standpoint on where we’ll be over the next year: We see no signs of recession.”
Indeed, for some market commentators, pullbacks can produce interesting buying opportunities. “Although a massive market drop can be attention-grabbing, it can also present a buying opportunity,” wrote Kathryn Vasel, personal finance reporter for CNNMoney.
And if we look at top analyst stock recommendations and price targets, these five stocks look especially undervalued right now. Plus all these five stocks boast a ‘Strong Buy’ analyst consensus rating from the Street, based on only the last three months of ratings.
So without further ado, let’s dive in:
1. Amazon (NASDAQ:AMZN)
- 34 buy ratings vs 2 hold ratings in last three months
- 23% upside potential from current share price
Even shares in one of the world’s most exciting companies suffered last week- with shares off by 6.32% at $1,339. But note that this appears to be a small blip on Amazon’s massive growth trajectory. On a 1-year basis shares are up by no less than 63%- and even on a three-month basis shares are up over 18%.
Looking forward, Amazon has plenty of meaningful revenue streams to keep growth rates rising. Most notably, the company is now reportedly planning a new service to pick up packages from businesses and deliver them to consumers. According to the Wall Street Journal, the service, called “Shipping With Amazon,” is expected to start in LA and roll out more broadly within the year. According to Baird’s Colin Sebastian with “just 1% of the market, Amazon could create a new $5B revenue stream.” Shares in rival delivery companies UPS and FedEx slipped on the news.
Meanwhile Aegis Capital’s Victor Anthony says “Amazon is disrupting almost every industry it touches… We expect the company to continue to invest heavily across logistics, fulfillment, digital content, devices, India, AWS, and physical stores, and those investments should continue produce high returns.” His $1,709 price target suggests 28% upside potential. Note that you can click on the screenshot below for further stock insights.
2. Mondelez (NASDAQ:MDLZ)
- 5 buy ratings vs 1 hold rating in last three months
- 23% upside potential from current share price
One of the world’s largest snack manufacturers, Mondelez owns all the best billion-dollar brands from Ritz and Oreo to Toblerone and Cadbury. As an investment opportunity, Mondelez is also looking pretty sweet right now according to RBC Capital’s David Palmer. Over the last week the stock is down by 7.38%- however on a three-month basis the stock is still holding firm.
He states that ‘outperformance is the norm for Mondelez’ and “forecasts 2018 to be a year of steady topline improvement and double-digit total returns with additional stock upside potential through M&A.” Specifically, Palmer is a fan of the company’s stepped-up snacking innovation (like Milka and belVita) alongside its improving US cookie share trends. He ramped up his price target to $56 accordingly (33% upside potential).
3. Facebook (NASDAQ:FB)
- 28 buy ratings, 2 hold ratings and 1 sell rating in last three months
- 29% upside potential from current share price
Social media giant Facebook hasn’t escaped the recent pullback. Shares are down by 7.45% over the last week. However, on a 1-year basis note that shares are still up by an impressive 31%. And according to top RBC Capital analyst Mark Mahaney– if there is one key tech stock that has strong growth potential right now, its Facebook.
Mahaney boosted his FB price target from $230 to $250 (42% upside potential) on February 1 following ‘very impressive’ Q4 fundamentals. He noted that the company recorded ‘very consistent and premium growth with record-high Operating Margins.’
At the same time, he didn’t miss the opportunity to reiterate his FB investment thesis, reminding investors that: We still think FB is the Best Growth Story in Tech. And we believe that’s FB’s current low market shares – less than 20% of Global Online Advertising & mid-single-digit % of Global Total Advertising – will help it maintain premium growth for a long time.”
4. Abbott Labs (NYSE:ABT)
- 12 buy ratings vs 2 hold ratings in last three months
- 21% upside potential from current share price
Global healthcare giant Abbott Labs is down in the last week by just over 7%- although shares are still marginally up over the last three months (and 34% over the last 1 year). Following the latest price move, David Toung’s new $80 price target suggests impressive upside potential of 40%. He bumped up his price target from just $66 on January 30.
He is a fan of the stock’s strong Q4 top-line growth and sees the company’s future expansion driven by 1) the acquisitions of St. Jude Medical and Alere and 2) the recent launch of new products. As a result, Toung is confident that the stock now merits a premium valuation. And as you can see in the screenshot below, it looks like the Street agrees with him:
5. Lam Research (NASDAQ:LRCX)
- 12 buy ratings in last three months
- 54% upside potential from current share price
Semiconductor hot stock Lam Research is definitely worth keeping a close eye on right now. In the last week the stock dropped by 7.4%, meaning that it is now trading at just $166. Given that LRCX has only buy ratings and upside potential of over 50%, the signs from the Street appear promising for a significant rebound. Bear in mind that even with the recent fall, prices are still up on a 1-year basis by over 40%.
Five-star Credit Suisse analyst Farhan Ahmad has a strong record from the Street as we can see here:
He recently ramped up his 12-month price target from $245 to $275. This is the Street’s highest price target yet in LRCX and indicates upside potential of 66%. Ahamd explains why the market is still undervaluing LRCX here: “We believe that investors continue to underestimate secular growth driven by rising capital intensity (LRCX revs per 1% bit growth has more than tripled over the last four years), and underestimate its increasing installed base which has supported +20% CAGR for Services (25% of revs).” As a result he believes that the company has ‘a solid case for target EPS of >$20 at analyst day on March 6.
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