Analyst ratings are not perfect, but they're one of the better ways for investors to forecast future stock price movement. Here are five stocks that analysts believe have massive upside for patient, long-term investors.
I found these stocks using the MarketBeat Analyst Ratings Screener tool. This is an excellent way to help you find stocks that are getting upgrades in the sectors and/or price ranges that fit your investment style.
The Comeback Story is Gaining Steam
Amazon.com, Inc. (NASDAQ: AMZN) stock is up 49% in 2023. Despite that surge, the stock is "only" up 6.75% in the last 12 months and has fallen back in the recent market sell-off. That just illustrates how lousy investor sentiment was in AMZN stock in 2022.
It wasn't without reason. The company's earnings were down sharply, and it wasn't just about normalization in the company's e-commerce business. There was a slowdown in the company's Amazon Web Services (AWS) business as well.
Some investors were also concerned that Amazon would be late to the artificial intelligence (AI) party. That may be true, but its recent announcement of an investment of up to $4 billion in Anthropic. This puts Amazon squarely into the generative AI conversation. It also provides an outlet for Amazon's Trainium and Inferentia chips, which Anthropic will use to build future large language models.
All of that explains why AMZN stock has a Moderate Buy rating with a $161.30 price target that is 27.8% higher than its price as of this writing.
This Stock is Worth Its Premium Valuation
Its shares trade hands for over $1,800 per share. It has a forward P/E ratio of 42.3x. Despite all of that, Chipotle Mexican Grill, Inc. (NYSE: CMG) still appears to be an attractive buy. And CMG stock looks slightly oversold, with the stock down 12% in the last three months.
The company continues to post higher year-over-year revenue and earnings. However, in its most recent quarter, it missed slightly on analysts' revenue expectations. That gave investors a reason to take a little profit. But the long-term story hasn't changed. Analysts still give the stock a Moderate Buy rating with a price target that is 19% higher than its current price. CMG stock remains a Buy.
Analysts Continue to Buy This Oversold Stock
Even dollar stores are not immune to inflationary pressures. In its earnings report for fiscal year (FY)2023, Dollar General (NYSE: DG) forecast slower sales for the rest of the year as consumers continue to pull back on discretionary spending.
Not surprisingly, DG stock has been severely punished; it's down 57% in 2023. However, institutional investors (i.e., the smart money) still own 90% of the company's stock, and buyers continue to outnumber sellers. So even though analysts give Dollar General a consensus Hold, they have a price target that shows a 48% upside.
Dollar General's business model puts its stores in predominantly rural areas that are not near big box stores. That makes them a lifeline for many consumers looking to find low-priced items without traveling far. And the company continues to launch new stores.
With DG stock trading near its 52-week low, it looks like a great time to pick up some inexpensive shares.
Short-Term Pain May be Worth Enduring
When you're looking at taking a long position in any stock, a couple of years is a relatively short time. T-Mobile US, Inc. (NASDAQ: TMUS) is one of the leading global telecommunication companies. Earnings are up even as revenue is down, but investors still can't seem to get excited about TMUS stock.
There's a reason for that. SoftBank (OTCMKTS: SFTBY) was the majority shareholder in Sprint. When T-Mobile merged with Sprint, SoftBank agreed to forfeit 48.8 million TMUS shares. However, under the terms of the merger, SoftBank can reclaim those shares if T-Mobile's stock price is over $150 for 45 days between 2022 and 2025.
Sure enough, every time TMUS stock has cracked the $150 mark, the sell-off begins. That's likely to continue in the short term. Investors also aren't that excited about the company's dividend announcement as it implies that management believes the stock is fairly valued.
Nevertheless, with inflation on the rise, the dividend gives long-term investors an incentive to hold TMUS stock. And with mobile phones being a relatively recession-proof item, patience is likely to be rewarded.
Investors May be Missing the Catalyst for this Pharmaceutical Stock
Pfizer, Inc. (NYSE: PFE) stock is down 37% in 2023, and the drop is even more pronounced since hitting an all-time high in December 2021. The conventional wisdom supports the pullback due to the normalization of the company's Covid-19-related products.
But that may be missing the bigger picture. First, the company's acquisition of Seagen, Inc. (NASDAQ: SGEN) is likely to go through over the objection of some regulators. This will enhance Pfizer's oncology portfolio. And even without Seagen, the company has 19 drug candidates in its pipeline that are expected to be approved in the next 18 months.
Analysts are seeing this. The consensus rating is Hold, but the price target is 44% higher than the current PFE stock price, which is around $32 as of this writing.
Of the stocks on this list, Pfizer is still projecting that its earnings will decline slightly in the next 12 months. That may put pressure on PFE stock. However, building a position now is likely to pay off in years to come.