Given the level of volatility in the market over the last several weeks a lot of investors now find themselves unsure of where to put their money to work in the current market.
It has become clear that the trade war between the U.S. and China is going to last longer than previously expected as both nations try to position themselves for the best possible outcome in this high stakes game of trade.
Trade tensions will continue to dominate the overall market, but what is important for investors to remember is that overall economic conditions in the U.S. remain favorable. It is also important to remember that the broader market as recently as last month was testing its all-time high from last year.
For traders that are unsure of where to turn, looking at price targets that analysts have on stocks can offer some good insight. No one has a crystal ball, and analysts are not always right, but analysts work full time track the stocks they follow and have their finger on the pulse of the market in a way average investors could never have, so it is important to monitor analyst opinions while at the same time doing our own homework.
Let’s take a closer look at a handful of stocks that analysts currently believe have a significant amount of upside potential.
Tech giant Apple (AAPL) faces a big hurdle with weakening iPhone sales. Sales of the company’s flagship product were down 17% year over year last quarter and falling iPhone sales have resulted in back to back quarters of falling total sales and earnings after 10 years of consecutive growth. Falling iPhone sales are a major problem, but the company has done a great job focusing on its services division which analysts believe will continue to grow at a rapid pace. Apple’s service segment reported sales of $11.5 billion last quarter, which is small in comparison to the $31 billion in iPhone sales, but the number is growing and has Wall Street bullish on the stock. AAPL trades at $187.20 and analysts have an average price target of $215.54 on the stock suggesting slightly over 15% upside. The company also has a solid capital program and last quarter authorized an additional $75 billion in share buybacks. AAPL has a dividend yield of 1.6% and a six-year streak of increases.
The social media sector is very competitive, but Facebook (FB) remains at the top of the sector and the platform boasts 2.38 billion active monthly users. With such a high number of monthly users Facebook has managed to become the first company to really pose a threat to Google’s (GOOGL) dominance of online advertising. Facebook continues to show impressive growth, with earnings expected to rise at an annual rate of 17.5% over the next five years, but that figure could be very understated as the company boosts its revenue from other platforms such as Instagram and WhatsApp. The stock sold off in the latter part of 2018 with the overall market, but shares have been strong in 2019 with shares up 41% year to date and analysts see a lot of additional upside. FB currently trades at $185.05 while analysts have an average price target of $213.91 on the stock which represents 15.6% upside.
General Motors (GM)
The auto sector is very competitive, and sectors leaders such as General Motors (GM) have to deal with not only satisfying current customer needs but also plan for the future as we move more towards electric and autonomous cars and trucks. GM also has a lot of exposure in China making it vulnerable to the ongoing trade war. As trade negotiations appeared to be nearing a deal between the two nations, negotiations have eroded in recent weeks and as such GM has trended lower. The stock’s recent pullback has lowered its forward P/E to just 5.9 while earnings are forecast to rise 15.4% per annum over the next five years. The valuation is very attractive and provides a lot of upside potential as trade negotiations progress. GM trades at $36.98 and analysts see 30.8% upside with an average price target of $48.38.
Raytheon (RTN) is a leading aerospace and defense contractor. Raytheon has shown solid growth in recent years with profits up 12% per annum over the last five years and analysts expect profits to rise an additional 12.7% annually over the next five years. Nations around the globe are modernizing and increasing their militaries which have helped drive demand and higher profits for the entire sector. Given analysts’ strong future estimates and RTN trading at just 13.8 times future earnings it is not surprising that analysts see a lot of upside in the stock which is already up 18.3% on the year. RTN trades at $181.42 but analysts see the stock rising to $211.55 which would mark a rise of 16.6%.