The end of 2018 was pretty brutal for most stocks as the overall market corrected and sent a huge number of previously strong stocks to 52-week lows.
2019 has started on a better foot, and we have already seen big recoveries in a lot of the stocks that took the biggest hits at the end of last year. For investors that were able to sit on the sideline and correctly timed when to jump back into the market, 2019 has produced huge gains. The good news is that even if you missed the run bull run, there is still time to get in on the action as there are plenty of big-name stocks expected to post huge gains to the recent rallies.
Trade negotiations are progressing with China, and the Federal Reserve has previously indicated it will increase interest rates fewer times in 2019 than it previously forecast. Both factors are helping push the market higher, along with overall strength in the current earnings season.
Here are five stocks that have staged big rallies from their recent lows but remain close to 20% below their average price targets.
Social media giant Facebook (FB) took a beating in 2018 from the fallout of its data breach scandal and waning user confidence, but the stock remains compelling and has already erased a big chunk of last year’s losses. FB fell all the way to $123.02 in December but has since rallied 32% to its current price of $162.90. The stock’s recovery has been impressive, but Wall Street analysts believe there is still a lot of upside remaining. The 34 analysts who cover FB have an average price target of $194, which suggest shares are still undervalued by around 19%. The company reported very strong quarterly numbers in January that shattered estimates on both the top and bottom line and the stock gapped higher. Facebook’s biggest challenge is re-engaging with the youth audience, but its WhatsApp and Instagram services remain very popular and offer a lot of future growth for the company. Facebook remains the only real competition to Google’s (GOOGL) dominance in online search and advertisers continue to rely on the company to reach its massive audience. Facebook has some challenges, but also has a lot going its way which could easily see the stock climbing to its average price target.
Alphabet (GOOGL) is the parent company behind a little web site called Google. Google has long dominated online search, and while Facebook (FB) has managed to carve away some of the market, Google remains the king of the hill in the highly lucrative online advertising market. Google played a key role in driving the overall market strength in recent years, but shares came under pressure during the second half of 2018 along with the overall technology sector and the stock hit a 52-week low of $977.66 in December. Since hitting its low the stock has rallied over 15% and is currently trading at $1,128.91. The company reported another solid set of quarterly numbers on February 4 that topped estimates on both the top and bottom line. Analysts expect to see GOOGL continue to add to its recent gains with an average price target of $1,336.62. The target suggests GOOGL is undervalued by around 18.5%.
Micron Technology (MU)
The entire chip sector got hit during the second half of 2018. The biggest reason why chip makers like Micron Technology (MU) came under pressure was fear of weakening demand as a result of the trade war between the U.S. and China. As the two nations have continued negotiations that both sides hope will put an end to the current trade war we have seen strength return to the sector. MU has rallied 50% from its 52-week low in December and the stock is currently priced at $42.80. Despite the large rally over the last six weeks analysts see a lot more upside in MU shares with an average price target of $51.82, suggesting an additional 21% upside. The company will report its next set of quarterly numbers on March 19. Analysts expect earnings of $1.70 per share, down from $2.82 during the same period last year. The earnings drop has already been priced into the stock, so as long as the company is able to hit its estimate the stock should build on its recent gains.
NVIDIA (NVDA) is another chip stock that took a beating during the second half of 2018, with shares falling as low as $124.46 in December. Since hitting its low NVDA has staged a decent rally, and is currently up 28% from its recent low to $159.85. Analysts see additional upside potential of 19% upside with an average price target of $190.95. The company reported its quarterly numbers on February 14, topping estimates on both the top and bottom line. The stock is trending higher since the earnings beat and should continue to erase more its 2018 losses as long as strength remains in the overall market and trade negotiations between the U.S. and China do not completely fall apart.
General Motors (GM)
Automakers like General Motors (GM) are very sensitive to the Chinese market. China is a huge market for automakers, and the ongoing trade war between the U.S. and China certainly played a role in GM’s weak performance in 2018. Auto sales in the U.S. have cooled off after years of record-setting numbers, which makes China growth all the more important. Steel and aluminum tariffs are also a concern for the sector as higher input costs could start to have a material impact on the bottom line. There is also the chance that the U.S. starts to impose tariffs on imported car parts. GM has done a good job growing earnings in recent years, with profits up 24% per annum over the last five years, and analysts expect to see earnings increase 15% annually over the next five years. Tariffs could pose a threat to the entire sector, but it remains unclear whether or not President Trump will decide to put new tariffs in place. The risk of sending the auto sector into a tailspin will be a deterrent for President Trump, who loves to boast about the nation’s strong economy, and a faltering auto sector would definitely pose a threat to the overall economy. GM posted very strong earnings on February 6 that topped estimates on both the top and bottom line. GM shares are up 30% from their October low, and the stock currently trades at $39.89 with an average price target of $48.77. The bullish price target suggests 22% upside in the stock.