Analysts see 10 percent upside in these stocks

 

With the markets trading near record levels, and the Dow Jones recently crossing through the psychological 20,000 barrier, a lot of traders are left wondering where to look for value in today’s market.

While it is true that a lot of stocks now appear to be in overbought territory, there are plenty of good values out there for investors with a little money they need to put to work.

The best clue as to which stocks have significant upside potential is to refer to price target that analysts have on stocks. Stocks do not always trade up to their price targets, but it does give the stock room to run as long as the overall market remains strong.

After looking at price targets, we also have to consider the general health of the company’s underlying business and the company’s sector in general.

If you have some money that you need to put to work, consider the following stocks, all of which appear to have at least 10% upside from their current price.

Lennar Corp.

U.S. homebuilder Lennar Corp. (LEN) is currently trading at $44.40, and the stock is in a weak downward trend. Lennar most recently reported earnings in mid-December, with results topping estimates on both the top and bottom line. The stock trended higher following the report, but shares have recently come under pressure, perhaps fear over the future impact of rising interest rates. The Fed boosted rates for just the second time since the financial crisis in December, and while it has not lifted rates since then, there is the expectation of future rate hikes during the current year. The housing market remains solid, and I believe another rate increase, or two, will not have a material impact on the housing recovery since rates will remain very low. Analysts have a $51.06 price target on the stock, which suggests 16.2% upside. The stock has a low valuation, with a P/E of just 11.7.

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Chart courtesy of www.stockcharts.com

Amazon.com

Amazon.com (AMZN) hit a small bump in the road following its recent fourth-quarter report, which showed weaker than expected sales for the quarter, despite a large earnings beat. The stock took a hit on the weaker than expected sales, but analysts remain very upbeat on the stock, and given the company’s stranglehold on the e-commerce market, the stock remains very attractive. Valuation is a concern, with a P/E of 186, but Wall Street has always traded the stock at high valuations, so traders should not place too much emphasis on the current valuation. Even with the stock’s current P/E, analysts see plenty of upside potential. AMZN is now trading at $815.37, but analysts have an average price target on the stock of $935.33, which suggests 14.7% upside potential. Another bullish indicator is that 23 out of the 30 analysts that cover the stock rate it a “strong buy”, with zero “sell” ratings, and just one “strong sell” rating.

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Chart courtesy of www.stockcharts.com

Pfizer

Pharmaceutical giant Pfizer (PFE) trended lower ahead of the recent presidential election, but the stock is once again trending higher, in anticipation that a Trump presidency will prove beneficial to the overall sector. The company is coming off a disappointing fourth-quarter report at the end of January, but the market did not sell off the stock following the report, instead pushing shares higher. The stock has a low valuation, with a P/E of 11.6, and analysts expect earnings growth of 8.6% during the current year. Analysts see a lot of upside potential for the stock, with an average price target of $37.85. Considering that PFE is now trading at $32.29, the average price target suggests 17.2% upside potential from the current trading price.

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Chart courtesy of www.stockcharts.com

Facebook

Social media giant Facebook (FB) continues to impress Wall Street, most recently posting much stronger than expected fourth-quarter earnings and revenue. Previous concerns over the company’s ability to monetize its mobile users are long forgotten, and the company continues to grow at a blistering pace. Last quarter the company enjoyed massive 78% year over year earnings growth, while revenue soared 50.8% versus the same period last year. The stock’s P/E has risen to 63, which seems a little high on the surface, but given that analysts expect earnings to rise by 24% this year, the high valuation is acceptable, especially considering the company’s history of posting much higher than expected quarterly numbers. The stock is now trading at $131.98. Analysts have an average price target of $158 on the stock, suggesting shares are undervalued by as much as 19.7%.

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Chart courtesy of www.stockcharts.com

Citigroup

Financial giant Citigroup (C) was among the stocks to gain the most following the recent presidential election, as Wall Street turned very bullish on the financial sector in the wake of President Trump’s unexpected victory. President Trump is expected to ease regulations on the industry, which in turn should allow big banks to lend money more easily, and lead to higher earnings. Trump is also in favor of rising interest rates, which will have a material impact on the amount of earnings that big banks will be able to generate on loans that they make to their customers. The company most recently reported quarterly numbers in mid-January, with earnings topping estimates while revenue came in a little weaker than forecast. The stock has a low P/E of 12.5, with earnings forecast to rise 13.7% this year. C is now trading at $57.44, with an average price target of $64.73. If the stock were to trade up to the price target, it would represent a gain of 12.7%.

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Chart courtesy of www.stockcharts.com

Symbols: AMZN C FB LEN PFE
Michael Fowlkes

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.

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