Hold onto your seats! The Dow Jones Industrial Average has just suffered its worst week in the last two years. And while the market may be edging back into the green, we can expect more volatility further down the road. However, it’s important to distinguish between a crash and normal market fluctuations. Right now, fundamentals remain strong.
“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 seven stocks look especially undervalued right now. I highly recommend tracking these seven stocks through this volatile market — especially as all seven stocks boast an analyst rating of “Strong Buy.” This is based on only the last three months of ratings. Let’s delve in to these seven stock picks now:
Strong Buy Stock: Facebook (FB)
– 28 analyst buy ratings, two hold ratings and one sell rating in last three months
– 28% upside potential from current share price to average analyst price target
Social media giant Facebook Inc (NASDAQ:FB) hasn’t escaped the recent pullback. Shares are down by 6% over the last week. However, on a one-year basis, note shares are firmly in the green with growth of over 31%. And according to top RBC Capital analyst Mark Mahaney, if there is one key tech stock that has strong growth potential right now, it’s Facebook.
He ramped up his FB price target from $230 to $250 (40% upside potential) on February 1 following “very impressive” Q4 fundamentals. Revenue hit a whopping $12.97 billion, soaring past Thomas Reuters consensus of $12.55 billion. Mahaney also highlighted the stock’s “very consistent and premium growth with record-high Operating Margins.”
At the same time, he didn’t miss the opportunity to remind investors that: “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.” Plus FB still has many big growth drivers up its sleeve from Instagram to video.
Strong Buy Stock: Abbott Labs (ABT)
– 12 analyst buy ratings vs two hold ratings in last three months
– 21% upside potential from current share price to average analyst price target
Global healthcare giant Abbott Laboratories (NYSE:ABT) is down in the last week by around 6%. But shares are still marginally up over the last three months (and 33% over the last 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 Jan. 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 the stock’s ‘Strong Buy’ consensus shows, analysts clearly agree with him.
Strong Buy Stock: Lam Research (LRCX)
– 12 analyst buy ratings in last three months
– 54% upside potential from current share price to average analyst price target
Semiconductor hot stock Lam Research Corporation (NASDAQ:LRCX) is trading at around $182 right now. Given that LRCX has only buy ratings and upside potential of over 40%, 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 one-year basis by over 40%.
Five-star Credit Suisse analyst Farhan Ahmad has a strong record from the Street. On Lam Research specifically he scores an 80% success rate and 38% average return. 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 big upside potential of 66%.
Ahmad explains why the market is still undervaluing LRCX: “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).” He believes that the company has ‘a solid case for target EPS of >$20’ at analyst day on March 6.
Strong Buy Stock: Amazon (AMZN)
– 35 analyst buy ratings vs two hold ratings in last three months
– 14% upside potential from current share price to average analyst price target
Even shares in one of the world’s most exciting companies suffered last week, with shares off by 6.32% at $1,339. However, this is just a small blip on Amazon.com, Inc.’s (NASDAQ:AMZN) massive growth trajectory. On a one-year basis shares are up by no less than 73% — and even on a three-month basis shares are up over 26%.
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.
Baird’s Colin Sebastian estimates that 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.
Strong Buy Stock: CVS Health (CVS)
– Nine analyst buy ratings vs two hold ratings in last three months
– 27% upside potential from current share price to average analyst price target
US pharmacy and retail health care giant CVS Health Corporation (NYSE:CVS) took a battering over the last week with shares down by 9%. Indeed- shares have under-performed over the last year. But top Oppenheimer analyst Mohan Naidu is not giving up hope. On the contrary, he has just reiterated his buy rating with a price target of $92 (32% upside potential).
Naidu is bullish on CVS’s plan to acquire Aetna Inc. (NYSE:AET) for a whopping $69 billion. He says: “Despite the numbers move near term, we think the focus should be on the CVS-AET combination, which should strengthen CVS’s position and have significant positive long-term impact.”
The deal — which would create a massive integrated health care company with both pharmacy and health benefits as well as preventative care services — is due to close in the second half of the year. A shareholder vote is planned for March 20 and according to a recent comment by CVS CEO Larry Merlo, “things are moving along as planned.”
Strong Buy Stock: Prudential Financial (PRU)
– Five analyst buy ratings vs one hold rating in last three months
– 23% upside potential from current share price to average analyst price target
The largest U.S. life insurer by assets, I believe that Prudential Financial Inc (NYSE:PRU) is a key stock to track right now. The company has just reported solid earnings results for the fourth quarter, beating consensus EPS estimates of $2.65 at $2.69. However, shares are still down by almost 10% over the last week — and the stock is now trading at just $106.
Top B.Riley FBR analyst Randy Binner likes what he sees. He noted the “unusually good” results from the retirement and asset management unit, and above-forecast results for Japan and Gibraltar in particular. He tells investors: “While U.S. protection margins were weaker, the larger segments did well, showing the benefits of the company’s broad diversification. We maintain our Buy rating considering favorable valuation at 9.1x 2018E EPS.”
Indeed Binner’s $140 price target comes in way above consensus and indicates 32% upside potential ahead.
Note that Binner is one of the top 250 analysts on TipRanks with a 70% success rate and 15% average return.
Strong Buy Stock: Activision Blizzard (ATVI)
– 11 analyst buy ratings vs 3 hold ratings in last 3 months
– 14% upside potential from current share price to average analyst price target
Video game publisher Activision Blizzard, Inc. (NASDAQ:ATVI) is the name behind masterpieces like Candy Crush, Call of Duty and World of Warcraft. And Jefferies’ Timothy O’Shea doesn’t hold back when he says that: “We believe Activision is building a Disney-style entertainment business for the 21st century, but with higher operating margins.” Plus, while ATVI may be down by 6% over the last week, over the last year the stock is up by an incredible 69%.
Now ATVI has just released Q4 results that beat Street expectations, boosted by the successful launch of Activision’s “Call of Duty: WWII.” The game made $1 billion in just six weeks, and even became the top grossing console game of the year globally. “With a direct connection to 385MM deeply engaged users (50 mins/day), we continue to see a vast opportunity for ATVI to more deeply monetize its audience” says O’Shea.
He took the opportunity to bump up his price target from $82 to $86. Now this top analyst is anticipating a 28% price spike in the coming months.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of 4,500 analysts, 5,000 financial bloggers and even 37,000 corporate insiders. As of this writing, Harriet Lefton did not hold a position in any of the aforementioned securities.