Wall Street analysts do a lot of research before making stock recommendations and assigning price targets. They also have extensive history with navigating various booms and busts within the stock market and across individual sectors.
While you shouldn’t buy a stock just because a Wall Street analyst likes it, knowing how they drew their conclusions can help investors understand bullish and bearish narratives for any stock.
Some Wall Street analysts like stocks because they have strong momentum and are generating plenty of buzz. However, some of the other top-rated stocks present good margins of safety and look like they can reward long-term investors. Furthermore, these are the types of stocks that can withstand economic uncertainty and rebound after downturns.
Investors looking for some promising stock picks may want to see what the pros recommend. These bargain stocks are some of the favorites among Wall Street analysts.
PayPal (PYPL)
PayPal (NASDAQ:PYPL) is currently rated as a Moderate Buy with a projected 23% upside from current levels. The stock is well off its 2021 high but now presents a margin of safety. PayPal currently trades at a 15 P/E ratio and is a leading payment solutions company. Many consumers use the company’s app to make payments with their credit cards, debit cards, bank accounts, and PayPal balances.
The stock is down by 1% year-to-date and has shed 48% of its market value over the past five years. PayPal’s hypergrowth days seem to be over, but it still delivers respectable results. Revenue increased by 9% year-over-year in Q1 2024 to reach $7.7 billion. GAAP EPS jumped by 18% year-over-year and came in at $0.83. PayPal also has a solid balance sheet that features $17.7 billion in cash, cash equivalents, and investments. That’s higher than the company’s $11.0 billion in debt.
PayPal used its financial strength to return $1.5 billion to shareholders through stock buybacks. This stock repurchase program covered 25 million shares. The fintech firm has returned $5.1 billion to investors through share repurchases over the last 12 months.
American Express (AXP)
American Express (NYSE:AXP) is another fintech firm that is rated as a Moderate Buy. The average price target suggests a 5% upside, but the highest price target of $275 implies a potential 22% gain.
Unlike PayPal, American Express has a strong growth story, and investors are piling into the stock. Shares are up by 19% year-to-date and have gained 80% over the past five years. The credit and debit card issuer is attracting younger consumers and makes money from every transaction.
American Express recently reported solid financial results to start off 2024. Q1 2024 revenue increased by 11% year-over-year while net income jumped by 34% year-over-year. The firm reported a 16.9% net profit margin, and the company should become more valuable as those margins expand. American Express currently trades at an 18.5 P/E ratio and offers a 1.25% yield. The corporation has maintained a double-digit dividend growth rate for several years.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) still has an attractive valuation despite more than tripling over the past five years. The stock trades at a 28 P/E ratio and offers a 0.45% yield. Shares are already up by 28% year-to-date.
The tech giant continues to enjoy rising revenue and profits as businesses flock to the company’s advertising channels. Advertising was the main reason Alphabet reported $80.5 billion in Q1 2024 revenue. That’s 15% higher than the same quarter last year.
While advertising generates most of the revenue, Google Cloud becomes more important with every passing quarter. Cloud computing made up more than 10% of Alphabet’s total revenue, and artificial intelligence should accelerate the cloud platform’s growth rate. Alphabet also increased its net income by 57% year-over-year as cost cutting has helped the company generate higher profits for shareholders. The firm’s ability to bring in a 29.4% net profit margin prompted leadership to offer Alphabet’s first of many dividends.
Wall Street analysts are very bullish on Alphabet and have rated it as a Strong Buy. The average price target implies a 12% upside from current levels.
On this date of publication, Marc Guberti held a long position in GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
