Most of the time, Wall Street is right. That is, more often than not, investors and analysts price a stock appropriately based on the performance and prospects of the underlying company.
But occasionally a stock’s price doesn’t reflect the full value of that company. Wall Street underestimates the likely future of the organization. Identifying these cases can be a great opportunity for you as a bullish repricing will happen sooner or later.
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Here’s a look at three growth stocks that Wall Street may be asleep on right now, but probably won’t be for much longer. One (or maybe even all) might be a good fit for your portfolio.
That’s not exactly surprising Opendoor Technologies (NASDAQ: OPEN) Shares are down 95% from their peak in early 2021. The real estate company went public in the middle of the pandemic-ravaged 2020, when home purchases began to rise and investors were willing to pay premium prices for attractive story stocks.
Once the dust settled and reality started to sink in, both tailwinds turned into headwinds. However, the sellers have arguably overshot their target, although not by much, at least according to the analyst community. The current consensus price target of $2.04 per share is only slightly above the current share price. But then again, this could be one of those cases where Wall Street underestimates what’s ahead.
Opendoor is a platform for selling real estate. It mainly serves individual homeowners, but also works with real estate agents. However, its differentiator is the fact that it makes quick cash offers to sellers who don’t want to wait for the usual time-consuming, agent-driven sales process to play out.
This differentiation hasn’t helped much since US home sales hit a wall in early 2022. Many homeowners simply don’t want to let go of their low-interest mortgages, while potential buyers don’t want to pay the high interest rates. Nowadays, extremely high prices are asked for most houses. The situation is what it is.
But the situation is also reliably cyclical and closely linked to the economy as a whole. That’s why, after the expected 26% revenue decline this fiscal year, analysts are calling for 42% revenue growth in the coming year. This growth is expected to continue at least until next year, when the company should be heading towards profits.
There is still a lot of risk and volatility here. However, the potential reward is worth it.
Maybe you’ve never heard of it ASML Holding (NASDAQ: ASML)but chances are you’re taking advantage of its technology right now without even realizing it. This Netherlands-based company produces the equipment the semiconductor industry needs to make microchips.
It’s called lithography, or more specifically, in the case of ASML, extreme ultraviolet (or EUV) photolithography. This is the art and science of using projected light as a mask or pattern to create circuitry, turning silicon into a functioning microchip.
ASML controls approximately 90% of the EUV lithography market, the only category of lithography equipment capable of making high-quality computer chips. This leading share is also well protected by an impressive portfolio of patents.
This doesn’t mean the company is immune to cyclical headwinds. ASML’s revenue is expected to grow just 4% this year, which will reduce earnings per share and reflect the headwinds currently blowing against the semiconductor industry. That’s the main reason why shares are down nearly 40% from their July highs and back to mid-2021 levels.
But as with Opendoor Technologies, the bears have likely overshot their target. This stock’s current price is 27% below the analyst consensus target of $923.58. Most of the analyst community also rates ASML shares as a strong buy, perhaps following the expected recovery in revenue growth in 2025, which is expected to unfold at a pace of almost 19%. Expected earnings per share of $27.22 for next year would also be a record.
Perhaps Wall Street is not wrong to overlook this name. For now, most of Main Street is.
Finally, add the name of the energy drink Celsius companies (NASDAQ: CELH) on your list of stocks to buy before Wall Street reconnects all the dots. The stock is down 68% from its May peak but appears ripe for a recovery.
Anyone keeping an eye on this company probably knows that its recently released fiscal third quarter figures both fell short of expectations. Perhaps even worse: both sales and profits fell from year-ago levels. Sales fell 31% year over year and net income fell 91%.
However, there is a critical footnote that should be added here. That is, all these setbacks are due to changes in the way the distribution partner (and co-owner) PepsiCo buys and pays for Celsius products. According to data from market research firm Circana, retail sales of Celsius’s energy drinks in supermarkets and convenience stores improved 7.1% year-on-year, continuing an established trend.
More of the same is also in the long term, given how Celsius Holdings differentiates itself from bigger rivals like Red Bull and Monstrous drink. At first glance, it looks more or less similar to these competitors.
Dig deeper, however, and you’ll discover important differences. Chief among these is the fact that none of the energy drinks contain sugar or corn syrup or artificial colors or flavors. The drinks are also promoted as boosting metabolism, making them even more marketable to the fitness-conscious public. And this focus works. Celsius Holdings’ turnover has increased more than fivefold in the past four years. Analysts believe that the company’s revenue will continue to grow at this pace for at least a few more years.
Celsius shares have been underperforming for a few months now, but not because the company is underperforming. This stock’s narrowing losses suggest that more investors are finally starting to realize this.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends ASML, Celsius, and Monster Beverage. The Motley Fool recommends Opendoor Technologies. The Motley Fool has a disclosure policy.
3 Growth Stocks Wall Street May Be Sleeping, But I’m Not was originally published by The Motley Fool
