Most of the time, Wall Street gets it right. That is to say, more often than not, investors and analysts alike price a stock appropriately based on the underlying company’s performance and prospects.
Every now and then, though, a stock’s price fails to reflect that company’s full value. Wall Street underestimates the organization’s probable future. Identifying these instances can be a terrific opportunity for you, since a bullish repricing is due sooner or later.
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Here’s a rundown of three growth stocks Wall Street might be sleeping on right now, but likely won’t be for much longer. One (or maybe even all) may be a good fit for your portfolio.
It’s not exactly surprising that Opendoor Technologies(NASDAQ: OPEN) shares are down 95% from their early 2021 peak. The real estate listing company went public in the middle of pandemic-riddled 2020, when homebuying was starting to soar and investors were willing to pay premium prices for compelling story stocks.
Once the dust settled and reality began setting in, both of these 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 a tad above the stock’s present price. But again, this may be one of those cases where Wall Street is underestimating what awaits.
Opendoor is a real estate sales listing platform. It primarily serves individual homeowners, although it also works with agents. Its distinguishing factor, however, is the fact that it will make fast 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 the U.S.’s home sales hit a wall in early 2022. Many homeowners simply don’t want to let go of their low-interest-rate mortgages, while would-be buyers don’t want to pay the wildly high prices being asked for most houses these days. The situation is what it is.
But the situation is also a reliably cyclical one that’s closely tethered to the overall economy. That’s why following this fiscal year’s expected 26% revenue tumble, analysts are calling for 42% top-line growth in the coming year. That growth is expected to persist at least into the following year, when the company should move to within sight of swinging to a profit.
There’s still plenty of risk here, and volatility. The potential reward is worth it, though.
You may have never heard of ASML Holding(NASDAQ: ASML), but there’s a very good chance you’re benefiting from its technology right now without even realizing it. This Netherlands-based company manufactures the equipment the semiconductor industry needs to make microchips.
It’s called lithography, or more specifically in ASML’s case, extreme ultraviolet (or EUV) photolithography. This is the art and science of using projected light as a mask or pattern to “spray” circuitry into existence, turning silicon into a functioning microchip.
ASML controls roughly 90% of the EUV lithography market, which is the only category of lithography devices capable of making high-performance computer chips. This leading share is also well-protected by an impressive portfolio of patents.
This doesn’t mean that the company is immune to the cyclical headwinds. ASML’s top line is only expected to grow a mere 4% this year, dragging per-share earnings lower with it and reflecting the headwind blowing against the semiconductor industry right now. That’s the chief reason shares are down nearly 40% from July’s high, and back to where they were in the middle of 2021.
As was the case with Opendoor Technologies, though, the bears arguably overshot their goal. This stock’s present price is 27% below analysts’ consensus target of $923.58. Most of the analyst community also rates ASML stock at a strong buy, perhaps keying in on 2025’s projected top-line growth recovery that’s projected to unfurl at a pace of nearly 19%. Next year’s expected per-share profit of $27.22 would also be record-setting.
Maybe Wall Street isn’t errantly overlooking this name. For the time being, however, most of Main Street is.
Finally, add energy drinks name Celsius Holdings(NASDAQ: CELH) to your list of stocks to buy before Wall Street reconnects all the dots. The stock is down 68% from its May peak, but is seemingly ripe for a rebound.
Anyone keeping tabs on this company likely knows its recently released fiscal third quarter top and bottom lines both fell short of estimates. Perhaps worse, both revenue and earnings fell from year-ago levels. Sales tumbled 31% year over year, and net income plunged 91%.
There’s a critical footnote to add here, however. That is, all of this setback is attributable to changes in the way its distribution partner (and part-owner) PepsiCo procures and pays for Celsius’ products. Retail sales of Celsius’ energy drinks within grocery and convenience stores improved 7.1% year over year, according to data from market research outfit Circana, extending a well-established trend.
CELH Revenue (Quarterly) Chart
More of the same is in the long-term cards too, in light of how Celsius Holdings differentiates itself from bigger rivals like Red Bull and Monster Beverage. At first blush, it looks more or less like these competitors.
Dig deeper, though, and you’ll find important differences. Chief among them is the fact that none of its energy drinks contain sugar or corn syrup, or any artificial colors or flavors. Its beverages are also promoted as boosting metabolism, making them even more marketable to the fitness-minded crowd. And this focus is working. Celsius Holdings’ top line has more than quintupled in just the past four years. Analysts believe the company’s top line is poised to continue growing at this pace for at least another couple of years, too.
Celsius shares have been poor performers for a few months now, but not because the company is performing poorly. This stock’s slowing losses suggest that more investors are finally starting to figure this out.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Celsius, and Monster Beverage. The Motley Fool recommends Opendoor Technologies. The Motley Fool has a disclosure policy.
