Whether you believe them or not, analyst ratings have long been a strong indicator of the stock price’s direction. There is a direct correlation between how Wall Street analysts rate a stock and how it performs. After all, analysts aren’t just pulling these price targets out of thin air. They use complex formulas that include analyzing the company’s past and present fundamentals to predict its future price multiple.
So should we blindly follow analyst ratings or price targets? We shouldn’t ever just rely on one rating to buy a stock. Rather, we should use analyst ratings as one indicator combined with other research like fundamentals and technical analysis. If you are looking for some stocks to watch in April, check out these Wall Street analyst favorites.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is the parent company of social media platforms like Facebook, Instagram and WhatsApp. As of April 2024, Meta is the seventh-largest company in the world by market cap with a value of $1.3 trillion. Meta is a favorite of Wall Street analysts and is currently trading right at its average price target of $519.12. The top end of the price target range sits at $600.00, representing a further 14% upside.
In March alone, Meta received 60 analyst ratings, 20 of which were a Strong Buy with 32 more being a Buy rating. This is almost as consensus as it gets among Wall Street analysts. Meta has more than two billion daily active users (DAU) across its platforms and has grown its revenue at a compound annual growth rate (CAGR) of 19% over the past five years.
Despite gaining more than 145% over the past year, Meta’s stock has gotten cheaper on a price multiple basis. It is now trading at just 10x sales and 26x forward earnings. This makes Meta cheaper than peers like Microsoft (NASDAQ:MSFT), NVIDIA (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA).
Uber Technologies (UBER)
Uber (NYSE:UBER) is the global leader in ride-sharing with over 130 million monthly active users in more than 70 countries worldwide. The stock has an average price target of $86.56 from analysts which represents an 11% upside from Uber’s current price. The Street-high analyst price target is $100 per share.
Earlier this year, Uber reported its first-ever profitable quarter. This came on the heels of Uber being added to the S&P 500 just a couple of months earlier in December 2023. Now, with the company finally at scale and its delivery growth soaring, analysts are calling Uber a stock to buy. In March, 45 of 48 analyst ratings were a Buy or Strong Buy which indicates just how much Wall Street loves this stock.
Usually, there are some valuation concerns after a stock has gained 143% over the past year. It depends on which metric you use with Uber. The stock is trading at a lofty 60x forward earnings but only four times sales. This divergence is usually caused by rapidly growing revenue with minimal profits, which is exactly the case for Uber. Its revenue has grown at a three-year CAGR of 50%!
TransMedics Group (TMDX)
TransMedics (NASDAQ:TMDX) is an American medical device and technology company that was founded in 1998. This stock isn’t the most widely covered company, but analysts do have an average price target of $99.40. TMDX is currently trading at a lower price than the lowest end of the one-year analyst price target range of $95.00.
This company has a market cap of just $2.8 billion and is far from being profitable, but a deeper dive tells you exactly why analysts love this stock. TMDX is the largest ex-vivo organ transplantation company in the world. It designs and implements new technologies to safely transport organs from donors to patients. Some analysts with an Overweight or Strong Buy rating include Oppenheimer, TD Cowen, and most recently initiated by Piper Sandler.
Despite being unprofitable and in hyper-growth mode, TMDX only trades at 11.4x sales even after seeing year-over-year revenue growth of 158.7%. Over the past three years, TMDX has seen a revenue CAGR of 111%. TMDX is an industry leader growing at an exponential rate and it is only a matter of time until the stock price follows.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
