Want to Go Value Hunting? These 3 Stocks Are Undervalued, According to Select Wall Street Analysts.
Want to Go Value Hunting? These 3 Stocks Are Undervalued, According to Select Wall Street Analysts.
Professional analysts aren't always right about which stocks to buy or how high those stocks could go. But when there's a strong consensus among them, I don't ignore it.
After all, these people became professionals due to their deep knowledge of how businesses and the stock market work. If they widely agree about something, it's worth noting.
There are many tools that are publicly available to track the opinions of analysts, one of which is TipRanks. For this article, I've found three stocks that most analysts believe investors should buy and could have at least a 25% upside from where they trade today. The three stocks are Academy Sports and Outdoors (NASDAQ: ASO), Celsius Holdings (NASDAQ: CELH), and Nice (NASDAQ: NICE). Here's what investors should know about each one.
1. Academy Sports
Of the 16 analysts tracked by TipRanks who cover the company, 12 recommend buying Academy Sports stock, while the other four recommend holding. Their average price target is about $66 per share, or 25% higher than where the stock trades as of this writing. Keep in mind that analysts usually are making a prediction about where a stock will trade around 12 months later when they set price targets.
Academy Sports' strategy is to operate huge sporting goods stores capable of high sales volume per location, similar to the strategy of Dick's Sporting Goods. The company has a little more than 280 locations right now, but intends to open between 160 and 180 new stores over the next five years.
This expansion plan should dramatically boost sales for Academy Sports in the coming years. But management is also striving to push its profit margin up to 10%. For perspective, the company's profit margin was a little less than 6% in the first quarter of 2024.
Given its strong plans to increase sales and profits, it's no wonder that most analysts who cover the company believe Academy Sports stock is worth buying.
2. Celsius
Of the 10 prominent analysts who track Celsius, eight recommend buying and two recommend holding. And these analysts generally think that its upside is much higher than the upside for Academy Sports. Their consensus price target here is nearly $91 per share, which is about 47% higher than where the stock trades right now.
Celsius' beverages have quickly grown in popularity in recent years, catapulting it to the third-highest market share in the energy drinks niche behind Red Bull and Monster. But one analyst noted that recent sales data suggests its market share had slipped from 12.4% to 12.2%, and the stock subsequently sold off by more than 30%, partly due to this news.
It's possible that analysts could trim their price targets for Celsius stock as more of them update their models based on recent sales data. However, they could be missing the forest for the trees. The reality is that this company has gained tremendous market share in recent years, and its recent slip was minuscule. It doesn't seem like something to get worked up about.
Moreover, Celsius generated 95% of its sales from North America in the first quarter. It's just starting to kick its international growth into high gear, and that presents a multiyear growth opportunity. If it achieves a comparable market share in its foreign markets to the market share it has taken domestically, the upside for investors who buy in today could be substantial.
3. Nice
There are 16 prominent analysts tracking Nice, and they are unanimous: This is a stock to buy. Their average price target is $274 per share, which implies a whopping 57% upside.
Artificial intelligence (AI) is the hottest trend in investing. So one might think that Nice is some start-up trying to capitalize on the market's enthusiasm, considering it bills itself as an AI customer-service software company. However, Nice has been a publicly traded company for almost 30 years -- it isn't just some obscure start-up. Nonetheless, it still flies under most people's radar.
Nice faces plenty of competition in this niche, including from some tech titans. Therefore, it's reasonable to have concerns about its ability to compete. That said, the company already counts 85 of the Fortune 100 among its customers, so it's clearly competing well enough to win business from top-tier clients.
According to management, the AI trend is a tailwind for Nice's business. In consequence, it expects 14% to 15% revenue growth this year, compared to just 9% growth in 2023. And it expects to grow its full-year free cash flow by at least 26% to $600 million. Those are strong projections for a stock that has dropped by more than 35% from its 12-month high.
Is there a clear winner?
Academy Sports, Celsius, and Nice are all stocks with substantial upsides ahead, according to Wall Street analysts. This would suggest that they're all relatively good bargains right now.
However, investors shouldn't just take the word of the analysts. They are often wrong, so individuals need to do their own research.
I believe that Academy Sports stock is the best value of these three today. It's profitable already and trades at a really cheap valuation of just 8 times its trailing earnings. Moreover, while nothing is guaranteed, it does have credible plans to grow its profits and revenues substantially by opening new stores and improving operations.
These plans should give Academy Sports stock a clear path higher. While analysts see about 25% upside potential over the next year, I believe its upside is 100% or more when extending the time horizon out to three to five years.
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Jon Quast has positions in Academy Sports And Outdoors. The Motley Fool has positions in and recommends Celsius, Monster Beverage, and Nice. The Motley Fool recommends Academy Sports And Outdoors. The Motley Fool has a disclosure policy.