Wall Street loves these 3 growth stocks — should you?
Some stocks attract more attention from investors and analysts than others. This is true even in bear markets, as investors of all types seek long-term winners who trade low.
So should you buy them just because they’re the hottest stocks on Wall Street? Let’s take a closer look at three high-growth stocks that are getting a lot of love from analysts these days.
Why the Street Loves Alphabet
the parent company of Google, Alphabet (GOOG -2.53%) (GOOGL -2.46%), is a perennial favorite of analysts. After a 20-to-1 stock split over the weekend and heading into next week’s second-quarter earnings report, that hasn’t changed. Indeed, 51 analyst firms offer ratings on the stock, according to CNBC data, and 14 of those reports call Alphabet a “strong buy,” 35 firms call it a “buy,” and the bottom two say it’s a “hold” at the moment.
I’ll choose one name from this huge hat of analyst opinions. Brian White of Monness, Crespi, Hardt recently lowered his split-adjusted price target on Alphabet from $175 to $145 per share with a “buy” rating on the stock. White likes Alphabet’s leadership position in the digital advertising market, which is poised for explosive long-term growth. The short-term price target was lowered due to the difficult macroeconomic situation in 2022, but the analyst firm believes that Google and Alphabet will come out stronger when the economic dust settles.
It’s high praise when you talk about a company that’s already established itself as one of the biggest stocks and most successful companies out there. I think White’s analysis is right on the money, with the added benefit of Alphabet’s ambitious diversification plans. This is a stock for all seasons, and I consider Alphabet a fantastic buy as it trades 24% lower in 2022. These low prices will not last.
What is Canaan up to?
Manufacturer of crypto-mining equipment Canaan (BOX 5.30%) is a very different story. Only three analyst firms track the Beijing-based company, but the handful of interested street groups sing its praises in unison. CNBC reports one “strong buy” rating and two “buy” ratings on Canaan’s stock.
One of those bullish ratings came from HC Wainwright analyst Kevin Dede, who started his coverage two weeks ago with a “buy” rating and a price target of $5 per share. Dede likes Canaan’s recent decision to lead some Bitcoin its own mining operations, more than doubling its self-mined holdings from 70.5 Bitcoins in the fourth quarter to 167 coins three months later.
Canaan’s reported bitcoin holdings were worth $3.7 million on July 18, which equates to just 0.9% of the company’s cash, so the internal mining effort isn’t a game changer. short term. This may change over time, however. If nothing else, I think it’s smart of Canaan to set up an environment where unsold crypto mining machines can be put to work for the equipment builder.
This stock is trading at ridiculously low valuation ratios today. Canaan shares change hands at just 1.8 times earnings and 0.7 times sales. This crypto winter is painful for companies on the infrastructural side of the industry, but Canaan stands to benefit greatly if and when the crypto tide turns again. Starting from today’s ultra-low prices and armed with a healthy balance sheet, Canaan looks like an attractive buy with limited downside right now.
Atlassian makes noise
We go Down Under to find Wall Street’s third favorite. Sydney-based project management software vendor Atlassian (CREW -0.49%) inspired 24 active analyst recommendations, including seven “strong buy” ratings and 12 “buy” ratings, with five companies sticking to a neutral “hold” recommendation.
For instance, Goldman Sachs analyst Kash Rangan changed this stock from “neutral” to “buy” at the end of June. The price target went from $279 to $300 per share. Rangan believes Atlassian’s transition from software licensing to cloud-based subscription revenue is poised to be a “pivotal moment” as software developers around the world seek more efficient project management practices. . Atlassian’s comprehensive suite of tools, such as the Jira collaboration platform, Trello workflow manager, and Bitbucket code management system, are often a good fit for these requirements.
Rangan also pointed out that the collaboration-based project management market has about 2.2 million companies large enough to become potential Atlassian users. The company has only processed a small portion of that big pie so far, reporting 234,575 active customers at the end of March 2022.
This stock isn’t exactly cheap by traditional metrics, trading at 18 times sales and 125 times forward earnings today. However, you get what you pay for. Atlassian sports frenzied revenue growth and increased free cash flow over time, and the forward-looking track for continued growth seems both long and clean. As a result, many analysts see Atlassian as an obvious buy today – and I wholeheartedly agree.
Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Anders Bylund has positions in Alphabet (A shares) and Bitcoin. The Motley Fool has positions and recommends Alphabet (A shares), Alphabet (C shares), Atlassian, Bitcoin and Goldman Sachs. The Motley Fool has a disclosure policy.