In this piece, we used TipRanks’ Comparison Tool to take a closer look at three battered stocks — CRM, NOW, and BA — that Wall Street believes investors gave up on too quickly. Each company has a “Strong Buy” consensus rating and underrated fundamentals that could drive a rebound.
It’s been a humbling year for many investors, with a wild bear market undoing most of the gains made in a euphoric 2021. The “speculative excess” of last year appears to have run out. However, there is one class of stocks that may have been overshot on the downside. As usual, there are babies being thrown out with the bathwater as the market is eyeing up markdown goods left, right and centre.
Various retailers are dealing with excess inventory and are ramping up discounting. The market seems to be in a similar predicament, as it appears to be pushing down prices on stocks across the board, while investors are jittery over plans by the Federal Reserve to raise rates in a bid to bring back “genie” inflation. ” in its bottle, where it should have lain for at least a few decades.
Salesforce has gone from a shining star on the big-tech scene to a dud since CEO Marc Benioff and company pulled the trigger on Slack. Shares are down nearly 50% from the top.
The most recent quarter from the cloud pioneer was a massive disappointment, especially given the company’s knack for hitting balls out of the park come earnings season.
Thanks to broader selling pressure in the market and a painful outlook downgrade, CRM stock now finds itself trading below $160 per share. With or without new lows, it seems oversold.
The second quarter numbers themselves are not overwhelming, especially when you remove the effects of the strong US dollar. Salesforce’s Second-quarter revenue reached $7.7 billion (up 22% year-over-year). Additionally, CRM reported earnings per share of $1.19 (beating the $1.05 consensus). The guidance downgrade was the left hook that landed on the chin of Salesforce shareholders.
Despite downgrading guidance, management is a fan of its own pipeline. The digital transformation trend is still in play, and the firm may want to acquire more companies (such as Troops.ai) now that tech multiples have dipped.
The announcement of the $10 billion buyback did nothing to ease the pain. Such a move suggests that the firm views its stock as cheap. Wall Street agrees, with 30 Buys, four Holds, and just one Sell assigned over the past three months. CRM’s average price target suggests a whopping 48.1% upside to the store over the next year.
ServiceNow is another high-multiple cloud stock that has suffered a fall from grace, now down 38% from its peak value of around $700 a share. In the most recent quarter, ServiceNow’s revenue rose 24% year-over-year, slightly below estimates, thanks to the impact of the strong greenback. Subscription sales increased 25% year-over-year.
With aggressive growth expectations through 2026, I expect the recent slide to be just one big bump in the road before the company sets its sights on new highs. Undoubtedly, ServiceNow needs to grow its margins while maintaining its impressive top-line growth rate. It won’t be easy, but management has the right people for the job.
ServiceNow is a standout player in the ITSM space. With many satisfied customers, the company should have few problems onboarding customers with new offers when they come to light. The company is incredibly innovative, which makes it difficult to stop the sales momentum, even when the recession is coming.
The stock is trading at a lofty 14.0 times sales, leaving it in a tough spot as the Fed raises rates higher than expected. While ServiceNow has the opportunity to make a big push into profitability, it’s hard to gauge how much is a fair price to pay for it.
A premium that much is guaranteed, but how much is the million-dollar question. Wall Street seems to think the stock NOW isn’t expensive enough, with 24 Buys, two Holds, and no Sells. The average NOW stock price forecast indicates 29.9% upside potential. Given the caliber of SerivceNow’s management and resilient growth in the face of a macro hailstorm, it’s hard to argue with Wall Street here.
Boeing was a plane-maker that lost about 80% of its value from peak to trough at its worst point. The stock market crash of 2020 had Boeing in its crosshairs as issues with the 737 MAX and lost air travel demand lingered. Boeing stock eventually rebounded to 2020 lows, but the rally faltered in 2021, and it’s been a bumpy ride ever since.
Boeing stock flirted with 2020 lows earlier this year before bouncing back to $162 and change per share — where it sits today.
Fueling the recovery were a handful of positive developments, including a better-than-feared second quarter. A 787 delivery pop is in sight, and with supply chain issues cleared up, 737 MAX production can return to full speed.
With the COVID-19 pandemic winding down, demand for new fuel-efficient aircraft may remain strong in the coming years, especially if jet fuel prices remain high.
Things are finally starting to turn around for Boeing. CEO David Calhoun remains optimistic, but investors seem more willing to take a “wait and see” approach. Although things are looking up for Boeing, it has run into strange setbacks before. The increase could be substantial if Boeing can execute effectively without any additional constraints.
Wall Street is bullish on Boeing, with a “Strong Buy” rating based on 11 Buys and just two Holds. Boeing is one of two global plane makers, after all. BA stock’s average price target of $213.33 indicates just over 40% upside potential.
Conclusion – Analysts Think Salesforce Has the Highest Potential
That’s it. Three battered stocks that Wall Street sees as turning a corner next year. Of the three names, Salesforce stock seems to have the most potential. Even with the recent outlook downgrade, I don’t see a wave of analyst downgrades coming down from the price target.
Disclosure