Investing

4 Top Analyst Stock Picks Predicted to Rise 50% to 100%

Jon C. Ogg

Published: June 11, 2017 10:13 am

Last Updated: January 12, 2020 11:09 am

The bull market is eight years old and investors have bought every major pullback for years. Friday, June 9, 2017, reminded the tech investors that Wall Street’s favorite (and most crowded) stocks can still take a beating on nothing more than a rapid round of profit taking and sector rotation. Now many investors have to wonder how they should be allocating new assets into the market for gains and income.

Credit Suisse released its mixed picks of the firm’s top investment ideas in the United States and Canada on June 7. While some of these companies are on the Credit Suisse Focus List, the reality is that these stocks were from more than 100 stock picks that the firm rates as Outperform.

24/7 Wall St. screened out the top expected performers from the list, with a 50% threshold at the lower-end of expectations and which had market capitalizations in the billions. Some companies actually had about 100% upside to the Credit Suisse target. Each analyst from Credit Suisse is given a chance to identify their top picks based on a six-month to 12-month time horizon. Of the full 136 stocks picked, 79 were growth names and 27 were value names. The firm did warn customers that these should not be viewed as portfolios because they are from each analyst universe.

As a reminder, most new Buy and Outperform analyst ratings in large cap stocks from analysts at the top firms on Wall Street come with implied upside of 8% to 15%. That means that having a 50% threshold either means that Credit Suisse is far more aggressive than most research firms in a particular stock or it might be a situation where a pullback has been seen and the firm has yet to update a more rational target.

As a reminder, all analyst calls should only be a starting point for investors. Sometimes analysts get it wrong, and having the highest price target of all analysts usually means that the call is the best potential outcome versus more reasonable analyst calls. We wouldn’t want you thinking we just blindly endorse analyst calls just because they come with big upside.

Consensus analyst target price data is from Thomson Reuters and additional color on each call has been provided. These are four of the top pick stocks from Credit Suisse with 50% to 100% upside targets.

Alexion Pharmaceuticals

Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) has a $164 price target at Credit Suisse, which is actually not the highest target on Wall Street. The share price at the time of the call was $101.61, and it closed at $105.38 on Friday. Credit Suisse said of this $23 billion biotech:

After pull-back in 2016, we think Alexion’s valuation looks more attractive. We think that the current trading price even with significant impact from biosimilars reflect little credits to the pipeline and 1210, which is in phase 3.

Alexion’s 52-week trading range is $96.18 to $145.42 and it has a consensus analyst target price of $155.00.

Devon Energy

Devon Energy Corp. (NYSE: DVN) has a $64 target price at Credit Suisse, nearly 100% higher than the $33.05 share price at the time. Devon Energy closed out the week at $32.58 despite a 3.5% gain on Friday. Its $17-plus billion market cap makes for a potentially larger financial gain as a whole than more speculative small caps.

The consensus target price is closer to $51.00, but Thomson Reuters showed that the highest analyst target on Wall Street was even higher at $79.00. Credit Suisse’s summary view said:

Devon is a transition story in 2017. As the company moves the STACK and Delaware into development mode, then production should start rising and cash margins should rise also. A higher oil price would also help, given the sensitivity of cash flow. As confidence in cash generation improves, then the discount to net asset value should close. Devon has a substantial inventory of well locations beneath its large surface footprint. Aside from cash flow delivery, 2017 is an important year for delineating the 12,000-plus locations in the Wolfcamp and Leonard (60% of 2017 drilling in the Delaware). In the second half, the Showboat density test in the STACK will be important. Devon had a rig operating in exploration mode in Dewey county which could deliver results. The Hobson Row delivery from the Woodford should demonstrate the value of this interval. Devon may report the tests of the Eagle Ford spacing tests which could expand inventory. Devon (and industry peers) continue to delineate the Powder River Basin. We also look for an update on how decoupling bundled services is helping to mitigate industry inflation. This is just a part of the story of improvement in shale execution at Devon over recent years.

Devon Energy has a 52-week range of $31.38 to $50.69 and its consensus analyst target price is $50.93.

Nutanix

Nutanix Inc. (NASDAQ: NTNX) has a $38 price target at Credit Suisse, more than 100% higher than the $18.67 price at the time. Nutanix shares actually traded down during the rest of the week to close at $17.48.

Credit Suisse said in the call of this $2.8 billion enterprise cloud platform solutions provider:

Despite the short-term weakness, we see multiple drivers growing sales, such as increasing penetration in G2000 (now at 24%) and expanding the international market, which now accounts for 48% of bookings. The company also plans to raise product Price to offset component costs, which will support gross margin along with the rising software mix.

Nutanix has a consensus target price of $27.76, much lower than the $38 target from Credit Suisse but still shy of the street-high target price of $41.

Nutanix has a 52-week trading range of $14.38 to $46.78.

Voya Financial

Voya Financial Inc. (NYSE: VOYA) is a Focus List stock at Credit Suisse, and the firm’s $56 target price for this insurance and financial planning giant implied upside of some 60% from the $34.97 price at the time the list was presented.

Voya closed up at $36.97 on Friday, still leaving an implied 54% upside, if the firm’s call turns out right. Credit Suisse said:

Voya, a Focus List stock, is our Top Pick, as we see attractive risk/reward in shares at current levels. In our view, Voya’s ongoing businesses are currently under-earning and we see upside to ROE. The company has also made significant progress de-risking the closed block variable annuity business. Through the end of the first quarter of 2017, the company retired about 27% of diluted shares since its IPO in mid-2013, and in each 2017/18E we estimate Voya can retire 8-10% of shares annually. Additionally, we think Voya screens attractively on a variety of valuation metrics, including being one of the cheapest under our coverage based on P/BVPS excluding AOCI. The stock also screens among the cheapest in our coverage on 2017/18E adjusted free cash flow yield, benefiting from a business mix that should sustain a high level of free cash flow generation as well as the benefit of utilizing its sizable DTA over time.

After looking through the Thomson Reuters universe, it appears that Credit Suisse has the highest target of them all.

Voya has a consensus analyst target of $46.08 and a 52-week range of $22.75 to $42.96.

It is important for investors to understand that analyst calls should be only one source of information rather than using them as a divining rod. After all, the market has gone up for so long that some investors might think a sell-off would be cruel or unusual these days.

Again, we wouldn’t want anyone thinking we blindly trust analyst calls just because one of them is wildly bullish on a stock pick.

24/7 Wall St. recently featured some market analysis pieces questioning the stock market performance and valuations, as follows:

• Did the stock market just peak?
• Warren Buffett’s top stocks look overvalued or have little upside.
• Nine companies that destroyed shareholders this past earnings season.
• General Electric is on the verge of being the Dow’s worst stock of 2017.