Investing

Wells Fargo Says Buy These 3 Stocks for 78% Returns

Rich Duprey

Published: September 12, 2024 3:11 pm

The Federal Reserve will be holding its next meeting in just one week. The market is anticipating the central bank will cut interest rates for the first time in over a year. But while the rate cuts are expected, the announcement may spur a new growth spurt for stocks. This might not be an instance of buy the rumor, sell the news.

Although the market has been bouncing along at its top, the S&P 500 index is currently sitting 5% below its high. That’s because the economy has been giving mixed signals about whether a recession is in the cards. It explains why stocks could soar again if the Fed cuts rates. It could provide a needed lift to the economy.

Yet a lot of factors go into whether a stock will move higher or not. Ultimately, it’s the business that will determine which way its stock goes. So whether the central bank acts or not, Wells Fargo (NYSE:WFC) has identified the three growth stocks below as ones that will charge higher over the next year. 

Key Points About This Article:

• The market is awaiting the Federal Reserve’s decision on interest rate cuts at its scheduled meeting next week, which could send the market higher if and when the central bank cuts rates.
• Ultimately, a stock’s growth will be its business fundamentals and Wells Fargo identified three growth stocks with average upside potential of 78% over the next year.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Alimentation Couche-Tard (ANCTF)

Many investors might not be familiar with Canadian convenience store operator Alimentation Couche-Tard (OTC:ANCTF), although there is a good chance they have visited one of its many stores. 

While Couche-Tard is the c-store chain’s flagship brand in Quebec, it operates about 6,700 Circle K locations in the U.S., the largest independent convenience store operator in the country in terms of the number of company-operated stores. There are also some 500 Holiday stores in 10 states. Globally, it operates over 16,000 stores.

Shares of the c-store operator are down more than 3% in 2024 though they are up 8% over the last year. Wells Fargo recently raised its target price on its Toronto Stock Exchange-traded stock from $86 Canadian to $88 Canadian. Couche-Tard also trades over-the-counter in the U.S. under the ticker symbol ANCTF. The target price implies 77% upside in the stock.

Although Couche-Tard’s earnings results have been hit-or-miss in recent quarters, the company is attempting to acquire Japan’s 7-Eleven chain owner Seven & i Holdings (OTC:SVNDY) for $38.5 billion. The Canadian company wants to increase EBITDA by 11.7% per year through 2028, and last quarter EBITDA actually fell. Its takeover offer was also rejected, but Couche-Tard is not giving up. 

Still, any deal might have difficulty passing regulatory muster under the Biden administration as 7-Eleven is the largest c-store chain in the U.S. by stores. Despite the industry being highly fragmented, the Federal Trade Commission has an almost knee-jerk aversion to large mergers.

Nvidia (NVDA)

Certainly not an unknown quantity, chipmaker Nvidia (NASDAQ:NVDA) also got a price target increase from Wells Fargo. The stock has lost 26% of its value after reaching an all-time high and becoming the world’s most valuable company in June. It has since fallen back to third place behind Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT).

Wells Fargo raised its price to $165 per share from $155 after Nvidia trounced analyst expectations in the second quarter and raised its guidance for the third quarter ahead of forecasts. At just under $103 per share, the new price target implies 60% upside remains in the stock.

Data center adoption of Nvidia’s artificial intelligence chips continues to add billions of dollars to the chipmaker’s top line and will continue to do so for the foreseeable future. A recent wrinkle, though, was the Justice Dept. sending Nvidia a subpoena as it investigates possible antitrust practices. Rivals have complained Nvidia is using its market positioning to unfairly gain business.

While the subpoena adds uncertainty to Nvidia’s sustained growth, the long-term adoption of AI and the ability of data centers to continue spending the way they have creates further opaqueness to Nvidia’s growth potential.

Crescent Energy (CRGY)

Crescent Energy (NASDAQ:CRGY) is a small, but fast-growing integrated oil and gas company operating primarily in the Eagle Ford Shale region of Texas. It is not content to stay small, though, and is pursuing a growth-by-acquisition strategy, including its announcement last week that it would purchase a private operator in the region for $168 million. The deal adds 30 new locations to Crescent’s existing portfolio as well as 5,300 net royalty acres of minerals, surface, and midstream assets. 

The oil and gas stock also recently closed on its $2.1 billion acquisition of another Eagle Ford operator, SilverBow Resources. The region is strategically important because of its ability to produce both natural gas and more oil than other shale plays.

Wells Fargo nudged its Crescent Energy target price higher by $1 to $21 per share on the new acquisition deal. As it will pay for the private operator in cash, it indicates the oil and gas stock has the financial wherewithal to finance its growth strategy. Crescent, though, trades at less than $11 per share, implying better than 96% upside in the stock over the next year.

As there remains a long tail to fossil fuel demand, Crescent Energy stock looks attractive at just 6 times next year’s earnings, a fraction of its sales, and a minuscule 3.5 times free cash flow.