Analysts' price targets can give investors an idea of how much potential there is for a stock to rally. They can also be a reminder of just how quickly price targets can get outdated, even though they are meant to project how a stock might perform over the next 12 to 18 months.
A rapidly falling stock can appear to be a huge bargain if its price target remains unchanged. If the company's metrics have deteriorated, the unchanged price target can create a false impression about how promising an investment is.
Three stocks that appear to have impressive upsides today according to Wall Street are ChargePoint (NYSE: CHPT), Medical Properties Trust (NYSE: MPW), and JD.com (NASDAQ: JD). Let's look at the reported potential upside and then determine if they are truly great buys right now or if they might instead be due for some downgrades.
1. ChargePoint: Projected upside of 264%
Share prices of ChargePoint have nosedived roughly 75% over the past six months. The company provides charging solutions and charging networks for electric vehicles (EVs).
The demand for EVs has fallen somewhat of late, resulting in some underperformance for ChargePoint. In November, the stock crashed after management released an underwhelming revenue projection. In the quarter ending Oct. 31, 2023, revenue totaled $110 million and was down 12% year over year. On top of that, its net loss ballooned from $85 million to more than $158 million.
Rising costs and slowing growth have resulted in a bearish outlook for the business, especially with ongoing concerns about a recession in 2024, which could make high-priced EVs even less attractive to consumers.
ChargePoint's stock could rebound in the long run as EV demand should recover. But with deep losses, the stock comes with plenty of risk, and there's little reason to expect that its $2.07 share price will more than triple within the next 12 to 18 months, as the consensus price target of $7.54 would imply. Investors are better off avoiding the stock until ChargePoint can drastically improve its financials.
2. Medical Properties Trust: Projected upside of 154%
Medical Properties Trust (MPT) has a consensus analyst price target of $8.50. If the stock reached that level, it would more than double in value from where it is today (around $3.35). A year ago, the consensus price target was nearly $17.
MPT is a real estate investment trust (REIT), which isn't normally associated with much growth. And in just the past six months, the stock has crashed roughly 67%.
Last year, the healthcare-focused REIT slashed its dividend, and the concern is that there might still be another cut on the horizon. Earlier this year, the company announced a plan to help improve the financials of one of its struggling tenants, Steward Health Care System, which involved providing a bridge loan to the company.
MPT faces some considerable challenges. Its funds from operations for the most recent period (ended on Sept. 30) totaled $216 million, down 14% year over year. The company has been turning to asset sales to bolster its liquidity.
MPT is not a top growth stock to buy, and it's likely that analyst price targets will come down further soon. A lot would have to go right for the stock to more than double in value anytime soon, and it's not something investors should count on right now.
3. JD.com: Projected upside of 83%
Chinese online retailer JD.com is comparable to Amazon: It has a strong fulfillment network that enables it to ship goods to customers quickly, in some cases offering same-day delivery. Based on the consensus analyst price target of $42.79, it could nearly double in value.
Over the past six months, JD's stock price has fallen by 37%. The company's growth rate has underwhelmed the market. For the period ending Sept. 30, 2023, revenue was $34 billion, up by less than 2% from the same period a year ago. Investors have also grown concerned about worsening U.S.-China relations, and that has weighed on many Chinese stocks.
The stock trades at 7 times its estimated future earnings and could be an underrated investment. Although its crashing value is a big reason for the implied upside, JD.com does have the potential to rally given the potential in the strong Chinese market, where the annualized economy grew 5.2% during the last three months of 2023.
It may require some patience, but JD.com could be a good underrated growth stock to buy right now. It might even hit analysts' consensus upside projections.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and JD.com. The Motley Fool has a disclosure policy.
