Investing

5 Big Stocks That Are Expected to Outperform Apple

It seems as though every single investor is still in love with Apple Inc. (NASDAQ: AAPL). The earnings report was solid, and the company’s dividend and buyback plan will end up generating $200 billion being returned back to shareholders through time. Apple is the newest of the 30 Dow Jones Industrial Average stocks, and it turns out that Apple also still has the highest expected upside in the year ahead. But does that make Apple the best stock with the most upside of all stocks in the market?

24/7 Wall St. wanted to look at other key stocks in technology and in other sectors to see if there were any solid industry leaders that have more implied upside than Apple. It turns out that there were five easily identified industry leaders that have more expected upside in the year ahead than Apple.

As far as what the implied upside really means, it is the current share price compared to the consensus analyst price target. 24/7 Wall St. did not include the dividends in this upside, because Apple’s dividend, even with the hike, is still far enough under 2% that dividend performance is simply a rounding error.

So, Apple’s current share price of $125.75 would generate an implied upside of 17.5% to the $147.80 consensus analyst target price. That target price keeps rising. Apple shares have sold off more since earnings, and it makes the hurdle for expected upside that much harder. Now to keep the most optimistic outlook in mind, Apple has an official street-high target of $195 for the stock price, which would be 55% upside if that high prediction were to come about, and that is after a gain of better than 50% over the past year.

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24/7 Wall St. has highlighted five sector leaders that could outperform Apple if the analysts are right: Alcoa Inc. (NYSE: AA), Facebook Inc. (NASDAQ: FB), Illumina Inc. (NASDAQ: ILMN), Micron Technology Inc. (NASDAQ: MU) and SolarCity Corp. (NASDAQ: SCTY). We have shown what the implied upside to the consensus price target is, as well as to the highest price target for the most optimistic analyst. We have looked at the trading history, the market cap and the performance versus a year ago, and we added in additional color in each company.

One last issue to consider here is that we also screened out companies that have seen their stock fall off the cliff right after earnings. The analysts have all had time to adapt to company outlooks for this year, and this keeps the numbers from looking skewed.

Alcoa
> Expected upside: 29%
> Market cap: $16.5 billion

Alcoa currently trades around $13.50 and its shares have been stable during earnings season. The consensus analyst price target of $17.38 is down from about $18.25 when its earnings report came in. This is lower, but not a train wreck. This leaves implied upside of 28.8%. Alcoa’s turnaround has yet to be realized in its stock, but the company is diversifying away from just being in the aluminum business into having aluminum compound products for auto and other sectors that can show promising growth ahead. It is also acquiring RTI International metals for roughly $1.5 billion.

Alcoa has a 52-week trading range of $12.65 to $17.75. The highest price target from analysts was $22.00, which implies upside of roughly 64% from current prices. Alcoa shares are up only 2% from this time a year ago.

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Facebook
> Expected upside: 20%
> Market cap: $223 billion

While it now trades near $79.65, and the consensus price target for Facebook of $95.55 would generate an implied analyst upside of 19.9%. After earnings, analysts were seeing more upside (just like Apple) despite economic and international headwinds. The king of social media just keeps growing, and its recent post-earnings pullback just has not really been any different from what Apple investors have seen. Mark Zuckerberg even seems to be getting mobile right, which has been elusive for advertising-dependent companies elsewhere.

Facebook shares have 52-week trading range of $56.26 to $86.07. According to Thomson Reuters, the highest analyst price target for Facebook is $110.00, and that would generate upside of about 38%, if the most aggressive target turns out to be right. Facebook shares have risen by 38% over the trailing 12 months.

Illumina
> Expected upside: 23%
> Market cap: $27 billion

Illumina was just trading at $186.25, so the consensus price target of $229.88 leaves implied upside of 23.4%. This company is far less known by the public that invests in biotech and advanced health care technology. It develops, manufactures and markets life science tools and integrated systems for the analysis of genetic variation — and it is the leader in gene sequencing technology. Illumina’s CEO even recently said the market could be a $20 billion one, and the stock also recently was named as one of three top stocks to buy after delivering great earnings. Still, shares have pulled back a bit.

Shares of Illumina have traded in a range of $131.07 to $213.33 in the past year. The highest analyst price target is actually all the way up at $270, which implies upside of 45%, if the most aggressive analyst is proven right in the year or more ahead. Illumina shares are up 39% from this time a year earlier.

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Micron Technology
> Expected upside: 38%
> Market cap: $30 billion

With shares trading near $28.30, the consensus analyst price target of $39.03 would leave implied upside of 37.9%. The company has grown in flash memory and is considered the king of DRAM. While Micron may no longer have massive growth after the turnaround, its pullback from the peak in the mid-$30s seems to have stabilized close to $27 in October and in March. Now analysts and investors are trying to get used to valuing Micron like a value stock. While earnings growth has stalled, this stock trades at less than 10 times expected earnings now.

The 52-week trading range is $25.25 to $36.59. Micron shares may have pulled back, but the share price is still up about 15% from a year ago. The highest analyst price target is still all the way up at $50, which would leave what seems a hard to believe 76% or so, if that actually comes about.

SolarCity
> Expected upside: 33%
> Market cap: $6 billion

SolarCity now trades at about $61.00. A consensus price target of $81.00 would leave implied upside of 32.8%. This is the king of rooftop solar installations in America. It also has ties to Elon Musk of Tesla. Despite low oil and energy prices, the company’s stock sell-off from over $70 that first went under $50 was all from last September and October. Its stock had been range-bound since then, and now shares are trying to break out, if that area above $60 can hold. What hurts about evaluating SolarCity is that it is expected to keep losing money for some time. Still, revenue expectations of $765 million by the end of 2016 would be after 78% revenue growth in 2016 and 68% growth in 2015.

SolarCity shares have traded within a 52-week range of $45.79 to $79.40. They are up 16% from a year ago. The highest price target from analysts was all the way up at $98, which implied an upside of over 60%, if the most aggressive target actually manages to come to fruition.

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