This past week may have been painful for the markets with a 665 point drop in the Dow as the rate hike probability gets ever more realistic. Many key stocks were crushed after poor earnings, but others shined brightly. What has been amazing is that for over four years now the investing public has lined up in droves to buy their favorite stocks on pullbacks and when value scenarios arise.
24/7 Wall St. reviews dozens of analyst research each weekday, which comes to a review of hundreds of these analyst calls each week. Most Dow and S&P 500 stocks with Buy or Outperform ratings are assigned upside of 8% to 15%, and some even get 20% to 30% upside. Then there are the much more aggressive analyst calls where an analyst, or several of them, see potential upside of 50% or even 100%.
Before investors just blindly jump in here chasing analyst calls, there are many serious issues to consider. Some analyst calls are just too optimistic, and some even seem to be a denial of reality, versus other research calls or the new market conditions. Then there are the cases that arise when analysts are just dead wrong in their assumptions. It can happen, and it can result in painful losses. Investors need to understand that Wall Street analysts often have no better information and data than institutional and savvy investors.
24/7 Wall St. tracked 15 fresh analyst calls in this past week alone in which analysts were calling for upside of almost 50%, all the way up to over 100% in implied upside. Some of these calls were in well-known companies, but others were in very speculative small cap stocks that most investors likely have never even heard of.
Keep in mind that very aggressive analyst calls almost always come with more risk than you might expect from a DJIA stock. The reality is that conservative or risk-averse investors just need to avoid these stocks at all costs. Also, the notion that some of these are in the heavily pressured biotech, solar, oil and services sectors should act as a further reminder that there is no free lunch.
Investors and traders need to understand that if these analyst calls are wrong, chances are high that they will be very wrong rather than just a little wrong — and big losses would be more likely than the big gains they were hoping for. Some of these stocks also have recently sold off and analysts have just tried to maintain what may be outlandish price targets based on prior data and market conditions. As such, we even included color on many of the calls if they seemed too aggressive.
These are this past week’s 15 fresh analyst calls with implied upside of 50% to 100% to each analyst’s price target. Caveat emptor!
BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) was reiterated as Buy with a $166 price target at Jefferies late in the week. This was versus a prior $111.15 close, but the stock closed at $107.44 on Friday, for an implied upside of 54% if the firm is right.
Jefferies thinks there is upside in BioMarin from a high likelihood of a positive FDA panel vote for Kyndrisa. That massive target is only $7 above the consensus analyst price target and is not that much higher than the 52-week high of $151.75.
Hain Celestial Group Inc. (NASDAQ: HAIN) has been unable to escape the trends hurting many organic and natural foods in 2015. Still, Hain Celestial was reiterated as Buy at Argus with a $78.00 price target this week. Just keep in mind that the pressure remains here, as the prior $45.26 close became a share price of $41.46 by Friday’s close.
The firm called Hain’s sell-off a buying opportunity, but other firms have been lowering their price targets aggressively as the 52-week high of $70.65 is history now and the stock hit a new 52-week low of $41.31.
Range Resources Corp. (NYSE: RRC) was raised to Outperform from Sector Perform by RBC Capital Markets on Thursday. The independent oil and gas outfit was assigned a $47.00 price target, up more than 50% from the prior $30.03 close.
Range Resources closed up almost 7% at $31.72 on Friday, and that would still leave an implied 48% upside if the firm is accurate. For that matter, Range Resources has a consensus analyst price target of $49.35 and a 52-week range of $27.55 to $74.47.
SunPower Corp. (NASDAQ: SPWR) was reiterated as Buy at Merrill Lynch on Friday, but readers should know that solar power stocks were stuck in the dark last week with big losses. SunPower’s price objective is $42.00 at Merrill Lynch, with the firm calling it a stable ship in the solar storm that still offers long-term growth.
SunPower’s prior close was $24.93, but its shares closed down 6.3% at $23.36 on Friday. With a consensus analyst price target of $35.72 and a weak solar trend in place, this has the hallmarks of a price objective that needs to be brought down more than just a couple of dollars.