This last week may have been short and light on investing interest in the United States. After all, millions of passengers flying out or driving out on Wednesday, then eating more turkey than can easily be measured, and then hitting the malls and retailers just puts the minds of investors elsewhere. The Dow Jones Industrial Average fell 0.14% and the S&P 500 Index rose by a whole 0.04% this last week. Still, there are some hidden gems which may be seen having huge potential gains ahead if Wall Street analysts are right in their calls.
24/7 Wall St. reviews dozens of analyst research reports each day. This often turns into hundreds of research reports each week. While many analyst reports cover stock to buy, most of the Buy and Outperform ratings come with 8% to 15% upside projections for Dow or S&P 500 stocks. Then there is another class of analyst upgrades and Buy ratings — where the projected analyst upside in a stock can be 35%, 50%, and in some cases even 100%.
There is one rule that investors need to keep in mind. The higher the projected return on an investment generally means that there is a lot more risk. That is certainly true of the latest pack of analyst upside calls for massive upside. Some of these are beaten down stocks, some are very risky companies with uncertain futures, and some could easily end up in the “what ever happened to that company?” category.
Conservative investors and those who are averse to risk should not even remotely consider investing in speculative companies just because some Wall Street analyst says there is upside. It is undeniable that many analyst calls do prove to be wrong. And many companies just never grow into their full potential.
Now that you have been reminded that these are full of much more risk than you might expect from a Dow or S&P 500 stock, these are six of the last week’s analyst upgrades and positive research calls with massive upside. In each case 24/7 Wall St. has pointed out at least one potential risk or pitfall that investors should at least consider before following a Wall Street analyst call just because they see huge upside.
Avon Products Inc. (NYSE: AVP) has been down and out for too long to easily recall now. Citigroup now sees upside here, potentially big upside. In a research report this last Tuesday Avon was raised to Buy from Neutral and it was assigned a $5.00 price target. This was versus a prior $2.85 close, but shares rallied well over 10% and then closed up again on Friday to end the week at $3.45.
Avon had a consensus analyst price target of $4.52 ahead of the call, and that consensus target was seen higher at $4.67 by the end of the week. Avon has a 52-week range of $2.41 to $10.20. The driving force for Citi’s upgrade here is that a turnaround may be taking shape, it seems to be targeting more profitable growth, and Brazil’s woes could even be abating for Avon.
Then again, there is always the risk that Avon keeps failing at a turnaround or cannot rekindle interest again. We have reported that no buyout firms were interested and that its options may be very limited.
Horizon Pharma plc (NASDAQ: HZNP) was reinstated as Buy at Jefferies back on Monday, along with a $43 price target. Its prior close was $18.82, and Friday’s closing price was $21.77. Jefferies believes that Horizon’s standalone growth appears healthy now that it is no longer being pursued in a low-premium takeover that undervalued the company. Another potential here is that near-term M&A remains likely.
Horizon’s consensus analyst price target is up closer to $38 and its 52-week range is $12.04 to $39.49. For a $3.5 billion market cap, this just may be more volatile than many healthcare and specialty biopharma investors can stomach.