For more than a year, Wall Street has been waving a gigantic green flag for the bulls. After dipping below 2,200 on an intraday basis in March 2020, the benchmark S&P 500 closed above 4,200 for the first time in history last week.
In many instances, the best-performing stocks over the past year are once-obscure companies that have found themselves in the right place at the right time.
But according to Wall Street analysts, you shouldn't have to focus solely on small-cap and mid-cap stocks to generate healthy returns. Based on one-year consensus price targets from investment banks on Wall Street, the following five brand-name stocks can deliver gains ranging from 27% to as much as 50%.
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Pinterest: Implied upside of 31%
If growth stocks are your thing, Wall Street would strongly suggest using last week's swoon in social media stock Pinterest (PINS 1.11%) as an opportunity to open a position or add to your existing stake. With a price target of $86, Pinterest offers implied upside of 31% over the next year.
The reason Pinterest's shares dived last week had to do with the company's guidance for the second quarter. Specifically, it guided for mid-teens growth in monthly active users (MAUs), with MAUs remaining relatively flat in the United States. While some folks are clearly disappointed with slower user growth, this looks to be nothing more than a reversion back to the mean after MAU growth rocketed higher during the pandemic. Keep in mind that Pinterest grew its MAUs by an annual average of 30% between 2017 and 2019 (i.e., before the pandemic began).
Another thing to consider is that Pinterest's growth story primarily revolves around new users outside the United States. Even though average revenue per user (ARPU) in foreign markets is a lot lower than within the U.S., there's much more opportunity to grow ARPU internationally as the company's MAU count moves higher.
Ultimately, no social media platform may be better suited for targeted advertising than Pinterest. With its users willingly sharing the things, services, and places that interest them, Pinterest simply needs to connect these motivated shoppers with merchants that can meet their needs. It's a platform that should be wildly successful over the long run.
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Merck: Implied upside of 28%
Bargains abound in the healthcare space as well. Pharmaceutical stock and Dow component Merck (MRK -0.36%) is forecast by Wall Street to gain roughly 28% over the next year.
The core catalyst for Merck looks to be its oncology drugs, led by cancer immunotherapy Keytruda. This top-selling treatment brought in $14.4 billion in 2020 -- a 30% improvement from the prior-year period -- and has been approved by the Food and Drug Administration in two dozen indications. Merck is currently testing Keytruda in dozens of additional clinical trials as both a monotherapy and combination treatment. Expanding its label in even a small number of these ongoing trials could allow Keytruda to become the world's top-selling drug.
Beyond oncology, Merck is also leaning on its animal health division as a steady growth driver. In the first quarter, animal health sales rose by a cool 17%, with companion-animal revenue up 26%. It's been more than a quarter of a century since year-over-year spending on companion animals fell in the U.S.
Keep in mind that Merck also benefits from being a basic-need goods supplier. Since we don't get to control when we get sick or what ailment(s) we develop, demand for the company's treatments is usually steady no matter how well or poor the U.S. and global economy are performing.
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Advanced Micro Devices: Implied upside of 29%
Another brand-name stock with significant upside over the coming 12 months is chipmaker Advanced Micro Devices (AMD 0.88%), which you probably know best as AMD. Wall Street's consensus price target of $105 implies almost 29% upside from where it closed this past weekend.
It's not a matter of what's gone right for AMD, because the simple answer is that everything is going right. It has seen strong demand for its graphics cards in notebooks, laptops, and personal computers; it's in the perfect position to take advantage of the release of new gaming consoles, and has whittled away at Intel's processor-chip dominance. And AMD is enjoying strong demand for its solutions in data centers.
What does everything going right look like? In the March-ended quarter, AMD's sales advanced by 93% to $3.45 billion. Meanwhile, net income catapulted 189% from the prior-year period. Please note that while the end of the first quarter in 2020 was adversely impacted by coronavirus concerns, chip demand was already determined many months in advance. In other words, AMD blew the lid off of even the most aggressive expectations.
With more businesses than ever bulking up their cloud storage needs, and the gaming/crypto community gobbling up AMD's graphics cards, it's certainly possible that Wall Street's $105 price target becomes a reality within the next year.
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GlaxoSmithKline: Implied upside of 27%
Yet another brand-name big pharma stock with a lot of perceived upside, according to analysts, is U.K.-based GlaxoSmithKline (GSK -0.58%). The approximate $10 per share in upside implied by Wall Street's consensus price target would yield a gain of 27% over the next year.
Unlike Merck, GlaxoSmithKline has been hit pretty hard by the pandemic. Sales of the company's established medicines (i.e., drugs that are at or passed their period of exclusivity) fell 20% in the most recent quarter, with vaccine-group revenue plunging 32%. This includes a near-halving in shingles vaccine revenue. With fewer people visiting their doctor for routine checkups as a result of the pandemic, core treatment lines for GlaxoSmithKline are struggling.
The good news is that there is a path for substantial growth once we move beyond the pandemic. In a post-pandemic world, GSK's vaccine group would pick right back up where it left off in 2019, HIV drug sales probably recoup what was lost in 2020, and oncology/respiratory treatments likely continue their double-digit growth trajectory.
At 12 times forward-year sales, GlaxoSmithKline isn't the cheapest big pharma of the bunch. But the company's 5.7% dividend yield is unmatched among drugmakers.
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Zoom Video Communications: Implied upside of 50%
Lastly, if you want a brand-name stock with some serious upside, consider adding cloud-based web conferencing company Zoom Video Communications (ZM 2.47%) to your portfolio. If Wall Street's prognostication of $478 in 12 months is correct, Zoom offers implied upside of 50% for growth-seeking investors.
As you can rightly imagine, Zoom was one of the biggest beneficiaries of the pandemic. With traditional workspaces disrupted or closed, businesses big and small turned to conferencing solutions like Zoom to keep projects and innovation moving. Last year, Zoom's revenue more than quadrupled to $2.65 billion. That was about three times higher than what the company had estimated it would generate in 2020 sales before the pandemic hit.
The reason Zoon has been such a success is its freemium model. It allows businesses to try out its web conferencing solutions for free, ultimately hooking them on the efficiencies it can provide. Even though 326% sales growth in 2020 was impressive, the more important figure was the 470% increase in subscribers with at least 10 employees. Zoom's ability to reach small and medium-size businesses is what'll really drive it forward.
Additionally, don't overlook how dominant Zoom is within the web conferencing space. Datanyze finds that Zoom controls 40% of U.S. web conferencing share, which is nearly double its next-closest competitor. With cloud-based web conferencing here to stay, Zoom looks to have a good shot at making patient investors richer.
