For the better part of the past 15 months, the stock market has been unstoppable. In fact, this is the strongest bounce-back rally in history following a bear-market bottom -- the benchmark S&P 500 has gained 95% since hitting its trough on March 23, 2020.
But just because the broader market is at or near an all-time high, it doesn't mean Wall Street analysts fail to see value. For each of the following five popular stocks, the highest price target from a Wall Street analyst implies they'll gain, at minimum, 105% over the next 12 months. The question is, could it actually happen?
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Snowflake: Implied upside of 117%
First up is cloud data-warehousing company Snowflake (SNOW 3.80%), which was arguably the hottest cloud stock to go public in 2020. Based on the most optimistic price target on Wall Street of $515, Snowflake offers potential upside of 117% over the next year.
The question of whether this price target is realistic really comes down to how much investors value Snowflake's competitive advantages. For example, Snowflake's solutions are layered atop the most popular cloud infrastructure services. Whereas it can be difficult to share data when that data is stored on competing platforms, this becomes a seamless process for Snowflake customers.
Likewise, Snowflake doesn't operate on a subscription model like its peers. Instead, it charges its clients based on the amount of data stored and the number of Snowflake Compute Credits used. This type of billing is more transparent and allow businesses to better control their costs.
There's no question Snowflake has tangible advantages. But whether they're worth an insane price-to-sales multiple is another question. The company is already valued at 63 times this year's forecasted sales, which is well over double the industry average for cloud stocks. Making a case for more than 125 times sales might be asking too much.
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Bionano Genomics: Implied upside of 108%
There's also quite a bit of presumed upside for healthcare stock Bionano Genomics (BNGO 1.76%). This small-cap diagnostics developer has a high price target on Wall Street of $14, which implies a gain of up to 108% over the next 12 months.
The price targets for Bionano really began to soar about six months ago, when the company released results on the effectiveness of its optical genome mapping (OGM) system, Saphyr. This system outperformed Pacific Biosciences' OGM technology in a study to identity large structural genome variations, and in a separate study identified three autism spectrum disorder risk genes. The thinking here is that Bionano's technology will make it easier for drug developers to discover and target specific genetic markers for hard-to-treat diseases.
While the above certainly sounds like a convincing reason for Bionano to hit $14 a share, there's the little part about Saphyr needing Food and Drug Administration approval. For the moment, healthcare companies can use Saphyr for research purposes, but Bionano's ability to generate revenue will be limited until such time as it gets the green light from the FDA. This is expected to be years off.
The good news is that Bionano Genomics has plenty of capital and growing clinical data momentum. But it's probably not going to hit or sustain $14 a share anytime soon.
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Kinross Gold: Implied upside of 120%
It's not just tech stocks and healthcare that Wall Street sees rocketing into the stratosphere. Gold stock Kinross Gold (KGC 0.67%) has a peak price target on Wall Street of $17.50 Canadian ($14.20 U.S.), offering an implied upside of a lustrous 120%.
One reason for optimism is the expected strength in the price of gold. Historically low lending rates coupled with the prospect of higher inflation over the long run should both have investors considering physical gold as a store of value. If Kinross can net a higher realized selling price for what it digs out of the ground, cash flow and profits should head higher.
Kinross is also actively expanding its production capacity. While Paracatu, Kupoi, and Tasiast remain the lowest-cost mines in Kinross' portfolio, accelerated production at Fort Knox and expanded output at Bald Mountain are two of the key drivers that can lift gold equivalent ounce (GEO) output higher by 500,000 GEO in 2023 to 2.9 million GEO.
Kinross is clearly inexpensive relative to its cash flow potential, but even a gold bull like myself struggles to see 120% upside over the next year.
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Cresco Labs: Implied upside of 144%
Wall Street is also keen on U.S. marijuana stocks. In particular, the peak price target for U.S. multistate operator (MSO) Cresco Labs (CRLBF 4.62%) of CA$34 ($27.59 U.S.) implies a gain of as much as 144% over the coming 12 months.
Like most MSOs, Cresco's been a busy bee on the retail front. It recently opened its 33rd dispensary, and will claim a handful of additional retail locations once its pending acquisition of Cultivate closes in Massachusetts. Cresco has targeted a number of legalized states where license issuance is limited. This means it'll be able to build up its brands and create a loyal following in these markets without being overrun by competition.
But what's most impressive about Cresco Labs is its wholesale operations. When Cresco purchased Origin House in January 2020, it became the owner of a highly lucrative cannabis distribution license in California. This license allows the company to place proprietary and third-party pot products into more than 575 dispensaries throughout the Golden State.
The biggest drawback for Cresco Labs is that wholesale margins are notably lower than retail. However, with the insane volume of the California cannabis market at its disposal, this margin gap may be meaningless. Though 144% upside may be asking a bit much over the next 12 months, Cresco does offer some very tangible upside.
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DraftKings: Implied upside of 105%
Rounding out the list is digital sports entertainment and gaming company DraftKings (DKNG 4.22%). The peak price target of $105 from the analysts at Loop Capital suggest it could gain a cool 105% over the next year.
On one hand, DraftKings should benefit from the steady growth of online gambling and sports betting in the United States. A Morgan Stanley report suggests this could be a $15 billion market by 2025, up from a little over $3 billion in online wagering last year. As someone who's an avid fantasy football nut, I can attest to the lure of easily accessible sports betting.
Then again, DraftKings' biggest tailwind -- aside from more states giving sports betting and online gambling the green light -- has been the pandemic. The closure of casinos has funneled new customers its way. But with vaccination rates climbing in the U.S. and most casinos reopening, the momentum that DraftKings possessed may begin to slow.
Similar to Snowflake, DraftKings' valuation is really going to come down to how much premium is placed on the company's rapid sales growth. While I expect investors to continue to be motivated by the growth in online gambling and sports betting, I'm not quite sure how DraftKings achieves a $40 billion market cap with its operating losses soaring. This isn't a price target I see coming to fruition.
