Some stocks attract more investor and analyst attention than others. This is true even in bear markets, as investors of all types look for long-term winners trading at low prices.
So should you buy them just because they are the hottest stocks on Wall Street? Let's take a deeper look at three high-growth stocks that are receiving lots of analyst love nowadays.
Why the Street loves Alphabet
Google's parent company, Alphabet (GOOG -1.60%) (GOOGL -1.61%), is a perennial analyst favorite. Coming off a 20-for-1 stock split over the weekend and headed into next week's second-quarter earnings report, that hasn't changed. Indeed, 51 analyst firms offer ratings on this stock, according to data from CNBC, and 14 of these reports call Alphabet a "strong buy," 35 firms peg it as a "buy," and the last two say it's a "hold" right now.
I'll pick one name out of that enormous hat of analyst opinions. Brian White from Monness, Crespi, Hardt recently lowered his split-adjusted price target on Alphabet from $175 to $145 per share with a "buy" rating on the stock. White likes Alphabet's leading position in the market for digital advertising, which is poised for explosive growth in the long run. The short-term price target was lowered due to the challenging macroeconomic situation in 2022, but the analyst firm feels that Google and Alphabet will come out stronger when the economic dust settles.
That's high praise when you're talking about a company already established as one of the largest stocks and most successful businesses on the market. I think White's analysis is right on the money, with the additional upside of Alphabet's ambitious diversification plans. This is a stock for all seasons, and I see Alphabet as a fantastic buy as it trades 24% lower in 2022. These low prices won't last.
What is Canaan up to?
Crypto-mining equipment maker Canaan (CAN -6.98%) is a very different story. Only three analyst firms follow this Beijing-based company, but the handful of interested Street groups sing its praises in unison. CNBC reports one "strong buy" and two "buy" ratings on Canaan's stock.
One of these bullish ratings came from H.C. Wainwright analyst Kevin Dede, who started his coverage two weeks ago with a "buy" rating and a price target of $5 per share. Dede likes Canaan's recent decision to run some Bitcoin mining operations of its own, more than doubling its self-mined holdings from 70.5 Bitcoins in the fourth quarter to 167 coins three months later.
Canaan's reported Bitcoin holdings were worth $3.7 million on July 18, which works out to just 0.9% of the company's cash on hand, so the in-house mining effort isn't a game changer in the short term. That may change over time, though. If nothing else, I think it's smart of Canaan to set up an environment where unsold crypto-mining machines can be put to work for the equipment builder.
This stock trades as ridiculously low valuation ratios today. Canaan's shares are changing hands at just 1.8 times trailing earnings and 0.7 times sales. This crypto winter is painful for companies on the infrastructure-focused side of the industry, but Canaan should benefit greatly if and when the crypto tide turns again. Starting from today's ultra-low prices and armed with a healthy balance sheet, Canaan looks like an interesting buy with limited downside right now.
Atlassian is making some noise
We're going Down Under to find the third Wall Street favorite. Sydney-based project management software maker Atlassian (TEAM 3.79%) has inspired 24 active analyst recommendations, including seven "strong buy" and 12 "buy" ratings, with five firms sticking with a neutral "hold" recommendation.
For example, Goldman Sachs analyst Kash Rangan upgraded this stock from "neutral" to "buy" at the end of June. The price target increased from $279 to $300 per share. Rangan believes that Atlassian's transition from software licenses to cloud-based subscription revenues is on the verge of a "pivotal moment," as software developers around the world search for more efficient project management practices. Atlassian's comprehensive suite of tools, such as the Jira collaboration platform, Trello workflow manager, and Bitbucket code management system, is often a good solution for these requirements.
Rangan also pointed out that the collaboration-based project management market holds about 2.2 million companies large enough to become potential Atlassian users. The company has addressed a small sliver of that big pie so far, reporting 234,575 active customers at the end of March 2022.
This stock isn't exactly cheap by traditional metrics, trading at 18 times sales and 125 times forward earnings today. However, you get what you pay for. Atlassian sports rampant top-line growth and rising free cash flows over time, and the forward-looking runway for continued growth looks both long and clean. As a result, many analysts call Atlassian a no-brainer buy today -- and I agree wholeheartedly.