If you're looking for stocks that can make significant gains in a relatively short amount of time I've got some good news for you. Wall Street analysts who follow these three stocks think they're deeply underappreciated right now.
The investment bank analysts who've made it their job to know these three businesses thoroughly think their share prices could rise between 46.4% and 59.1% over the next year or so. Here's why they're so bullish.
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Taiwan Semiconductor
As its name implies, Taiwan Semiconductor Manufacturing (TSM 2.71%), or just TSMC, is a computer chip manufacturer headquartered in Taiwan. The stock has risen significantly from a 52-week low it hit in early November, but it's still down about 33% since the beginning of 2022.
Wall Street analysts who follow TSMC expect a rebound. The average price target on this stock suggests it could soar 46.4% over the next year or so.
TSMC shares are under pressure because sales of semiconductor-containing goods like smartphones and laptops could come under pressure if the economy enters a full-blown recession. Analysts are still bullish about TSMC's long-term prospects because it's likely to maintain a leading share of the market for extra-tiny chips.
TSMC is currently one of just a few companies that can produce 7-nanometer and 5-nanometer chips. Sales of chips 7 nanometers wide and smaller already contribute a majority of revenue and demand for 3-nanometer chips is significantly stronger. Delivery challenges from TSMC's tool suppliers have been holding back 3-nanometer chips, but the company expects to achieve high-volume production at this size before the end of the year.
Duolingo
Duolingo (DUOL -0.71%) is the parent company behind the hyper-popular language learning application of the same name. It's quickly become the top-grossing education app on Apple's App Store and Alphabet's Google Play Store, but the stock is down around 30% this year.
Analysts up and down Wall Street think Duolingo can recover this year's losses and keep on climbing. The consensus price target on the stock right now represents a 50% premium.
Language learning start-ups with popular software have a tendency to impress investors early on. Unfortunately, high customer acquisition costs combined with a lack of retention means they have a nasty tendency to post chronic losses as Rosetta Stone did for years before it was taken private in 2020.
Duolingo is still reporting losses, but analysts are encouraged by a trend toward sustainable profitability from quarter to quarter. Under generally accepted accounting principles (GAAP), Duolingo reported a third-quarter loss of $18.5 million, which worked out to 19.2% of total revenue. That's a solid improvement from a loss that was 45.6% of total revenue in the previous year period.
CrowdStrike Holdings
Contrary to its name, this company is not interested in getting crowds of workers to unite for better pay. CrowdStrike Holdings (CRWD 0.13%) runs a cloud-native cybersecurity business -- and a pretty good one at that.
Despite maintaining a leadership position in the cybersecurity space, CrowdStrike's stock price has fallen around 28% this year. Wall Street analysts who know the company inside and out have much higher expectations than the overall market. The average price target on CrowdStrike suggests it could soar 59.1% if more investors begin seeing its business in the same light as they do.
Wall Street analysts are bullish for the cybersecurity space in general because hackers don't take time off during recessions. CrowdStrike is especially interesting because its platform employs machine-learning techniques that theoretically improve as more customers use the service. The platform processes over 1 trillion events daily, which is kind of like having exclusive access to the best training course available.
CrowdStrike shares have fallen this year but the stock still trades at a nosebleed-inducing valuation of 110 times forward-looking earnings estimates. While the stock has a good chance to meet analyst expectations and provide a positive return, any roadblocks on its path to profitability could also lead to swift losses. If you're going to buy this or any of these stocks it's important to make them a relatively small part of a diversified portfolio.
