If you're picking stocks to buy for your portfolio, you can save some time by looking at ones that Wall Street analysts are already bullish on currently. Analysts spend a lot of time examining a company's financials, and while you shouldn't rely entirely on their findings, they can help steer you toward undervalued stocks that may be good buys.
Two stocks that Wall Street analysts think can deliver returns of around 30% or more right now include InMode (INMD 0.70%) and Alphabet (GOOG 9.96%). Here's a closer look at these growth stocks and whether you should consider adding them to your portfolio today.
1. InMode
InMode is an Israel-based company that provides contouring and remodeling treatments to help people improve the look of their bodies. It can be an easy way for consumers to fix unappealing imperfections and it's a more convenient option than cosmetic surgery. But what was unattractive for investors last year was the stock's performance: InMode lost nearly half of its value in 2022.
The sell-off has been extreme for the stock. A worsening growth rate may be raising concerns about whether this was just another business that benefited from an uptick in consumer spending amid the pandemic.
In the company's most recent earnings numbers, sales of $121.2 million for the period ended Sept. 30 rose 29% year over year. That's a solid growth rate but nowhere near the 58% surge it achieved a year earlier. And despite achieving a strong gross margin of 85%, the company's net income totaled $48.8 million and only increased by 9% because InMode's sales and marketing expenses soared by 40% from the prior-year period.
InMode's stock currently trades at 17 times its trailing earnings, which is slightly lower than the S&P 500 average of nearly 19. And at its current level, analysts see the stock rising by around 30%, with the consensus price target being just above $46.
Although InMode's growth rate has been falling, the company is still doing well and is a relatively cheap buy given the potential the business has in attracting more consumers away from cosmetic surgery. Once the economy starts to show signs of improvement and inflation gets to more tenable levels for investors, this is a business that could take off.
InMode is a smart stock for long-term investors to buy in 2023.
2. Alphabet
A business that analysts are even more bullish about is Alphabet, which lost 39% in value in 2022. The company's prized assets include video sharing platform YouTube and its Google search engine. The consensus analyst price target for Alphabet is $144, suggesting that the tech stock could jump by more than 60% from where it entered 2023.
For Alphabet to get to that level, it simply needs the ad market to recover. Businesses are scaling back how much they're spending on advertising in preparation for a recession this year, and that is hampering many tech companies that are dependent on ad revenue.
That impact is painfully evident in Alphabet's most recent earnings report (ended Sept. 30), where revenue of $69.1 billion increased at a rate of just 6% year over year. In the previous year, the company's growth rate was 41%. While it may be overly optimistic to assume Alphabet can get back to that kind of growth given that the pandemic ramped up consumer spending and sales for many businesses, analysts are likely banking on more than just a single-digit growth rate from the tech giant in the future.
As with InMode, a recovery in the share price may not happen until the economy shows signs of strengthening to the point that companies feel more comfortable spending money on ads again. If you're willing to wait at least a year or two, Alphabet should be a good buy from here on out and deliver some positive returns. At 18 times its trailing earnings, the stock provides good value for investors as the tech industry's average multiple is 24.
