Analysts' price targets can give you a good gauge of where a stock might be headed in the months ahead -- but that's not always the case. In some situations, a stock that's in free fall can decline faster than analysts can downgrade it. The result is a price target that looks high, with the stock looking as though it has plenty of upside. That, however, can sometimes be a dangerous assumption for investors to make.
Three stocks that have been struggling this year and that analysts think have more than 50% upside right now are Plug Power (PLUG 1.26%), Medical Properties Trust (MPW -1.10%), and Warner Bros. Discovery (WBD -2.17%). Here's a closer look at whether these are indeed good stocks to buy, or if investors should brace for more downgrades.
Plug Power: 187% upside
Plug Power is a green energy stock with a consensus analyst price target of nearly $10. For it to get to that level, shares of the hydrogen cell company would have to nearly triple in value. But that upside has more to do with the stock's rapid fall this year, as Plug Power's valuation has plunged 72% since January.
The hydrogen fuel cell company is a big play for investors expecting hydrogen to be a key part of the world's green energy solutions. But even if that's the case, it doesn't mean Plug Power will be the company to lead the industry there. Regardless of the long-term potential, the business needs to survive long enough to realize those opportunities, and that isn't a sure thing at all.
This month, the company released its latest earnings numbers along with a "going concern" warning, saying that there is doubt about its ability to survive. As of the end of September, the company reported cash, cash equivalents, and restricted cash of less than $337 million. Meanwhile, its current liabilities -- what it has to pay over the course of the next 12 months -- total $931 million. It could sell inventory and available-for-sale securities, but overall, it's not a pretty picture, as this is a cash-burning business.
Investors should be careful not to get caught up looking at Plug Power's Wall Street price targets as they are likely to come down in the weeks and months ahead. This isn't a stock to risk your hard-earned money on.
Medical Properties Trust: 84% upside
Medical Properties Trust (MPT) is a real estate investment trust (REIT) that has been struggling for the past few years due to the pandemic. Its tenants, which are mainly hospitals, have been enduring some challenging conditions in the industry. Labor costs have risen, and that has put a strain on their bottom lines -- and their ability to pay rent.
The situation deteriorated so much for Medical Properties that it had to slash its dividend payments earlier this year. Although its yield remains incredibly high at more than 12%, that's more indicative of just how bearish investors have been on the stock. Year to date, shares of Medical Properties Trust are down 57%, and the stock can't seem to catch a break.
The consensus analyst price target for the stock is $8.83, which implies an upside of more than 80% from where it trades today. There is a bullish case to be made for MPT. The REIT reported funds from operations per share of $0.36 in its latest quarterly results (which ended Sept. 30)
That's enough to support its quarterly dividend of $0.15 -- but there is still plenty of risk with the stock as interest rates remain high. And the company is looking to potentially sell assets to free up liquidity, which isn't exactly a sign of confidence.
The future remains hazy for Medical Properties, and investors should be careful not to rely too heavily on the stock's price target, as analysts are likely to downgrade it further. It may be an appealing contrarian investment, but this isn't a dividend stock that most investors should get their hopes up for now.
Warner Bros. Discovery: 55% upside
The actors' and writers' strikes in Hollywood are over, but Warner Bros. Discovery is still going to feel the effects of them into next year. That could amount to hundreds of millions of dollars on this year's earnings before interest, taxes, depreciation, and amortization (EBITDA). There have been delays in releasing content due to the strikes. And to make matters worse, the ad market hasn't been particularly strong of late, either.
The stock is up 14% this year, and it has been the best-performing investment on this list. In the past three months, however, shares of Warner Bros. Discovery have fallen by 12%. The good news is that at least the worst news is out of the way -- the strikes have been resolved.
Analysts have been lowering their price targets for Warner Bros. stock, but with the consensus price target still at nearly $17, there's more than 50% upside for the stock, according to analysts.
The company reported a net loss of $407 million for the most recent quarter, which ended on Sept. 30. The big challenge is what looms ahead for the business. More downgrades could be coming for the stock, but despite a possibly difficult year ahead for the company, Warner Bros.
Discovery is the only stock on this list that investors may want to buy. With some quality media assets and brands, including HBO and Warner Bros., this could still be a good long-term play.
