Compared to an extremely upsetting 2022, Wall Street has a lot to be happy about these days. The S&P 500 index has climbed nearly 20% in 2023.
The S&P 500 is way up, but it's still below the all-time high it reached on Jan. 3, 2022. The benchmark index needs to climb about 5% higher to signal the start of a new bull market.
It has clawed its way back from 2022's deep losses, but not every great growth business has participated in the recovery. There are still some magnificent stocks out there with prices that don't reflect their true value.
These two stocks could rocket 31% and 47% higher over the next 12 months according to Wall Street analysts who recently pinned lofty price targets on them.
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1. Uber: Implied upside of 31%
When the Federal Reserve began raising interest rates in early 2022, growth stocks associated with unprofitable businesses like Uber (UBER -0.38%) were beaten severely. Now, though, the mobility service leader is generating a significant profit that isn't entirely reflected in its stock price.
Following Uber's recent inclusion in the S&P 500 index, Oppenheimer (OPY 4.72%) analyst Jason Helfstein raised his price target on the stock to $75 per share. This target implies a gain of about 31% from recent prices.
Inclusion in popular indexes tends to push stock prices higher, but this isn't the main reason analysts are excited about Uber. They're a lot more interested in the company's ability to pull off significant price hikes without losing customers to competing services from Lyft and DoorDash.
If we ignore the effects of one-time business model changes, Uber's third-quarter take rate, or revenue margin, increased for its delivery and mobility segments. Higher pricing didn't stop the number of monthly active platform consumers from rising 15% year over year.
Over the past year, Lyft lost $902 million and DoorDash has fared even worse. Uber, though, reported $1.1 billion in net income.
Uber could be a great investment now because the network effect that is allowing it to beat the competition today appears sustainable. More passengers hailing rides encourage more drivers to hit the roads -- which, in turn, makes the service more attractive to potential new customers.
2. Bill Holdings: Implied upside of 47%
Shares of Bill Holdings (BILL 3.21%) got hammered in November after Bloomberg reported the bill-payment service provider was in talks to acquire Melio Payments for $1.95 billion. Bill Holdings quickly denied the rumor, but the stock is still down about 50% from the peak it set in July.
Canaccord recently lowered its price target on Bill Holdings stock to $100, but this target still implies a gain of around 47% from the stock's recent closing price.
The company markets software that helps small to medium-size businesses (SMBs) automate payments and track receivables. Sales growth has decelerated, but the company still reported core revenue that rose 24% year over year during its fiscal first quarter that ended on Sept. 30.
Most of the businesses Bill Holdings is targeting still use pen and paper to track payments or at best a simple spreadsheet. An ability to automate processes that SMBs generally manage by hand is attracting new customers, while its increasingly integrated platform makes leaving its network for a competitor a more unappealing prospect.
Shares of Bill Holdings have been beaten down to 37 times forward-looking earnings expectations. Despite a difficult macroeconomic environment, this company is still growing at a pace that more than justifies the high multiple. Buying the stock now to hold over the long run looks like the right move.
