From ‘Sell’ to ‘Strong Buy’: 3 Dramatic Analyst U-Turns to Watch
The bottom line about the stock market is that it is a popularity contest. That’s because there is no one true way to determine the exact value of a stock. Despite this, financial institutions dedicate entire teams of analysts to try and predict the future value of a stock. Ironically, stocks with analyst upgrades then become self-fulfilling prophesies, as retail investors who respect institutional opinions will go and purchase the stock.
This then increases its trading volume, which then increases its share value as it has more buy activity than sell activity, ultimately increasing the company’s market capitalization. In these cases, an analytical stance can quickly become a catalyst for growth, or it could just be a sign that the stock is worth buying.
The following three stocks have all been recently upgraded by analysts as good buying opportunities thanks to their financial reports and relatively niche addressable markets. Keep in mind, however, that an analyst upgrade does not mean risk-free investing. All three of these stocks are subject to the volatility of the market like any other company.
Guardant Health (GH)
Recently upgraded by Guggenheim, Guardant Health (NASDAQ:GH) received a buy rating as its average projected value was raised to $36.89 per share. This estimate represents a 27.74% upside from its current price of $28.88 per share. The company focuses on precision oncology through proprietary blood tests, data sets and advanced analytics.
While this approach to cancer therapy may not be as exciting as companies searching for the cure, it is a critical component of the process. The reason for this is that it allows clinical researchers to more accurately test and collect data regarding the cancers they are trying to treat, which may snowball into a more lucrative model over time for GH stock.
Looking at its financials, Guggenheim likely upgraded GH stock to a buy as a result of its 30% year-over-year revenue generation for the first quarter of 2024. While still operating in the red, GH has made strides toward profitability as it commercializes its testing technologies.
International Paper (IP)
The largest paper company in the world, International Paper (NYSE:IP) was recently upgraded by Seaport Global to a buy. The company focuses on the international staple of paper pulp and fiber-based packaging products, which are both renewable and constantly in demand.
For a global blue-chip company like International Paper, the name of the game is steady, long-term growth. This is not a stock that received a buy rating based on a new product or revolutionary technology. Rather, investing in IP stock is more like betting on the future of paper in the world. While it may not be as critical as it was before the digital age, still has a central role in packaging and sanitation.
Some key factors to keep an eye on for the future of International Paper are its sustainability and recycling projects as well as its commitment to ethically sourcing wood for its pulp making. As such, IP performs like other stocks with analyst upgrades focused on its future stability.
Cincinnati Financial (CINF)
A classical large-scale insurance company, Cincinnati Financial (NASDAQ:CINF) recently received a buy rating from Citigroup for its stock performance potential. The company operates an intriguing insurance business model where it offers its policies through localized independent agencies. These agencies then sell CINF’s insurance on behalf of the company and receive a commission for the sale while CINF picks up the responsibility and monthly premium.
Warren Buffet famously made much of his money by investing in insurance companies through Berkshire Hathaway’s (NYSE:BRK-A, BRK-B) acquisition of GEICO. Thus, it is nothing new for institutional investors to applaud an insurance stock like CINF for its buying prospects.
To back this rating up, Cincinnati Financial saw green in several of its key performance metrics for Q1 2024. Particularly, its 235% net income YOY increase garnered attention as investors wait to see if the success repeats for Q2. These factors have put it alongside other stocks with analyst upgrades.
On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
