Savvy investors know to stick with stocks in an uptrend. But analysts are still pounding the table for some S&P 500 stocks down 50% this year.
Wall Street analysts are calling for 11 battered stocks down 50% or more in the S&P 500, including Dish Network, Tesla and Catalent, to rally at least 50% over the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
Such bold calls will either mark a moneymaking opportunity or drive S&P 500 losses even further.
"Markets must digest the changing investment landscape of elevated interest rates, quantitative tightening, elevated inflation and hawkish global central banks," said Richard Saperstein, chief investment officer at Treasury Partners. "Overall, we remain underweight equities, and believe it's important to retain dry powder and consider opportunities in bonds, instead of stocks."
Sizing Up The S&P 500's Damage
S&P 500 investors who try to buy the dip keep getting burned. That's why it is surprising to see analysts still hang in on some stocks.
The pain is undeniable. The S&P 500 just this year is down more than 20%, putting it squarely in bear market territory. But selling goes deeper than that. More than 30 stocks in the S&P 500, including giants like Tesla and Meta Platforms, are down more than 50% this year.
What's more, the average S&P 500 stock is now down nearly 13%. And every S&P 500 sector, except for energy, is down on the year.
So, what's to like in this market? Analysts are sticking their necks out for a few of the biggest losers.
Finding Opportunity In Battered Communication Stocks
The communication services sector is down more than any other. No wonder dumpster-diving analysts are looking there for bargains.
The Communication Services Select Sector SPDR is off 39.9% this year. That's roughly twice the loss of the S&P 500. It's the worst-performing sector among the 11 in the S&P 500. Only the 38.2% drop in the consumer discretionary sector comes close.
And worse than its sector, Dish Network, a satellite communications firm, is off more than 58% this year to 13.50 a share. Analysts, though, still hold out hope it will return to 32.44 a share — roughly the same price it started the year — in 12 months' time.
But it's hard to buy into that bright vision. Analysts also think the company's adjusted profit will fall 31% in 2022 and another 36% in 2023.
Analysts Keep Light On For Tesla
What exactly is electric car maker Tesla worth now that it's fallen 68% this year? Some analysts are holding out low numbers.
But Wall Street analysts still think Tesla stock is destined for a rally. Analysts forecast Tesla to trade for 248.38 a share in 12 months. If they're right that's implied upside of 120%.
Tesla at least has the fundamental growth to back up the high hopes (for now). Analysts think the company's adjusted profit per share will rise 83% in 2022 and more than 33% in 2023.
Looking For Health Care Bargains
Big health care stocks are holding up relatively well this year. And some have displaced tech stocks in the top-10 most valuable in the S&P 500.
But analysts see one beat up health care stock they like. It's drug therapy company Catalent. Unlike other more mature (and stable) health care stocks, shares of Catalent lost two-thirds of their value this year to 42.94.
Analysts, though, still insist this stock will be worth 74.72 a share in 12 months. And if accurate, that works out to an expected gain of 74%. The company's profit is forecast to fall 15% in the current fiscal year, but rise nearly 17% in the following year.
Should you blindly follow analysts' calls? Absolutely not, especially with beat-up stocks like these. Price targets can, and are, coming down for many stocks. But it's still interesting to see where analysts see the most opportunity in the wake of a terrible year for stocks.
Analysts' Top Picks In The Wreckage
Stocks down 50% or more with highest 12-month price targets
| Company | Ticker | YTD Ch. | Implied upside | Sector |
|---|---|---|---|---|
| DISH Network | -58.4% | 140.2% | Communication Services | |
| Warner Bros. Discovery | -62.3% | 132.6% | Communication Services | |
| Tesla | -68.0% | 120.4% | Consumer Discretionary | |
| Catalent | -66.5% | 74.0% | Health Care | |
| Amazon.com | -50.9% | 72.4% | Consumer Discretionary | |
| Caesars Entertainment | -57.2% | 70.7% | Consumer Discretionary | |
| Match Group | -70.2% | 68.5% | Communication Services | |
| PayPal Holdings | -64.2% | 56.4% | Information Technology | |
| Signature Bank | -65.5% | 55.5% | Financials | |
| Expedia Group | -53.7% | 54.0% | Consumer Discretionary | |
| Generac Holdings | -72.7% | 53.0% | Industrials |
Sources: S&P Global Market Intelligence, IBD
Follow Matt Krantz on Twitter @mattkrantz
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