3 Stocks Getting Boosted by Analysts

May 06, 2024 at 06:05 AM EDT

photo of mobile device screen displaying shopify logo

Wall Street analysts reconsider their views on specific stocks and sectors every earnings season. Investors should keep up with ratings and sentiment changes for those names that could interest their portfolios.

Of course, these ratings are only part of the puzzle. They should be taken with a grain of salt, as further due diligence will always guide investors into the underlying trends. This time around, analysts are choosing to boost stocks like Shopify Inc. (NYSE: SHOP), Sherwin-Williams Co. (NYSE: SHW), and even Enphase Energy Inc. (NASDAQ: ENPH).

Are ratings enough? Not likely. Investors will also have access to solid fundamental reasoning behind potential waves pushing these businesses higher. Far from blindly following analyst ratings, here is why investors could add the stocks in this list to their watchlists.

Shopify’s Staying Power Through the Cycle

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Now that the U.S. economy is pivoting, with worrying signs of potential downside ahead, Shopify’s business model may provide investors the stability they need during these uncertain times. With both the manufacturing and services PMI indexes contracting, Shopify remains.

Analysts see up to 50.8% earnings per share (EPS) growth this year. In their latest ratings, Citigroup Inc. (NYSE: C) specifically sees the stock going as high as $105 a share. However, to prove these valuations right, the stock would need to rally by 41% from today’s prices.

Because Shopify offers cost efficiencies for businesses experiencing headwinds and scalability opportunities, this stock is set to grow at rates above competitors like Amazon.com Inc. (NASDAQ: AMZN) and Wayfair Inc. (NYSE: W).

Amazon analysts think the stock could deliver 23.5% EPS growth this year. At the same time, Wayfair’s projections still suggest the business won’t make a net profit. For this reason, markets are now willing to pay a premium for Shopify’s earnings over the rest of its peers.

Compared to the software industry, Shopify’s 827x P/E valuation commands a massive premium to the industry’s average 49.6x multiple today. Because the stock has underperformed the broader S&P 500 by roughly 12% over the past quarter, investors now have an additional ‘catch-up’ potential play on their hands.

A U.S. Construction Boom Could Help Sherwin-Williams

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After buying homebuilding stocks like D.R. Horton Inc. (NYSE: DHI), Warren Buffett made his view public regarding the immediate future of residential construction activity in the U.S.

What better way to quietly benefit from this trend than through lateral companies like paint providers? After all, finished homes need to be painted and well-presented for potential buyers; that’s where Sherwin-Williams comes in.

Knowing this, analysts at Citigroup see a valuation of up to $370 a share for this stock, calling for a 19% upside from where the stock trades today. With the expected 12% EPS growth this year, markets felt comfortable enough with these projections to bid the stock higher.

Compared to the construction sector, Sherwin-Williams calls for a 44.3% premium through its 33.2x P/E multiple over the sector’s 23.5x. Once again, stocks tend to trade at premium valuations or near their 52-week highs for good reasons.

Trading at 90% of its 52-week high, Sherwin-Williams fits the profile for a stock worth boosting, as it could potentially flirt with making new highs soon, mainly riding the construction tailwind, now Buffett-certified.

High Oil Prices? Better Call Enphase Energy

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Out of the most viable alternative energy sources on the market, solar energy has the most potential to overtake others. Representing roughly 4.5% of the total global electricity generation, the industry has a lot of ground to cover, meaning more runway for profit growth.

The main drivers for the industry include increasing adoption rates and cost reduction, which is good news for Enphase analysts, as their job just got a bit easier. Holding a 19.2% market share in U.S. residential real estate solar energy production, Enphase holds another angle from which it could grow further.

With oil prices rising above their stubborn $80 a barrel ceiling in the past quarter, more expensive fossil energy is pushing businesses and consumers to look into alternative energy to cushion these rising costs. As a result, Mizuho Financial Group Inc. (NYSE: MFG) analysts saw fit to boost Enphase’s price target to $148 a share.

Calling for a 29.5% upside from where the stock trades today, these analysts aren’t the only ones spotting the higher ceiling the stock could provide. EPS growth is set to reach 126.4% this year, justifying the stock’s premium 59.5x P/E valuation over the energy sector’s 14.6x multiple today.

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3 Stocks Getting Boosted by Analysts

Shopify’s Staying Power Through the Cycle

A U.S. Construction Boom Could Help Sherwin-Williams

High Oil Prices? Better Call Enphase Energy

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