The stock market has been in strong performing companies lately. Large numbers of stocks have doubled or tripled in the past year, and some have gained even more. And for many of these stocks, a large portion of the gains have come fairly recently.
But Wall Street experts are not always so optimistic about these investments. For some of these now popular stocks, analysts have set price targets that are far below current levels. This suggests that the best of Wall Street believe that the recent rises in their share prices have exceeded the point – and that they may fall back to earth in short order.
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Below, we look at three popular high-flying stocks, all of which have at least tripled since the end of October, and see if any of them need to move further. Equity analysts are clumsy, but there is more to the story.
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1. MicroStrategy
MicroStrategy (NASDAQ: MSTR) recently had a great run in the market – its share has quadrupled since the end of October. However, the boom does not have much to do with the fundamental business of the business.
MicroStrategy is an application software developer that helps businesses analyze their data. It’s been a growing niche lately, but MicroStrategy has not reaped the rewards. Total revenue has been quiet for a decade now, as the company has tried to switch to a subscriber-based model that is less dependent on license revenue.
Last summer, however, MicroStrategy took advantage of the cryptocurrency and said it would take the cash it had on its balance sheet and use it to buy bitcoin. This linked the company’s share to changes in the price of bitcoin, and as the cryptocurrency rose, so did MicroStrategy’s share price.
Equity analysts could not keep up. Citi raised its price target on the stock by $ 75 per share on Friday, but that did not change its sales rating on the stock. On top of that, even the increase raised the price target to just $ 325 per share – more than 50% lower than the $ 680 per share that MicroStrategy achieved on Friday morning.
In the future, MicroStrategy’s prosperity will be almost entirely linked to bitcoin, especially as it considers further leverage to take a larger position in the cryptocurrency. It may bear fruit, but Wall Street seems to think the share price is too high.
2. SunPower
The solar power industry has been doing well across the market lately. The share price of the industry leader SunPower (NASDAQ: SPWR) has risen by 230% since the end of October.
SunPower has sometimes done a bit of everything in the solar industry, but recently it has been working to reduce its capital footprint by concentrating on higher margins. The company has its division for manufacturing solar panels into a new company, Maxeon (NASDAQ: MAXN), and is now working to promote technological innovation in the solar arena, along with the marketing and offering of leading solar power products and services such as battery storage solutions.
SunPower recently raised $ 55 a share, but stock analysts are not nearly as enthusiastic about the company. The average price target among those covering SunPower is slightly higher than $ 24 per share, which represents a disadvantage of about 55% of current levels. The low target is $ 12 per share, which would be a decrease of almost 80% from here.
Even relatively positive analysts are losing confidence in SunPower. Piper Sandler downgraded its solar power rating from overweight to neutral on Friday, and although it left its $ 35 per share target unchanged, it said the big rise in the share price did not have a good fundamental explanation. Without obvious catalysts to stimulate further investor interest, SunPower may struggle to climb out of here.
3. Appiaan
Finally, Appiaan (NASDAQ: APPN) has benefited from the digital transformation that is taking place around the world. The provider of low-code software platforms enables its customers to produce faster and more efficient custom applications, and Appian has seen significant growth in sales – and specifically in recurring revenue. This has contributed to the share being 240% higher within three months.
Appian is just one of the many software-as-service stocks that have caused controversy over their price movements. Its core business is certainly strengthening, but the burgeoning share price jump has upset many analysts. This is why, even though it trades at around $ 220, the average target price among analysts is only $ 98 per share.
However, the target number has been climbing upwards lately. This month alone, Needham more than doubled its price target to $ 193 per share, and Morgan Stanley (NYSE: MS) gave a more modest $ 20 boost to raise its target to even $ 100. If Appian can continue to perform well, he could possibly keep the share price where it is – and allow analysts to increase their targets accordingly.
Call your own calls
Wall Street has benefits that go through corporate finances all day, but they are not infallible. Among these stocks, the link between MicroStrategy and bitcoin will give its stock just as much volatility as the cryptocurrency itself, while arguments that SunPower came fairly quickly are compelling. However, Appian may be in the early stages of a much larger secular trend that could carry it much higher in the long run.
If you like what you see in these companies, do not let the worries of Wall Street analysts stop you. Do your own research and come to your own conclusions and then invest accordingly.