Wall Street’s price targets are not a surefire guarantee that a stock will reach a certain level. Things can change, and so can price targets. Also, they usually only look at where a stock might go over the next 12 months; they are by no means long-term indications of where a stock might end up in the long run.
However, price targets can be helpful in finding stocks that may have a lot of potential for price appreciation. Three stocks that have a lot of upside potential (according to analysts) and are currently trading at low valuations are baidu (NASDAQ: BIDU), United Airlines (NASDAQ: UAI)And Enbridge (NYSE:ENB)Here’s why these stocks could be a good buy right now.
Baidu: 80% upside potential
Chinese technology stock Baidu has performed poorly over the years, falling more than 20 percent in five years, and investors are still not so optimistic. Not only are there concerns about the Chinese government’s involvement in the company, but now there are fears that the country’s economy could slow down.
But Baidu is a stock that could be worth taking a risk on. The company has a diverse business that includes cloud computing, search, and a popular chatbot called Ernie that reached 200 million users earlier this year. It’s an intriguing stock in the artificial intelligence (AI) space, provided you’re willing to take some risk.
Business hasn’t been great for Baidu. Revenue rose just 1% to $4.4 billion in the first three months of the year compared to the same period last year. On the positive side, however, operating profit rose 10%. And with some promising opportunities emerging, particularly in AI, investors shouldn’t write off Baidu given its strong presence in the huge Chinese market.
Analysts believe the stock can reach $146, which represents at least 80% upside potential from the current price. The price-to-earnings (P/E) ratio is currently just eight, which is quite modest. While this carries some risk, investors could be fairly compensated with an increase in value given the low valuation the stock is currently trading at.
United Airlines: 91% upside potential
Although the travel industry appears to have recovered from pandemic-related shutdowns, many airline stocks are struggling to win back investors. United Airlines stock, for example, has fallen more than 55% in five years. Analysts expect the share price to trade significantly higher, at over USD 72, which would correspond to an upside potential of around 91% for the stock.
United is coming off a strong second quarter, with operating income for the period ended June 30 rising nearly 6% to nearly $15 billion. And net income of $1.3 billion rose 23% from the same period last year. Concerns about a slowing economy and a possible recession are weighing on investors and likely preventing the stock from rising higher than it currently should.
With a dirt-cheap P/E of just four, this is another example of investors potentially being well compensated for taking on some risk. United could struggle during an economic downturn, but it’s still a top airline that should do well when the economy recovers. Buying and holding the stock could lead to strong long-term returns.
Enbridge: 48% upside potential
Shares of pipeline company Enbridge were the best-performing stock on this list and the only one to gain 12% over the past five years. Analysts believe oil and gas stocks could rise even further, predicting the price could rise above $55. And if that turns out to be true, you could make a profit of almost 50% if you buy the stock today.
A good reason to hold the stock is the increasing dividend. Enbridge has increased its payouts for 29 consecutive years and is already a fantastic dividend stock with a yield of around 7%, which is more than five times the S&P500 Average 1.3%.
The Canadian company has been able to increase its dividend while expanding its business. Last year it announced the acquisition of several companies from Dominion Energy in an effort to expand its presence in the U.S. market, calling it a once-in-a-lifetime opportunity to secure high-quality assets that would pave the way for it to become the “largest natural gas supply franchisee” in North America.
Enbridge’s finances could get much better, and they are already solid. The company’s distributable cash flow for the period ended June 30 rose 3% to CA$2.9 billion (US$2.1 billion). The company uses distributable cash flow to determine how much room it has to pay dividends. Since it continues to rise, it suggests that the current payout is fine and further increases are possible.
With a price-to-earnings ratio of 18, Enbridge stock has been on the rise recently but still offers good value for long-term investors.
Should you invest $1,000 in Baidu now?
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David Jagielski does not own any stocks mentioned. The Motley Fool owns and recommends Baidu and Enbridge. The Motley Fool recommends Dominion Energy. The Motley Fool has a disclosure policy.
3 Cheap Stocks Wall Street Analysts Think Can Rise at Least 48% was originally published by The Motley Fool
