3 Underperforming Stocks That Could Be Poised for a Bull Run

Past performance does not guarantee future results. Or does it?

The age-old investment disclaimer is sure to be put to the test this year. Some of last year’s biggest winners will be off to a strong start in 2024.

NVIDIA is the best example. After surging 239% last year, the semiconductor leader is up nearly 50% year to date. Meta Platform Inc. NASDAQ: META followed up its 194% increase with a 34% year-to-date advance. CrowdStrike Holdings Inc. NASDAQ: CRWD, Advanced Micro Devices Inc. NASDAQ:AMD AND Palo Alto Networks Inc. NASDAQ: PANW they are also backing the huge rallies of 2023 with the big gains of 2024.

Looking beyond the top five Nasdaq-100 stocks of 2023, however, there are exceptions. After doubling last year, Tesla Inc. NASDAQ:TSLA saw nearly a quarter of its market capitalization wiped out. Intel and Atlassian also have a slow start.

With artificial intelligence (AI) euphoria driving the Nasdaq-100 to near-daily record highs, the tech-focused index’s valuation has surged 32 times. This suggests that investors should be more cautious when it comes to individual stock selection. Wall Street research firms echo this sentiment.

Since valuations are stretching for most of the Nasdaq outperformers, their upside is likely nowhere near what it was a year ago. This has led analysts to gradually move towards underperforming and less important names to find the next big thing.

One way to identify Wall Street’s latest “flavors of the month” is to compare consensus analyst ratings. While “buy,” “hold,” and “sell” are the basic calls made by a single analyst, combined they can reveal which stocks rank highest.

Aggregated analyst data from the Institutional Brokers’ Estimate System, or IBES, is one way to achieve that granularity. IBES uses a rating system of 1.0 to 5.0, where 1.0 indicates a strong buy and 5.0 a strong sell. The lower the score, the more bullish the Street is and vice versa.

The latest IBES rating scores for the Nasdaq-100 are telling. Analysts still love NVIDIA, Amazon.com, CrowdStrike, and Microsoft, all of which have a 1.7 rating. What goes up must continue to rise. But these are not the best choices.

With slightly higher IBES scores, these three companies are Wall Street’s current favorites.

What is the analyst consensus rating of DexCom?

DexCom, Inc. NASDAQ: DXCM it has an IBES rating of 1.6, which puts it on the verge of being a strong buy. Considering there are 14 analysts actively following the company, that says a lot.

Last week, the maker of continuous glucose monitoring (CGM) devices announced that fourth-quarter revenue and adjusted earnings per share (EPS) increased 27% and 47%, respectively. Both growth numbers exceeded consensus expectations and reflect increased product distribution, customer acquisition and the successful global launch of Dexcom G7.

The findings helped ease concerns that the boom in GLP-1 diabetes drugs will limit demand for CGM devices. Management noted that while many studies are ongoing, it expects “good data throughout the year.” This gave it the confidence to forecast organic revenue growth of 16% to 21% for 2024. While this marks a slowdown from last year’s 24% growth, it could prove conservative as DexCom beat its forecast in each of the last three years.

What is the upside for PDD stock?

PDD Holdings Inc. NASDAQ:PDD will continue to recover from the March 2022 lows in the eyes of Wall Street analysts. A consensus price of $176 indicates a 33% upside for the Chinese online retailer over the next 12 months. The moment could be favorable to enter what has been one of the best movements on the Nasdaq in recent months. PDD went as high as $152.99 in January 2023, but has fallen to around $20.00.

The stock rose to last month’s level thanks to a strong third-quarter earnings report that showed 94% revenue growth. Transaction services revenue rose 315% at PDD, which operates in the world’s largest e-commerce market, helping both sales and EPS beat analysts’ estimates. Wall Street is hoping for more of the same when the company releases fourth-quarter financials next month. Thirteen out of fourteen companies call PDD a buy, giving it an IBES rating of 1.6.

Will Synopsys stock reach $600?

Synopsis, Inc. NASDAQ: SNPS rose more than 60% in 2023, but analysts expect it to hit new highs in 2024. The stock has been one of the biggest beneficiaries of a strong recovery in the semiconductor industry and, in particular, demand for AI chips. Customers designing AI chips, hardware and networking products are embracing ZeBu Server 4 and the company’s software security offerings. Going forward, Synopsys expects to achieve diversified growth not only from machine learning but also from interconnected smart devices, autonomous vehicles and other high-growth markets.

Last month, Synopsys strengthened its leadership in chip design technology by acquiring Ansys in a cash-and-stock deal worth about $35 billion. While stock buying often declines on such news due to large outlays and integration uncertainty, SNPS has maintained some stability and has been trending upward ever since. Five analysts reiterated buy ratings following the acquisition announcement to keep the stock’s unanimous buy rating intact.

Before you consider DexCom, you’ll want to hear this.

MarketBeat tracks daily Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and DexCom wasn’t on the list.

While DexCom currently has a “Moderate Buy” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here