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Wall Street analysts set price targets for where they think a stock can go in the next year or so. A high price target can be a good indicator of a growth stock with a lot of potential. But investors should be careful not to assume a stock is a sure thing just because it has a lot of projected upside. In some cases, a stock may only appear to have significant upside because it has fallen sharply of late.
Three stocks that have bullish consensus price targets implying upside of 30% or better are MicroStrategy (NASDAQ: MSTR), Rivian Automotive (NASDAQ: RIVN), and Warner Bros. Discovery (NASDAQ: WBD). Let's take a closer look at these stocks to see whether they are indeed good buys, or if some downgrades could be coming.
MicroStrategy: 30% upside
MicroStrategy is an intriguing company because its operations center around analytics and helping companies with business intelligence decisions. For the most part, this hasn't been a rapidly growing business. During the first three months of this year, revenue totaled $115.2 million, down 5% from the prior-year period. It also incurred a hefty operating loss of $203.7 million.
The reason for this result was a digital asset impairment loss totaling $191.6 million. The company is incredibly bullish on Bitcoin, and in the first line of the company's earnings release, MicroStrategy highlighted that it was "the largest corporate holder of bitcoin." It even reported that as of the end of the quarter, it had 214,400 bitcoins.
MicroStrategy is a volatile stock that seems to be trying to get some of the excitement around Bitcoin behind its business as well -- and it has worked as the stock has more than doubled since January. Its fundamentals, however, don't look great. The company struggles with profitability, and it carries a lot of exposure to Bitcoin.
This stock looks to be overdue for some downgrades, and investors should take heed.
Rivian Automotive: 91% upside
Electric vehicle maker Rivian Automotive is poised to rise by more than 90% if you believe Wall Street analysts as they have a consensus price target of nearly $20.
Rivian has been struggling right along with rival Tesla this year as rising competition from China and concerns about demand amid challenging economic conditions have investors worried about the future of these EV makers. Rivian is a far riskier stock than Tesla as it is less established and it isn't profitable.
Its shares have plummeted more than 56% this year (Tesla is down by 26%). That decline is likely a key reason why Rivian's stock looks like it possesses a lot of upside now. At the start of the year, the stock was trading at more than $20; analysts likely weren't expecting such a sharp and quick sell-off.