- Three technology stocks show investors enough room to catch up and deliver double-digit rallies.
- Backed by recent price action, Wall Street analysts feel comfortable boosting their valuations.
- One institutional buyer has started to add massive stakes in all three of these companies, a sign to consider.
The technology sector has been the darling of the entire stock market since the aftermath of the COVID-19 pandemic, and most stocks in the space easily delivered double-digit rallies for investors. However, not all stocks in the sector are made—or treated—equal, which is where investors can find some new opportunities to exploit in a catch-up strategy.
Value investors like Warren Buffett love to buy from pessimists, and that is exactly what retail investors can do today: find the best discounted technology stocks with room to run at par with their peers. Following this list during volatile markets also creates an additional margin of safety in case things take a bit longer to play out, especially after Goldman Sachs analysts called for a potential “Lost Decade” scenario in the broader S&P 500.
In this list of potential targets, investors can find names like PayPal Holdings (NASDAQ:PYPL) carrying some new momentum after delivering relatively flat performance during the past couple of years. Then Alphabet (NASDAQ:GOOGL) creates a potentially attractive entry point after a brief sell-off. Speaking of sell-offs, shares of ASML Holding (NASDAQ:ASML) stopped falling after the company’s earnings report, and evidence of a potential recovery looms.
1. PayPal Stock Attracts Upgrades and Institutional Buyers as Analysts See New Growth
After a couple of years of lackluster performance, PayPal stock is now back to a new 52-week high, showing investors there is enough bullish momentum to potentially keep carrying this stock forward in the coming quarters. There are those on Wall Street who would agree with this view as well, risking their reputations on price targets.
Those at Mizuho Financial took the lead last quarter when boosting their valuations for PayPal stock up to $90 a share. Still, after a sharp rally to get there in record time, new valuations have been placed on the company. This time, Mizuho wants to see PayPal at $100 a share and reiterated an Outperform rating on the company as well.
Calling for a further 23.6% upside from where the stock trades today, not to mention a new 52-week high, is a bold prediction, though one that other Wall Street participants are accepting. Institutional buying is a gauge investors can consider when contemplating whether analysts are being too bullish or bearish on a stock.
Today, those at International Assets Investment Management have boosted their PayPal stock holdings by 9,864% as of October 2024. This massive jump in allocation would bring their investment to $84.3 million as a sign of confidence in PayPal for the coming quarter.
Confidence can be justified further by today’s Wall Street earnings per share (EPS) forecasts for PayPal, which shoot for $1.30 a share in 12 months. This implies a growth rate of 9.2% from today’s $1.19 level.
2. Alphabet Stock Offers Double-Digit Upside After Recent Sell-Off
After a more than 12% sell-off in Google's parent company, Alphabet, investors forgot how vital this company is to the global economy and how likely it was to pose a recovery rally shortly thereafter. As it turns out, Alphabet recovered half of the lost gains in only two weeks, returning to 83% of its 52-week high, but Wall Street analysts think there’s more to be had.
Those at Truist Financial (NYSE:TFC) reiterated their Buy rating on Alphabet stock as of October 2024, boosting their valuations up to $220 a share from their previous $196 a share. To prove these new targets right, Alphabet would have to rally by as much as 34.2% from where it trades today, also calling for a new year-high.
The same firm that bought a new massive stake in PayPal also landed on Alphabet recently; International Assets Investment Management saw it fit to add up to 43,000% to their Alphabet stock stakes, bringing their net allocation up to $31.1 billion today. Taking such a sizeable position in the company sends a message investors should not ignore in today’s market.
One significant tailwind helping Alphabet harness momentum from investors is that its self-driving rideshare initiative, through Waymo, has started to outperform even the most optimistic expectations. If this project takes off in favor of Alphabet, it will return the investments made into it in spades for shareholders.
3. ASML (AS:ASML) Stock Won't Stay Low for Long
After a disappointing quarterly earnings release, shares of ASML dropped by as much as 16% in a single day, though today’s prices might not remain there for long. Investors can dismiss the previous bearish momentum mainly because the stock’s valuation multiplies.
Particularly the forward P/E ratio, which is now right at the pre-COVID average of 27.5x. Risk-wise, this means that any and all slowdown risks from the pandemic demand cycles might already be priced through this valuation. Knowing that the risk-to-reward ratios favor a buy, Wall Street analysts kept an optimistic outlook.
Those at J.P. Morgan Chase reiterated an Overweight rating for ASML stock, keeping a price target of up to $1,148 a share for a net upside of as much as 61.8% from where the stock trades today to pose a swift recovery. Again, the same institutional buyer made its way into ASML.
International Assets Investment Management raised its stake in ASML stock by a staggering 94,079% as of October 2024, bringing its net position to $4.1 billion today. This is another sign for investors to consider when considering a purchase in this stock with room to catch up.