Every once in a while, the stock market lets investors dive into reasonable discounts in some of the best companies in the economy. These discounts always come as a surprise, considering that these companies aren’t usually found trading near their lows. This is why today’s list of stocks near their 52-week high could come in handy for those looking for a deal.
With Wall Street analysts and the rest of the market finding enough reasons to boost these stocks back to their true valuations, investors now have enough of an opening to keep their attention fixed on these potential recoveries. Names like Target Co. (NYSE: TGT) offer investors double-digit upside in the consumer discretionary sector after the stock traded down on recent earnings.
But the good news doesn’t stop there. Investors can also head into the energy sector through Enphase Energy Inc. (NASDAQ: ENPH) to align their portfolios to potential double-digit rallies ahead. Finally, in the middle of the semiconductor industry drama, there is a better way to navigate the space with a greater margin of safety found in ASML Holding (NASDAQ: ASML) and its discounts from recent highs.
Target Stock’s Upside Potential Forces Bears to Abandon Their Positions
Over the past month, even as Target stock traded down to only 72% of its 52-week high, the company’s short interest has declined by as much as 6.8% to show signs of bearish capitulation, a symptom that might have resulted from the potential upside that lies ahead for the stock.
Just when these short sellers might have gotten excited to see their positions turn a profit, it looks like the broader market trends forced them to cover their positions, especially as bond prices rallied recently to lower yields. Lower yields are always good for consumer trends; Target stock is no exception.
Wall Street analysts would agree, seeing that the current consensus valuation for Target stock has been set at $160 a share. To prove this view right, the stock would need to rally up to 21.3% from where it trades today, but it still wouldn’t be close to its yearly high of $181 a share.
Some institutional buyers, particularly those at State Street, possibly replaced some of these short sellers leaving the stage. As of November 2024, these investors boosted their Target stock holdings by 8.3%, bringing their net position to a high of $5.5 billion or 7.7% ownership in the company.
Enphase Energy Stock: How a New Energy Cycle Could Attract Investors
When investors accept that the lowering bond yields, the ones that will help trends in favor of Target stock, are the same trends that will help push the price of oil higher, then the upside in Enphase Energy stock becomes clear.
There’s a reason Warren Buffett has kept his Occidental Petroleum Co. (NYSE: OXY) position despite selling out of other names recently. It’s because he knows the coming cycle will be good for oil prices. In the same way, solar stocks will likely benefit from the most expensive oil, as contradictory as that may seem.
Higher oil prices will boost fuel costs and electricity costs as well, as the two are tied together on an annualized basis, which means that alternative – and cheaper – sources of energy will become a more attractive proposition. Out of all the alternative energy sources in the market today, solar has the most market adoption and reach.
That is why analysts at J.P. Morgan Chase have kept their “Overweight” ratings on Enphase Energy stock and, as of October 2024, have also kept their $120 per share price targets. Enphase Energy stock would have to rally by as much as 63% from where it trades today to reach these valuations.
Considering the company now trades at 51% of its 52-week high, the risk-to-reward scale favors buyers here, not sellers.
A Better Risk/Reward Profile in ASML Stock
After the Super Micro Computer Inc. (NASDAQ: SMCI) debacle and its threat to Nvidia Co. (NASDAQ: NVDA), some semiconductor stocks traded lower on the market concerns. However, this is where ASML stock and its current level at only 64% of its 52-week high come into play.
Whether the risk implied for the bigger names becomes a reality or not, the truth is that ASML stock is discounted enough that the potential upside far outweighs the potential risks of trading even lower. This is one fact that analysts at J.P. Morgan Chase were also willing to reiterate publicly.
As of October 2024, they kept their “Overweight” ratings on ASML stock and even placed a $1,148 price target on the company despite the recent bearish price action. This would imply that ASML stock has a net rally of 71% in store for those willing to take another look into the company.
Moreover, markets are still willing to pay a premium to access ASML’s financials, as the stock’s 14.9x price-to-book (P/B) ratio would suggest, especially compared to the computer sector’s average 7.1x valuation. Markets typically overpay for a stock they believe will easily outperform peers in the coming quarters.
