Seeing S&P 500 growth stocks implode is tough to watch, unless you're ready to spot a buy point. Some of the biggest wipeouts are likely to turn into opportunities over the next 12 months, analysts say.
Analysts expect rallies of 65% to 113% coming to 10 S&P 500 Pure Growth stocks — including industrial play Generac, health care name Moderna and tech titan Nvidia — in the next 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. All these growth stocks are down from 30% to 60% this year.
Most investors are waiting to see if markets get even worse following the S&P 500's third-quarter reporting season before jumping in. "It seems a lot of investors are just waiting to see if U.S. stocks drop another 5% or 10% before placing some long-term bets," said Edward Moya of Oanda.
But S&P 500 analysts insist that some growth stocks are worth taking a flier on.
S&P 500 Growth Continues To Struggle
It's been a rough year for S&P 500 growth companies. With rates rising, waiting for future profits from high-growth companies isn't as lucrative as it was.
The SPDR Portfolio S&P 500 Growth ETF is down more than 31% this year. That's even worse than the 25% drop in the SPDR S&P 500 ETF Trust. And it's twice as painful as the roughly 17% drop in the SPDR Portfolio S&P 500 Value ETF.
And the indexes mask much of the pain in growth stocks. So far this year, 49 of the 56 stocks in the SPDR S&P 500 Value ETF, or nearly 88%, are down. And some of the losses are brutal. Nearly 15 of the growth stocks in the S&P 500 lost at least half of their value this year.
But analysts still think you can find value in growth.
Analysts See Opportunity In Generators, Vaccines
Two of analysts' favorite growth stocks are among those whipsawed by Covid-19.
Take Generac Holdings, a well-run maker of generators that saw business boom in 2019 and 2020. The company's profit shot up nearly 28% in 2020 and an additional 49% in 2021. And this year analysts think profit will jump 24% to $11.96 a share.
No wonder, then, that analysts think Generac is a growth stock worth betting on. Shares are down more than 56% this year to 152.06. Even so, analysts expect this stock to more than double over the next 12 months based on their price target of 324.19 a share. That makes Generac the top call of S&P 500 analysts out of the entire S&P 500 pure value index.
Moderna, a maker of key vaccines, is also seeing its shares in a steep decline this year, sliding more than 50% to 120.72. Demand for the company's vaccine products has dried up a bit from the 2021 bonanza. Moderna's adjusted profit this year is still slipping more than 7% to $26.26 a share. And yet, analysts are still big believers. They're calling for the stock to trade for 218.07 a share in 12 months. If they're right, that's nearly 81% potential upside.
Picking Up From The Chip Wreckage
In one of the biggest booms to busts, look no further than semiconductor stocks. Shares of Nvidia, which could do no wrong in 2021 amid endless demand, has seen shares plunge more than 60% this year to 115.86 a share.
It's a totally rational move for the stock. The company is going from growing at a rapid clip to looking at a profit drop of nearly 25% this fiscal year. But again, analysts think the company's efforts in making chips for servers will pay off. They're calling for the chipmaker's shares to be worth some 77% more in 12 months' time.
Watching the S&P 500 implosion is less painful if it opens the door to more moneymaking.
Analysts' Favorite S&P 500 Pure Value Stocks
All are seen rallying to analysts' 12-month price targets
| Company | Symbol | Implied upside to target price | Sector |
|---|---|---|---|
| Generac Holdings | 113.2% | Industrials | |
| Moderna | 80.6 | Health Care | |
| Nvidia | 77.3 | Information Technology | |
| Monolithic Power Systems | 74.7 | Information Technology | |
| Advanced Micro Devices | 74.0 | Information Technology | |
| Meta Platforms | 69.5 | Communication Services | |
| Bio-Techne | 67.9 | Health Care | |
| Signature Bank | 67.9 | Financials | |
| Lam Research | 66.8 | Information Technology | |
| Qualcomm | 65.4 | Information Technology |
Sources: IBD, S&P Global Market Intelligence
Follow Matt Krantz on Twitter @mattkrantz
