After stocks bounced back impressively in 2023, all eyes are now on the next potential big winners of 2024. To kick off the New Year, top Wall Street analysts and brokerage firms have named their favorite stocks for the next 12 months - and while tech stocks are stealing the spotlight once again, there are also some interesting picks from sectors like retail and energy to consider.
Here, we've highlighted three top-tier stocks that boast solid financial track records and promising growth potential - plus, they've all scored high-profile nods from Wall Street as A-list picks for 2024. Let's dive into the reasons why these analyst favorites are worth a look right now.
Nvidia: Still the Top Chip Stock
Nvidia (NVDA), a member of the “Magnificent 7” group of Big Tech stocks, rocked the industry last year with its explosive growth, fueled largely by artificial intelligence (AI). The company designs and sells graphics processing units (GPUs) to power cutting-edge applications and devices, and its specialized chips have become a key component of the sophisticated tech needed to drive AI computing.
While the stock has so far been unable to break out above the psychologically significant $500 level, despite multiple challenges of this area in recent months, NVDA still boasts a market-crushing 52-week gain of 230%.
In Q3 of fiscal 2024, NVDA's revenue hit $18.12 billion — a jaw-dropping 206% jump from last year, and up 34% from the previous quarter. Net income soared up over 12 times from the previous year, hitting $9.24 billion. Adjusted earnings per share (EPS) for the quarter grew by over 12 times year-over-year to $4.02.
Wall Street expects NVDA's breakneck pace of growth to slow somewhat after the fiscal year ending this month, but there's still plenty of upside ahead. For fiscal year 2025, analysts are looking for EPS growth of 62%, with revenue projected to expand by 54.3%.
TD Cowen's Matthew Ramsay is one of the analysts to tag NVDA as his top chip pick for 2024. With Nvidia already leading the charge in accelerated computing and generative AI, Ramsay wrote in a note to clients that the company's “suite of superior technologies, long pedigree of innovation, and extensive growth-oriented investments should continue to allow for strong, sustained, above-peer growth across a widening set of AI verticals.”
Broadly speaking, the rest of Wall Street seems to agree. With 36 analysts in coverage, 31 are shouting "strong buy," 3 recommend a "moderate buy," and only 2 call it a “hold.” The mean target price is $643.63, signaling almost 31% upside.
Target: Goldman's Top Retail Stock
Target (TGT) is a retail juggernaut that's expanded into the digital era, catering to all our needs from groceries and home essentials to trendy outfits and gadgets – all with wallet-friendly prices and doorstep delivery.
But let's talk about their stock performance. TGT had a rough year in 2023, and gave up 4.4% of its value over the course of the year. That said, the shares are now attractively priced, at 1.43 times forward adjusted EPS and 0.63x forward sales.
Most recently, Target reported a stronger-than-expected profit in Q3 2023, with adjusted EPS of $2.10 and revenue of $25.4 billion both surpassing Wall Street's expectations. Comparable sales for the period slipped by a slimmer-than-forecast 4.9%, and both gross and operating margins expanded year-over-year. Inventory, meanwhile, was down 19% from the year-ago period.
Target's also been pretty generous when it comes to paying back its shareholders. They've increased their dividends for 51 consecutive years, earning them the title of not just Dividend Aristocrat, but Dividend King. The current quarterly payout of $1.10 per share translates to a yield of 3.09%. The payout ratio is 55.07%, meaning over half of the company's earnings are given back to shareholders as dividends.
Goldman Sachs has named Target its top retail pick for 2024, as the brokerage expects a more favorable macro environment to be supportive. On average, analysts have given Target a consensus “moderate buy” rating. Out of 29 analysts, 13 scream “strong buy,” 3 go for a “moderate buy,” and 13 say “hold.” The mean target price is $151.56, signaling potential upside of 5.6% from here.
Diamondback Energy: A Standout Permian Pick
Diamondback Energy (FANG) is a leading oil producer that operates in the Permian Basin, the largest and most prolific oil and gas region in the United States. The company’s business model is based on acquiring, developing, and producing oil and natural gas from its low-cost and high-return assets.
Despite a volatile year for energy prices in 2023, Diamondback Energy stock still managed to close out the calendar year with a gain of 13.4%.
In the third quarter of 2023, FANG reported EPS of $5.49, while revenue arrived at $2.34 billion. The results surpassed analysts' expectations on both the top and bottom line. Plus, the potential takeover target generated $884 million in free cash flow for the period, and guided $2.9 billion for the full year.
They're not stingy about sharing that cash flow with shareholders, either. Diamondback Energy offers a quarterly dividend of $0.84 for a forward dividend yield of 2.17%. With a payout ratio of 43%, there's room for those dividends to keep growing sustainably in the years ahead.
Piper Sandler has tagged Diamondback Energy as its top energy stock pick for 2024, with analyst Mark Lear calling out FANG's “size, scale and asset quality in the Midland Basin, paired with improving productivity and capital efficiency.” Piper has a $206 price target on FANG, well north of the mean target of $180.91 - which implies expected upside of 14.5% from current levels.
According to the 23 analysts covering FANG, 19 agree it's a “strong buy,” 1 says it's a “moderate buy,” 2 say “hold,” and 1 says “strong sell.”
