After a stretch of underperformance in the broader equities market, many stocks are now trading at bargain prices - and in particular, says brokerage firm Goldman Sachs (GS), its list of stocks with “high operative leverage” are trading near a record valuation discount compared to low operating leverage stocks. The analysts at Goldman, led by Jenny Ma, like high operating leverage stocks in this environment, because they're able to generate more sales without an accompanying increase in costs.
Here are five familiar names from Goldman's list of high operating leverage stocks that have underperformed the broader S&P 500 Index ($SPX) this year, but still have consensus “Buy” ratings from analysts - and could be poised for upside from earnings growth. Let's have a closer look.
1. Pfizer
We start with pharma giant Pfizer (PFE). Founded in 1849 and based out of New York City, Pfizer is one of the world's largest pharmaceutical companies. They primarily focus on prescription drugs and vaccines, but historically have also sold many other healthcare products and chemicals. PFE currently commands a mammoth market cap of $146.7 billion.
PFE stock is down 10% on a YTD basis. However, the stock offers a dividend yield of 6.38%, which is more generous than the sector median of 1.49%.
Overall, analysts have deemed Pfizer stock a “Moderate Buy,” with a mean target price of $34.80, which indicates an upside potential of about 34.3% from current levels. Out of 21 analysts covering the stock, 8 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 12 have a “Hold” rating.
2. Boeing
Notwithstanding all the controversies surrounding the company, Wall Street remains upbeat about Boeing (BA). Established in 1916 and headquartered in Virginia, Boeing is a leading global aerospace manufacturer. They design, manufacture, and sell airplanes, defense systems, and commercial space exploration products. Its market cap is currently at $102.3 billion.
Boeing stock is down 35% on a YTD basis.
Overall, analysts have a rating of “Moderate Buy” for Boeing stock, with a mean target price of $243.47. This denotes an upside potential of roughly 45% from current levels. Out of 21 analysts covering the stock, 14 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 6 have a “Hold” rating.
3. Palo Alto Networks
Founded in 2005, Palo Alto Networks (PANW) is a cybersecurity company specializing in firewalls and cloud security. Their core product focuses on preventing cyberattacks through a next-generation firewall technology. They also offer a suite of security products for cloud environments and endpoint protection. Its market cap is currently at $90.2 billion.
PANW stock is down 7.7% on a YTD basis.
Overall, analysts have a consensus rating of “Moderate Buy” for Palo Alto stock, with a mean target price of $335.55 - which indicates an upside potential of about 23.3% from current levels. Out of 40 analysts covering PANW, 27 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 11 have a “Hold” rating.
4. Akamai Technologies
Established more than two decades in 1998, Akamai Technologies (AKAM) is a global content delivery network (CDN) and cloud services provider. They offer a variety of services to help improve the performance and security of web content delivery, including CDN, cloud security solutions and web performance optimization. Its market cap currently stands at $15.5 billion.
Akamai stock is down 13.6% on a YTD basis.
Notably, analysts have deemed AKAM stock a “Moderate Buy,” with a mean target price of $125.93. This indicates an upside potential of about 23.2% from current levels. Out of 18 analysts covering Akamai stock, 10 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 6 have a “Hold” rating, and 1 has a “Strong Sell” rating.
5. Estee Lauder
We conclude our list with beauty products manufacturing giant Estee Lauder (EL). Founded in 1946 and based out of New York, Estee Lauder is a multinational manufacturer and marketer of high-end skincare, makeup, fragrance, hair care, and other beauty products. Its portfolio of famous brands includes Clinique, M∙A∙C Cosmetics, Bobbi Brown, and La Mer, among others. The company currently commands a market cap of about $49.2 billion.
EL stock is down 6.2% on a YTD basis. The stock also offers a dividend yield of 1.9%.
Overall, analysts have an average rating of “Moderate Buy” for EL stock, with a mean target price of $157.38, which denotes an upside potential of about 14.7% from current levels. Out of 26 analysts covering the stock, 9 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 16 have a “Hold” rating.
