2023-05-17 13:29:03 ET
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Even the most experienced investors have only so many hours in the day to perform their due diligence. That’s where analyst ratings can be helpful. Analyst upgrades and downgrades frequently move stocks.
Analysts spend a great deal of time covering a particular stock or an entire sector. This gives them access to information and company insiders that retail investors don’t have. One of an analyst’s key responsibilities is to issue a rating and/or price target for the stocks that they cover. Many analysts issue revisions to ratings and/or price targets around a company’s earnings report. These give investors a better idea of how an analyst views a stock.
Analyst upgrades are generally seen as a bullish sign for a stock. That’s because analysts are generally looking 12 to 18 months ahead. So savvy investors will use an analyst upgrade as a signal to enter or add to a position for a particular stock.
Can analysts get it wrong? Of course they can. That’s why analyst upgrades shouldn’t be the only consideration for investors. But in many cases, they can point investors to opportunities like the ones in the stocks on this list.
Royal Caribbean Cruises (RCL)
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Cruise line stocks dropped sharply at the onset of the Covid-19 pandemic. But if you had money that you could afford to keep on the sidelines, you could see the potential comeback. And Royal Caribbean Cruises (NYSE: RCL ) was a target for many investors.
That patience is paying off. RCL stock is up 56% in 2023 and over 220% since the onset of the pandemic. And it may be just getting started. In its most recent earnings report, Royal Caribbean posted $2.89 billion in revenue. That makes four straight quarters that the cruise line is seeing revenue that’s back to pre-pandemic levels. More importantly, the negative 23 cents earnings per share is significantly better on a year-over-year basis. It also suggests that a return to profitability may come sooner than later.
Since the earnings report, Argus upgraded the stock from a Hold to a Buy and gave RCL stock a price target of $88 which is 13% higher than the current stock price. In addition to the upgrade, four analysts have boosted their price target for RCL stock. One of those estimates was higher than the consensus price as of this writing for $83.14.
Gilead Sciences (GILD)
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Another stock benefiting from analyst upgrades is Gilead Sciences (NASDAQ: GILD ). The biotechnology company has been a solid performer in the last five years. GILD stock is up 16.62% in that time. And a recent upgrade suggests there may be more upside ahead.
Gilead recently announced an expansion of its research deal with Arcus Biosciences (NYSE: RCUS ). Under the terms of the deal, Gilead has to make milestone payments to Arcus when the companies make new discoveries. That means earnings may take a short-term hit.
But whenever you consider investing in a biotech company, it’s about the pipeline . Gilead and Arcus already have been working on oncology treatments. And that should only increase as the companies will be looking for treatments for inflammatory diseases.
Since Gilead reported earnings in April, BMO Capital Markets upgraded the stock from Market Perform to Outperform with a price target of $100. That’s nearly a 25% improvement from the current stock price of around $77.
The last of our stocks benefiting from analyst upgrades is Albemarle (NYSE: ALB ). The company is one of the top North American lithium miners. ALB soared in 2022 along with lithium prices reaching a 52-week high of $334.55 in November 2022.
Lithium is a core component of the lithium-ion batteries that are required for electric vehicles (EVs). However, the lithium rush that some investors were expecting is temporarily on hold. In its most recent earnings report, Albemarle lowered its guidance for 2023 based on falling lithium prices. However, the demand for the rest of the decade remains strong. Trading at just over 6x earnings, ALB stock is an intriguing buy for patient investors .
Since its May earnings report, Albemarle has received three analyst upgrades and one downgrade. The most recent upgrade came from Robert W. Baird on May 15 with a $288 price target. That would push the stock to a level not seen since November 2022. And Albemarle offers a dividend that has been increasing for 30 years.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.
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