Wall Street Is Completely Clueless About These 3 Popular Stocks
Many investors rely on Wall Street to tell them whether a stock is a good investment. Even as discount brokers have made stock commissions a thing of the past, full-service brokerage companies still charge management fees, commissions, and other charges that reduce the returns you’re able to generate from your investment portfolio.
One of the most frustrating things about counting on Wall Street’s professional analysts is that there’s often huge disagreement among the ranks about what prospects certain stocks have. In particular, when you look at the stocks about which there’s the most dissension, you’ll find some of the most popular companies in the market.
Below, we’ll look at three stocks about which there’s no clear consensus among Wall Street’s finest. You’ll learn the arguments on both sides so that you can make an informed choice about whether you want to make these stocks part of your portfolio.
Netflix (NASDAQ: NFLX) has been one of the best-performing stocks dating back to its IPO in 2002. Yet when you look at Wall Street’s current thinking about the streaming video specialist, you won’t find much consensus. Among 65 analysts making recommendations, 44 call Netflix a buy, 15 a hold, and six a sell. Price targets are even more spread out across the board, with the lowest at $340 per share and the highest at $720. Those figures imply a loss of as much as 36% or gains of 117%, depending on whether you believe the bears or the bulls.
The big naysayers on Netflix are Societe Generale and Wedbush. The latter has consistently seen the company as a prospective underperformer despite its actual strong returns. It believes that despite Netflix’s huge first-mover advantage, it has already gotten just about all the subscribers in the U.S. that it’s going to get. That means it’ll have to rely on international expansion for new customers, and that will limit its growth potential.
Meanwhile, more-bullish investors point to Netflix’s stream of future content releases, especially as studios reopen as the pandemic starts to ease. Pivotal Research, which has the top price target of $720 per share, has consistently boosted its views on Netflix, arguing that subscribers fund new programming, which in turn brings in new subscribers. Pivotal sees the streaming service substantially boosting its monthly charges, and that could keep things moving higher for Netflix well into the future.
Shares of Netflix have stayed in a fairly tight range between $450 and $600 throughout the past year. As the rising competition among streaming video providers plays out, investors should get a better sense of where Netflix will land.
Biogen (NASDAQ: BIIB) also raises a lot of disagreement in the Wall Street community. Despite no one being willing to bet against the biotech giant outright, analysts are split almost straight down the middle as to whether the stock is a buy or a hold. Moreover, price targets are all over the map, with the lowest at $244 and the highest at $647. Those figures are 30% below and 85% above the current stock price, respectively.
The bearish view comes from Mizuho Securities. Late last year, Mizuho asserted that a couple of potential catalysts for the biotech company — resolution of a patent case involving its Tecfidera treatment and data on its gosuranemab candidate treatment for Alzheimer’s — were unlikely to weigh in Biogen’s favor. The analyst reiterated its view in early June.
Yet bullish investors at Truist pointed to the Food and Drug Administration approval of its aducanumab Alzheimer’s candidate, also known as Aduhelm, as a huge win for Biogen. In setting the $647 price target, Truist said it thinks the stock could jump another $227 per share if regulators in the European Union follow suit with approval.
The FDA move has generated a lot of controversy, with many remaining skeptical of Biogen’s treatment. Yet with so many Alzheimer’s patients having waited so long for a viable way to treat the disease, any success could help Biogen climb even further.
Lastly, Tesla (NASDAQ: TSLA) brings out all sorts of opinions in the investing community, and Wall Street has plenty of diversity of thought on the electric vehicle (EV) giant. The stock features 21 buy ratings, 22 holds, and 11 sells. Price targets range from $1,295 per share, or almost double the current price, all the way down to just $60, representing a more than 90% decline.
GLJ Research is responsible for one of the lowest price targets on Tesla stock on Wall Street, at $67 per share. According to GLJ, Tesla won’t be able to boost its monthly vehicle delivery volumes in the key Chinese market much above 20,000, and that could dramatically limit the potential upside from the world’s most populous nation.
More-bullish analysts include New Street Research, which sees Tesla’s 1 million vehicle-production capacity leading to numbers that will exceed expectations. Moreover, New Street is quick to remind investors that EVs are just the first phase of Tesla’s long-term strategy, which includes energy storage and other fast-growing innovative areas. Wedbush shares many of the same arguments with its $1,000 price target on the stock.
After Tesla’s huge stock price run, Wall Street’s cluelessness on where it goes from here is understandable in the short term. The company has plenty of potential for business growth, but how much of that is already incorporated into the stock price is anyone’s guess.
Make up your own mind
In the end, Wall Street doesn’t have any more insight than you can gain from your own research. The most important thing is to base your decision to buy a stock on your own investing thesis. That way, you’ll be able to compare what actually happens with what you expected, and that’ll either help you keep your conviction and hold the stock for the long run or provide you with the basis for making tough decisions along the way.
10 stocks we like better than Netflix
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now… and Netflix wasn’t one of them! That’s right — they think these 10 stocks are even better buys.
*Stock Advisor returns as of June 7, 2021
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Netflix and Tesla. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.