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Equities

Contrarian Investment Opportunities Identified by Goldman Sachs

Goldman Sachs identifies undervalued stocks with potential for significant gains, diverging from broader Wall Street views.

By Alex P. Chase

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3/13, 15:41 EDT
Capital One Financial Corporation
General Electric Company
Li Auto Inc.
Moderna, Inc.
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Key Takeaway

  • Goldman Sachs identifies contrarian investment opportunities in underappreciated stocks, with Instacart, Capital One, Gap, and Petco highlighted for significant upside potential.
  • Instacart's restructuring includes a 7% workforce reduction amid efforts to streamline operations and focus on AI integration, despite meeting Q4 revenue expectations.
  • Analyst actions reflect dynamic market valuations; Morgan Stanley upgrades HashiCorp while HSBC downgrades Moderna, indicating shifting investor sentiment and market trends.

Contrarian Investment Opportunities

Goldman Sachs has highlighted the potential for investors to achieve significant gains by adopting a contrarian investment strategy, focusing on stocks that are currently underappreciated by the market. According to a note released by the firm, these "differentiated buy names" are buy-rated stocks that Goldman's analysts believe have a positive outlook, contrary to the broader Wall Street consensus. The firm's vice president, Deep Mehta, emphasized that these stocks "appear underappreciated by the market and could generate alpha for investors with a contrarian view," with Goldman's estimates being "2%+ above consensus in 2024E."

Highlighted Stocks with Upside Potential

Among the stocks identified by Goldman Sachs, several stand out due to their significant upside potential according to the firm's price targets. Instacart, with nearly 50% growth this year, has a 40% upside to Goldman's price target. Capital One and Gap are also on the list, with expected upsides of 24% and 15%, respectively. Notably, Petco is seen as having an 88% upside, despite its shares being down 19% so far in 2024. These stocks span various sectors, from internet and consumer finance to retail specialty and biopharma, indicating a diverse range of opportunities for contrarian investors.

Instacart's Restructuring and Layoffs

Instacart has announced a restructuring plan that includes laying off about 250 employees, or 7% of its workforce, as it aims to create a flatter organizational structure and focus on larger projects. This move comes as the company reported fourth-quarter revenue of $803 million, aligning with Wall Street's expectations. Despite the layoffs, Instacart's public offering and its focus on incorporating artificial intelligence and machine learning into its platform highlight its growth ambitions.

Analysts' Perspectives and Market Movements

The market has seen various analyst calls and upgrades, reflecting the dynamic nature of stock valuations and investor sentiment. For instance, Morgan Stanley upgraded HashiCorp, citing an improving cloud market backdrop, while HSBC downgraded Moderna due to challenges in its cancer vaccine pipeline. These analyst actions, along with others such as upgrades for General Electric and Li Auto, demonstrate the ongoing reassessment of companies' prospects based on market trends, technological advancements, and strategic initiatives.

Street Views

  • Deep Mehta, Goldman Sachs (Bullish on differentiated buy-rated names):

    "These names appear underappreciated by the market and could generate alpha for investors with a contrarian view... For each of the below names, GS estimates are 2%+ above consensus in 2024E."