SUPERNEWS

Macro

Analysts Eye Big Rebounds for S&P 500's Underdogs

Underperforming stocks like Caesars, Incyte, and Carnival poised for over 20% gains, spotlighting market's potential for comeback stories.

By Bill Bullington

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4/1, 10:28 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
Broadcom Inc.
Carnival Corporation
Caesars Entertainment, Inc.
Incyte Corporation
Live Nation Entertainment, Inc.
Match Group, Inc.
NVIDIA Corporation
UnitedHealth Group Incorporated
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Key Takeaway

  • Stocks like Caesars Entertainment and Carnival Corp, down 8.9% and 8.1% YTD respectively, show promise with analysts predicting strong rebounds.
  • Match Group and UnitedHealth Group, despite underperforming in 2024, have potential upsides of 22% and 20.1%, according to FactSet.
  • Analysts remain bullish on certain S&P 500 stocks lagging behind the market, highlighting significant recovery opportunities for investors.

Market Divergence: Laggards Poised for Comeback

The S&P 500's 10.2% year-to-date gain as of March 2024 underscores a market that, while advancing, reveals significant divergence among its constituents. Notably, sectors such as energy and financials have outperformed the broader index, with gains of nearly 13% and 12%, respectively. This performance disparity has spotlighted a group of underperforming stocks, identified by CNBC Pro, that are flat to down 10% year to date but are well-liked by analysts, holding a consensus rating of "buy" and an average price target suggesting over 20% upside potential. Among these, Caesars Entertainment, Incyte Corp, and Carnival Corp are notable mentions, each with substantial expected upside according to FactSet data.

Analysts' Picks: Potential Turnaround Stories

Several companies stand out for their potential to rebound. Match Group, down 2.3% year to date, has an average price target indicating a 22% upside, buoyed by its designation as a favorite asset-light stock by Goldman Sachs. UnitedHealth Group, despite a 6.5% decline partly due to a cybersecurity breach, has a 20.1% upside based on consensus price targets. The breach has led UnitedHealth to pay out over $3.3 billion to affected providers, a significant financial impact. Carnival Corp, down 8.1%, also shows promise with a 24.3% potential upside, even after posting mixed Q1 results.

Asset-Light Strategy: A Winning Formula

Goldman Sachs' introduction of two stock baskets based on corporate asset intensity highlights a strategic pivot towards asset-light companies, which have historically outperformed their asset-heavy counterparts by 40 percentage points since 2002. This strategy emphasizes companies with superior return on equity and lower capital expenditure ratios. Notable asset-light companies include Nvidia, with a staggering 73.1% year-to-date return and an 87% consensus EPS growth for 2024, and Broadcom, up 27% year to date with a 19% expected EPS jump. Match Group and Live Nation Entertainment also feature as companies with significant upside potential and favorable analyst ratings.