For most of 2023, investors who were still buying stocks were focused on defensive, value-oriented stocks. But since the beginning of November, the outlook for equities is much more bullish. This has some investors on the hunt for growth. One way to find the top-rated growth stocks is to follow the lead of industry analysts.
Analysts work for investment banks and brokerage houses. Every analyst at a firm may cover multiple stocks, including entire sectors. Their responsibility is to issue a rating for each stock and offer a price target.
While analyst ratings are not perfect, they often set a direction for a stock. This is particularly true when many analysts share a common sentiment on a stock. Many investors use analyst ratings as a way to build a watch list. Traders can use analyst ratings to find entry and exit points based on price targets.
Many stock screeners allow you to look for stocks that have recently received upgrades. Another benefit of using a screener is that you can focus on specific stocks. If you were looking for top-rated dividend stocks in January, you may be looking for top-rated growth stocks now. Here are seven choices for you to consider.
Costco Wholesale (COST)
Many of the big names among retail stocks reported earnings before Black Friday. Costco Wholesale (NASDAQ:COST) was not among them. But many investors will be keenly interested in what the company has to say.
The message in retail is that the consumer is still spending, but they’re beginning to spend less. And they’re spending on staple needs more than discretionary wants. Costco has reported seeing the same trend. Yet so far, the company has beat on the top and bottom lines even when facing difficult comparisons with 2022.
A significant reason for that is the company’s business model. Shoppers pay a membership fee that helps ensure their loyalty. Plus, members frequently take advantage of Costco gas stations which come with its own perks. Gas and groceries in one trip screams value.
Not only does Costco get some of the most bullish ratings, it’s also one of the stocks that receives the most analyst coverage. In the last three months, 38 analysts have issued a rating on COST stock. In fact, 24 of them rate the stock a strong buy or buy, with another 12 giving the stock a hold.
And on November 30, Stifel Nicolas raised its price target from $595 to $615, while Truist Financial reiterated its $619 price target.
Salesforce (CRM)
When investors think about top-rated growth stocks, they frequently look at the tech sector. As we head into the holiday season, Salesforce (NYSE:CRM) is worthy of consideration. The company is now the world’s fourth largest Software as a Service (SaaS) in terms of revenue.
A whopping 50 analysts have weighed in on CRM stock in the last three months and 34 give the stock a strong buy or buy rating. It’s not hard to see why. The company is consistently beating revenue and earnings on a year-over-year (YOY) basis.
Additionally, Salesforce is reporting expanded margins. In its November 30 earnings report CRM showed an adjusted operating margin of 31.2%. That was 850 basis points higher than in the same quarter the prior year.
And, since the company already has a pile of cash at its disposal, it’s choosing to buy back shares. All of these are reasons analysts continue to give CRM stock the benefit of any doubt.
Pure Storage (PSTG)
Continuing in the tech sector is Pure Storage (NYSE:PSTG). The data storage company is in one of the sector’s fastest growing industries. Pure Storage delivers all-flash data storage hardware and software products that are in high demand. That’s been evident in revenue and earnings that are growing YOY.
Further, analysts are pumped by the company’s push to encourage its customers to shift to a consumption and subscription service. And despite the company offering lower guidance in the coming quarter, analysts continue to believe in the stock’s future growth. Of the 19 analysts that have offered a rating on PSTG stock in the past three months, 17 have a strong buy or buy rating.
As of this writing, PSTG stock is up 21% in 2023 despite gapping down to a level of support near $33.31. However, with a valuation of 108x forward earnings, the stock may have been in need of a haircut. Opportunistic investors should watch the stock closely as a potential buy-the-dip candidate.
Diamondback Energy (FANG)
The energy sector and particularly the oil and gas sector stand to benefit if the economy rallies in 2024. One of the stocks to consider is Diamondback Energy (NASDAQ:FANG) that operates as an upstream and midstream company.
The expected rally in oil and gas stocks hasn’t happened as expected. Despite OPEC+ maintaining their output cuts, the price of oil is trading at under $80 a barrel. That has many positive impacts for the economy, but it’s been difficult for oil and gas stocks.
Despite that, FANG is up more than 14% in 2023. And of the 32 analysts who have offered ratings on the stock in the last three months, 26 give the stock a strong buy or buy rating.
FANG has an appealing valuation at just over 8x forward earnings. Also, the company pays a dividend that’s been growing for the last five years. The 2.12% yield isn’t particularly attractive. However, the stock pays out $3.36 per share on an annual basis.
Six Flags Entertainment (SIX)
If you’re looking for top-rated growth stocks in under-the-radar areas, you may want to look at Six Flags Entertainment (NYSE:SIX). Stock charts can tell a story, and the story that SIX stock is telling is one of normalization. Revenue dropped off a cliff in 2020, but came roaring back in 2022. This year that growth has continued but at a much slower level.
However, the company is planning to merge with Cedar Fair (NYSE:FUN). That should open up another revenue stream, in addition to higher EBITDA due to cost savings in the combined companies. It’s likely a key reason for the sharp reduction in short interest in SIX stock in the past 30 days.
Six Flags has received ratings from 13 analysts in the last three months and five in just the last 30 days. The sentiment is bullish with a consensus price target of $28.08 which is 14% higher than the stock price as of this writing.
DICK’S Sporting Goods (DKS)
Shares of DICK’s Sporting Goods (NYSE:DKS) gapped down sharply in August when the company missed on the top and bottom lines. And as the broader market corrected sharply in September and October, DKS stock tumbled with it.
However, this frequently leads to a situation where expectations get extremely low. And in this case, DICK’s jumped over them by smashing revenue and earnings expectations on the top and bottom lines.
Many analysts were lowering their price targets for DKS stock in August and September. Out of 27 analysts that have offered a rating on DKS stock in the last three months only 11 gave the stock a strong buy or buy rating.
However, in the week before earnings, that trend was reversing. Investors should expect to see more change in analyst sentiment. And with it a higher share price for DKS stock, which is still trading well below its 52-week high and trades at an attractive valuation of just 10.46x forward earnings.
Welltower (WELL)
The last of the top-rated growth stocks on this list is Welltower (NYSE:WELL). Welltower is a real estate investment trust (REIT). By itself, that doesn’t scream “growth stock” to me.
But this is one REIT you can’t judge by its cover. Welltower specializes in properties that are geared towards senior housing, post-acute care, and health systems. In layman’s terms it’s a play on the aging of America that is accelerating. It also leans into the desire of many baby boomers and now Gen-Xers to live in communities that may facilitate a transition from independent to assisted living.
At first glance, WELL looks like it may be priced fairly with a valuation of 24x forward earnings. But the stock has increased in price by 20% in the last five years, with a dividend that currently has a 2.74% dividend yield. A 4% average capital gain with a 2.74% dividend keeps most investors well ahead of inflation. And the stock may just be getting started.
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.
Commodities, Consumer Discretionary, Consumer Staples, Energy, Food, Natural Gas, Oil, Real Estate, Retail, Software, Technology
