In this article, we will take a look at the 5 NASDAQ stocks with biggest upside. To see more such companies, go directly to 10 NASDAQ Stocks with Biggest Upside.
5. Paypal Holdings Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 86
Paypal Holdings Inc. (NASDAQ:PYPL) ranks 5th in our list of the best NASDAQ stocks with upside potential according to the media. Paypal Holdings Inc. (NASDAQ:PYPL) recently made headlines after the company launched a U.S. dollar-denominated stablecoin, PayPal USD (PY-USD).
Alex Chriss was recently named as Paypal Holdings Inc. (NASDAQ:PYPL)’s president and CEO.
RiverPark Large Growth Fund made the following comment about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2023 investor letter:
“PayPal Holdings, Inc. (NASDAQ:PYPL): PayPal shares were a top detractor in the quarter despite reporting better than anticipated 1Q earnings and raising guidance for the remainder of 2023. Revenue of $7 billion grew 9% year over year, an acceleration from the prior year and quarter. EPS of 1.17 grew 33% year over year on better cost discipline leading to better operating margins. The disappointment was centered around weaker gross margins, as unbranded checkout, which has lower gross margins, accelerated faster than branded checkout. Management anticipates this trend to continue and therefore guided to lower gross margins for the remainder of the year. Despite the gross margin headwind, operating margins continue to expand due to expense discipline.
PayPal is the most accepted digital wallet – with almost triple the acceptance of Apple Pay, the number two digital wallet – providing the purest exposure to the secular growth in ecommerce-driven digital payments. PayPal is also a key beneficiary of consumer-to-consumer payment trends through its Venmo peer-to-peer (P2P) payment service. With a 1Q non-GAAP operating margin of 23%, PYPL also has significant margin expansion potential given that competitors Adyen, Visa and Mastercard have 50%-65% operating margins. We believe the combination of the secular growth of eCommerce and P2P payments, along with expanding operating leverage and the strategic use of the company’s significant and growing cash balance should fuel at least a high teens earnings growth rate over the next five years. This, to us, presents an excellent risk/reward given that PYPL trades at a below market multiple.”
4. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 135
Apple Inc. (NASDAQ:AAPL) shares were under pressure as of September 6 after Wall Street Journal reported China has ordered its government agencies to stop using iPhones as part of its hostility against the US. However, Wall Street analysts believe Apple Inc. (NASDAQ:AAPL) selloff after this news is overdone.
Wedbush’s Dan Ives said in a note that Chinese government agencies account for less than 500,000 iPhones out of the roughly 45 million iPhones he expects to be sold in the country during the next one year.
Ives has an Outperform rating and a $230 price target on Apple Inc. (NASDAQ:AAPL).
3. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 225
Meta Platforms, Inc. (NASDAQ:META) is one of the top NASDAQ stocks with upside potential. Goldman Sachs’ Brian Nowak recently said that Meta Platforms, Inc. (NASDAQ:META) could generate as much as $20 per share in earnings by 2024, driven by Reels, Click to Message and ads. Nowak said that Reels monetization results have surprised him and they account for just about 28% of the total core ads business. The analyst has a $375 price target on Meta Platforms, Inc. (NASDAQ:META).
RiverPark Large Growth Fund made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its Q2 2023 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): META shares, continuing their rebound, were the top contributor for the second quarter. The company reported 1Q23 results, beating revenue expectations and lowering guidance for operating expenses and capital expenditures, while increasing revenue expectations.
META owns multiple social media platforms, each with more than one billion users, has an 80% gross margin, and generated $20 billion of FCF in 2022. Both its Facebook and its Instagram franchises have more than 2 billion Daily Active Users and generate the bulk of the company’s revenue. Recently, the company’s short form video offering, Reels, has gained mass user engagement and growing advertiser adoption, which we believe will return the company to strong revenue and free cash flow growth. After its advance, META shares trade at 19x Wall Street’s consensus estimates for 2024 EPS, estimates that we think could prove to be too low.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 278
Analysts believe Amazon.com, Inc. (NASDAQ:AMZN) is one of the top tech stocks with huge upside potential. Morgan Stanley recently said that Amazon.com, Inc. (NASDAQ:AMZN)’s upcoming event regarding AWS is a good opportunity for the company to create a buzz around its generative AI offerings. Analysts are also hopeful that Prime Day event this year would act as a catalyst for Amazon.com, Inc. (NASDAQ:AMZN).
Insider Monkey’s database of 910 hedge funds shows that 278 hedge funds had stakes in Amazon.com, Inc. (NASDAQ:AMZN) at the end of the June quarter.
RiverPark Large Growth Fund made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2023 investor letter:
“Amazon.com, Inc. (NASDAQ:AMZN): Amazon was a top contributor in the second quarter, in reaction to a solid 1Q23 earnings report. The company generated $127 billion of revenue (2% ahead of expectations) and nearly $5 billion of operating income (57% better than expectations) driven by rebounding online sales and strong incremental gross margins. During the company’s earnings conference call, Amazon management pointed to easing inflationary pressures, higher productivity gains, and lower expected capital spending for the remainder of the year. The only negative in the quarter was slowing AWS revenue growth, which we believe will rebound later in the year.
With its ability to continue its market share gains in three leading businesses (e-commerce, web services and online advertising), plus a multi-year operating margin expansion opportunity (from improved e-commerce margins and greater contribution from the faster growing, higher margin AWS and advertising segments), we believe Amazon remains one of the best-positioned global growth companies in the world. AMZN shares trade at a 10-year trough EPS multiple, despite what we believe to be currently depressed margins and earnings.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 300
Microsoft Corporation (NASDAQ:MSFT) remains a top tech stock with upside potential according to market analysts as everyone is betting that the company’s huge investments in AI would bear fruit in the future. Microsoft Corporation (NASDAQ:MSFT) has already gained about 40% year to date.
Microsoft Corporation (NASDAQ:MSFT) is the most popular stock among the elite hedge funds tracked by Insider Monkey as 300 hedge funds reported owning stakes in the company as of the end of the June quarter.
Microsoft Corporation (NASDAQ:MSFT) is relentlessly launching new AI offerings and signing AI deals. Recently, digital pathology solutions company Paige said it entered a partnership with Microsoft Corporation (NASDAQ:MSFT) to build an AI model for cancer detection.
Alger Spectra Fund made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q2 2023 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. Microsoft’s CEO expects technology spending as a percent of Gross Domestic Product (GDP) to jump from about 5% now to 10% in 10 years and that Microsoft will continue to capture market share within the technology sector. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the period, shares contributed to performance as the company reported fiscal third quarter results above expectations driven by outperformance in More Personal Computing and Office Commercial. Additionally. management provided in-line Azure guidance, easing investor concerns of a potential slowdown in Azure growth estimates. Moreover, management provided encouraging commentary around Al, noting strong long-term opportunities as they integrate various Al offerings into their products and services.”
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