Generally speaking, Wall Street analysts tend to be well-trained and very intelligent. But no one is infallible, and the price targets set by these analysts represent the opinion of one person. Moreover, these forecasts are typically near-term in nature, meaning they may exclude the impact of long-term catalysts. For that reason, a high price target alone is never a good reason to buy, and a low price target is never a good reason to sell.
However, price targets can be a good place to start your research . If Wall Street sees significant upside for a particular stock, it may be worth your time to take a closer look. For instance, Stitch Fix ( NASDAQ:SFIX ) and Teladoc Health ( NYSE:TDOC ) have price targets that represent 100% and 112% upside, respectively.
Here’s what you should know about these stocks. Image source: Getty Images 1. Stitch Fix
Stitch Fix is a pioneer in the apparel industry. Its disruptive platform pairs data science with the expertise of professional stylists, allowing the company to ship personalized assortments (called “Fixes”) of clothing, footwear, and accessories to its clients at regular intervals.
This creates a flywheel effect. Each new client completes a style profile, detailing their tastes and preferences, and this profile is updated over time based on the client’s purchases. As more data is collected, Stitch Fix’s algorithms become more predictive, helping the company make even better recommendations for its clients. Stitch Fix also uses this information to inform design decisions in own apparel lines.
In both cases, that cycle has helped the company gain traction with shoppers. Over the last two years, the number of active clients grew 29% to 4.2 million, and revenue per active client jumped 3% to $505. In turn, the compounding effect created by those trends has translated into solid top-line growth.
Going forward, Stitch Fix has plenty of room to grow its business. By 2025, spending on apparel is expected to reach $472 billion in the U.S. and U.K. — the two markets its which Stitch Fix operates — and management is executing on a strong growth strategy.
For instance, the company launched Freestyle in September, a service that allows shoppers to make direct purchases from a personalized selection of outfits. In essence, Freestyle creates an e-commerce store specifically tailored to the tastes and preferences of each shopper. What’s more, Stitch Fix’s first-mover’s advantage theoretically makes its data science algorithms uniquely effective.
Given that compelling value proposition, Keybanc’s price target of $70 per share, which implies about 100% upside, seems realistic. However, investors should monitor Stitch Fix’s ability to add and retain customers in coming quarters, especially as supply chain disruptions continue to weigh on businesses around the world. 2. Teladoc Health
Teladoc is the largest and most comprehensive virtual healthcare service in the world. Its cloud platform connects patients with a range of medical professionals, addressing everything from general health and wellness to acute and chronic care. This clearly makes healthcare more convenient, eliminating time spent driving to and from a physician’s office.
But Teladoc’s virtual-first business model also creates significant cost savings. In fact, clients (e.g. insurance companies) save $472 per general medical visit compared to alternative solutions, according to Veracity Analytics. And Teladoc’s chronic care programs are backed by similar data. Studies have shown that Livongo for Diabetes, a service acquired by the company last year, saves each participant an average of $1,908 per year.
Not surprisingly, Teladoc has delivered impressive top-line results over the past two years.
During the most recent quarter, Teladoc saw a sharp deceleration in membership growth, and the stock has fallen 53% from its all-time high. But Wall Street overlooked the silver lining: Total visits climbed 28% to 3.5 million in the second quarter, and the platform utilization rate reached 21.5%, up from 16% last year. In other words, patients with access to Teladoc are engaging with the platform more frequently, demonstrating its value.
Going forward, shareholders should expect those figures to tick upward as more health systems, insurance providers, and employers realize the benefit in Teladoc’s virtual-first healthcare model. For that reason, Canaccord ‘s price target of $295 per share, which implies about 112% upside, seems entirely plausible. However, investors should still monitor Teladoc’s ability to add new members and boost enrollment in its chronic care programs, as these metrics are key to the company’s long-term growth . Should you invest $1,000 in StitchFix right now?
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