More than halfway through the year and the stock market is not done setting new all-time highs. With inflation ticking lower for the first time in four years possibly paving the way for interest rate cuts to arrive sooner than expected, investors are bidding up shares.
But the market leaders might not be the same ones who carried us higher over the first six months of 2024. The tech stock rally could be headed to the backseat. The iShares Semiconductor ETF (NASDAQ:SOXX) is down nearly 9% since peaking at a record high last week.
Goldman Sachs expects the market to rotate away from tech stocks. In April, the investment banking firm cautioned that it was time to begin looking elsewhere for investment ideas. Although the sector proved resilient for months afterward, now might be the time to follow the analyst’s advice.
Below are three stocks Goldman Sachs analysts give a “buy” rating. They also assigned price targets that indicate they are poised for double-digit returns over the next year. Let’s see if the investment banker is early again with its call or right on the money.
Exact Sciences (EXAS)
Cancer testing and diagnostics outfit Exact Sciences (NASDAQ:EXAS) is forecast to grow 50% over the next year. Goldman analysts lowered their price target from $88 a share to $75 but reiterated their buy rating. The stock is down 36% year-to-date as concerns about competing tests coming to market have weighed on shares.
Exact Sciences is a leader in stool-based colon cancer testing. Although a colonoscopy is still the gold standard for accuracy, the invasive nature of the test makes it suboptimal. The diagnostic firm’s stool test is the next best option. Yet Guardant Health (NYSE:GH) is developing a blood test for colon cancer that a Food & Drug Administration advisory committee recommended approval.
However, stool tests are seen as more accurate, particularly for early screening purposes, even if blood tests are more convenient. Exact Sciences’ Cologuard test has an opportunity for substantial growth and margin expansion. Goldman Sach’s lowered price target may be appropriate until the blood test competitive fears subside, but EXAS stock should eventually hit the previous higher target.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) just wrapped up its latest Prime Day sales extravaganza, which it says sold more merchandise than during any prior event. As always, Amazon is big on superlatives but short on actual numbers. Still, analysts forecasted it would sell some $14 billion worth of goods over the two-day event.
The better performance underscores one of the reasons Goldman Sachs raised its price target on Amazon to $250 and reiterated its buy rating. One primary reason was overall consumer health, as exhibited by the retailer’s second-quarter results. Even though Amazon saw some softness in a few markets, e-commerce remains resilient.
Moreover, Amazon is also seeing higher retail margins and growing operating income. In addition to the ongoing growth in its cloud services business, the investment banking firm sees Amazon as a solid growth vehicle.
It is hard to argue with the analysis. The retailer should also benefit from the boom in digital advertising. Ad revenue soared 23% in the first quarter to $11.5 billion. Because most people start their search for a product on Amazon’s website, it is a natural destination for marketers to seek out.
Snowflake (SNOW)
Earlier this month Goldman Sachs analyst Kash Rangan reiterated his firm’s buy rating on data warehousing provider Snowflake (NYSE:SNOW) and its $220 per share price target. The stock was added to the investment banking firm’s conviction buy list.
Unfortunately, that was before the massive hack of AT&T (NYSE:T) data hosted on Snowflake’s servers was revealed. Virtually all of the wireless carrier’s 90 million cellphone subscribers were affected. AT&T learned of the hack back in April and subsequently paid the hackers over $370,000 to retrieve the data. Other Snowflake customers have also been hacked including Live Nation Entertainment’s (NYSE:LYV) Ticketmaster and Advance Auto Parts (NYSE:AAP).
Snowflake’s stock is down 33% this year as worries about competitive pressures weigh on shares. A Barron’s report notes investors are concerned “Snowflake was less confident of the growth it gets as customers deploy artificial intelligence models.”
Snowflake’s customer retention rate has declined over the past two years, coming in at 128% in the first quarter. Although the number of customers with over $1 million in product revenue sold to them grew to 485, this time two years ago, the retention rate was 168%.
Wall Street still has a bullish outlook for Snowflake stock. Analysts have a consensus one-year price target of $197 per share, implying there is 47% upside. Goldman Sachs believes it is worth a bit more than that.
On the date of publication, Rich Duprey held a LONG position in T stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor held a LONG position in AMZN.