The thought of high interest rates lasting longer than anticipated and persistent macro uncertainty are impacting investors’ appetite for growth stocks. Nevertheless, Wall Street analysts are bullish on several growth stocks, as they are looking beyond the near-term headwinds and focusing on the long-term prospects. Using TipRanks’ Stock Comparison Tool, we placed Uber (NYSE:UBER), Block (NYSE:SQ), and SoFi (NASDAQ:SOFI) against each other to find the most attractive growth stock, as per Wall Street analysts.
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Uber Technologies (NYSE:UBER)
Ride-sharing and food delivery company Uber turned profitable on a GAAP basis in the second quarter, generating earnings per share (EPS) of $0.18 compared to a loss of $1.33 per share in the prior-year quarter. Robust demand, the company’s growth initiatives, cost discipline, and a 22% rise in trips drove the second-quarter earnings. Further, Q2 2023 marked the first quarter in which Uber’s free cash flow crossed the $1 billion mark.
While most analysts are optimistic about the company’s turnaround efforts, a leading position in ride-hailing, and its diversified business model, there are certain concerns related to regulatory challenges, intense competition in both ride-hailing and delivery markets, and macro pressures.
Is UBER Stock a Buy Right Now?
On September 27, Needham analyst Bernie McTernan reiterated a Buy rating on Uber stock with a price target of $60. The analyst said that his firm’s Mobility Tracker revealed that September trends for both Uber and rival Lyft (NASDAQ:LYFT) “appear strong”. He added that pricing is trending higher against seasonally solid demand trends, with Uber’s average prices reaching the highest within Needham’s observed data over the past two years.
With 30 Buys and one Hold, Uber stock earns a Strong Buy consensus rating. The average price target of $58.93 implies 35.5% upside potential. Shares have rallied about 76% year-to-date.
Block (NYSE:SQ)
Shares of fintech company Block have declined 31% year-to-date due to concerns about the impact of macro challenges on the company’s business and management’s commentary about a slowdown in its gross profit growth rate.
The caution about gross profit growth slowdown overshadowed the company’s better-than-anticipated Q2 2023 results. Revenue grew 26% to $5.53 billion, driven by the solid performance of the company’s Cash App ecosystem (peer-to-peer payment business) and Square ecosystem (focuses on merchants or sellers). Additionally, adjusted EPS more than doubled to $0.39 from $0.18 in the prior-year quarter, boosted by improved margins.
Looking ahead, Block is focused on further strengthening its Cash App ecosystem and bolstering its Square ecosystem by expanding globally and focusing on upmarket sellers.
Is Block a Buy or Sell?
Bank of America analyst Jason Kupferberg believes that the recent pullback in Block stock due to multiple reasons, including rotation out of growth stocks due to high interest rates and concerns about Square business, is unjustified. He thinks that SQ stock deserves a higher valuation, given the company’s growth profile.
Kupferberg contended that even if the Street’s consensus estimate of 16% to 17% gross profit compound annual growth rate (CAGR) for 2023 to 2025 proves to be modestly too high, he believes this growth profile still justifies a significantly higher multiple.
Also, the analyst said his operating expenses analysis indicates a potential 20% or more adjusted EBITDA upside. He expects the ongoing operating expense discipline to drive further increase in the 2023 adjusted EBITDA guidance. Kupferberg reiterated a Buy rating on the stock with a price target of $71 on October 10.
Wall Street has a Strong Buy consensus rating based on 24 Buys and eight Holds. The average price target of $79.86 implies about 85% upside potential.
SoFi Technologies (NASDAQ:SOFI)
Shares of financial services company SoFi Technologies have jumped 76% so far this year, thanks to the company’s solid performance due to the strength in its personal and home loans segments.
Moreover, investors are also impressed by the company’s progress on the banking front. SoFi gained a banking license through the acquisition of Golden Pacific Bancorp last year. The company’s banking business helps it utilize its deposits to fund its loans, thereby lowering its funding costs and reducing its reliance on third parties.
Meanwhile, with the end of the government-backed student loan moratorium, SoFi is expected to benefit from an increase in student loan refinancing. However, higher interest rates could impact refinancing and loan origination volumes.
What is the Target Price for SOFI Stock?
SoFi is scheduled to report its third-quarter earnings on October 30. Bank of America analyst Mihir Bhatia thinks that the risks to the stocks in the consumer finance space are high heading into the Q3 results. The analyst expects companies in this sector to report in-line EPS and pre-provision net revenue (PPNR). In line with his investment thesis, Bhatia reiterated a Hold rating on SOFI stock and lowered the price target to $10 from $11.50.
Wall Street is sidelined on SoFi stock, with a Hold consensus rating based on five Buys, six Holds, and four Sells. The average price target of $9.73 implies nearly 20% upside potential.
Conclusion
Wall Street is bullish on Uber and Block but has a Hold rating on SoFi. They see the highest upside potential in SQ and believe that the pullback in the stock offers an attractive opportunity to build a position in the growing fintech company for the long term.
