Stock Analysis & Ideas

Which Severely-Battered Stock Has the Most Turnaround Potential?

Story Highlights

The market sell-off has caused a considerable amount of pain in a select few companies that seem well-poised to come roaring back over the next year. Here are three of the hardest-hit firms that Wall Street can’t seem to get enough of.

In this piece, we used TipRanks’ Comparison Tool to have a closer look at three battered stocks — CRM, NOW, and BA — that Wall Street believes investors are too quick to give up on. Each firm has a “Strong Buy” consensus rating and underrated fundamentals that could drive a rebound.

It’s been a humbling year for many investors, with a vicious bear market that’s clawed back most of the gains enjoyed in a euphoric 2021. The “speculative excess” of last year looks to have been drained. Still, there is a class of stocks that may have overshot to the downside. As always, there are babies thrown out with the bathwater as the market looks to markdown merchandise from left, right, and center.

Various retailers are dealing with excess inventory and ramping up discounting. The market seems to be in a similar predicament, as it looks to slash prices on stocks across the board, as investors grow jittery over the Federal Reserve’s plans to raise rates in a bid to put that inflation “genie” back in its bottle, where he’ll hopefully lay dormant for at least another few decades.

Salesforce (NYSE:CRM)

Salesforce went from a shining star in the big-tech scene to a dud ever since CEO Marc Benioff and company pulled the trigger on Slack. Shares are down nearly 50% from the top.

The latest quarter from the cloud pioneer was a tremendous disappointment, especially given the company’s knack for knocking balls out of the park come earnings season.

Thanks to broader market selling pressure and a painful outlook downgrade, CRM stock now finds itself trading below $160 per share. Whether or not new lows are in store, the selling seems to have been overdone.

The second-quarter numbers themselves weren’t too abysmal, especially when you take out the effects of the strong U.S. dollar. Salesforce’s Second-quarter revenue came in at $7.7 billion (up 22% year-over-year). In addition, CRM reported earnings per share of $1.19 (beating the $1.05 consensus). The guidance downgrade was the left hook that landed on the chin of Salesforce shareholders.

Despite the guidance downgrade, management is a fan of its own pipeline. The digital transformation trend is still in play, and the firm may wish to acquire more firms (such as now that tech multiples have sunk.

The $10 billion buyback announcement did nothing to soothe the pain. Such a move suggests the firm views its stock as cheap. Wall Street agrees, with 30 Buys, four Holds, and just one Sell assigned in the past three months. The average CRM price target suggests a whopping 48.1% upside in store over the year ahead.

ServiceNow (NYSE:NOW)

ServiceNow is another high-multiple cloud stock that’s suffered a fall from grace, now down 38% from its peak of around $700 per share. In the latest quarter, ServiceNow’s revenue rose 24% year-over-year, a tad lower than estimates, thanks in part to the effect of the strong greenback. Subscription sales rose 25% year-over-year.

With aggressive growth expectations through 2026, I expect the recent slide is just a major bump in the road before the firm sets its sights on new highs. Undoubtedly, ServiceNow needs to beef up its margins while maintaining its impressive top-line growth rate. It won’t be easy, but management has the right people for the job.

ServiceNow is a standout player in the ITSM space. With many satisfied customers, the firm should have few problems onboarding customers to new offerings as they come to light. The company is incredibly innovative, making sales momentum tough to stop, even as recession looms.

The stock trades at a lofty 14.0 times sales, leaving it in a tough spot as the Fed raises rates higher than expected. Though ServiceNow has a chance to make a big profitability push, it’s tough to gauge what multiple is a fair price to pay for it.

A premium multiple is warranted, but just how much is the million-dollar question. Wall Street seems to think NOW stock isn’t pricy enough, with 24 Buys, two Holds, and no Sells. The average NOW stock price forecast implies 29.9% upside potential. Given the caliber of SerivceNow’s management and resilient growth in the face of a macro hailstorm, it’s hard to argue with Wall Street here.

Boeing (NYSE:BA)

Boeing is a plane-maker that lost around 80% of its value from peak to trough at its worst point. The 2020 stock market crash had Boeing in its crosshairs as the 737 MAX issues and dissipating air travel demand took hold. Eventually, Boeing stock rallied off the 2020 lows, but the rally faltered in 2021, and it’s been a turbulent ride ever since.

Boeing stock flirted with 2020 lows earlier this year before bouncing back to $162 and change per share — where it sits today.

Fuelling the recovery were a handful of positive developments, including a better-than-feared second quarter. A 787 delivery pop is in sight, and with supply chain woes easing, 737 MAX production will be able to get back up to full speed.

With the COVID-19 pandemic winding down, demand for new fuel-efficient aircraft could remain strong through the coming years, especially if jet fuel prices remain elevated.

Things are finally starting to turn a corner for Boeing. CEO David Calhoun remains optimistic, but investors seem more willing to take a “wait and see” approach. Though things are looking up for Boeing, it’s run face-first into idiosyncratic setbacks before. The upside could be huge if Boeing can execute effectively without any further hurdles.

Wall Street stands by Boeing, with a “Strong Buy” rating based on 11 Buys and just two Holds. Boeing is one of two global plane-makers, after all. The average BA stock price target of $213.33 implies just over 40% upside potential.

Conclusion – Analysts Think Salesforce Has the Most Upside Potential

There you have it. Three battered stocks that Wall Street sees turning a corner over the next year. Of the three names, Salesforce stock seems to have the most upside potential. Even with the recent outlook downgrade, I don’t see a wave of analyst downgrades knocking the price target much lower.


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