Potential Dark Horses in the Stock Market of 2024


In bull markets, most investors usually choose popular stocks. However, popularity is not always an indicator of a healthy stock. Sometimes, winning investments are companies that are relatively unknown but show great potential for success, also called dark horses. Hence, investors interested in diversifying their strategies may find value in allocating a small portion of their capital to stocks with a high risk-reward ratio.

While these stocks inherently come with elevated risk, the potential for significant rewards can make them an attractive option for those seeking to add a higher risk reward element to their portfolios.

Upstart Holdings (NASDAQ: UPST)

Upstart Holdings (NASDAQ: UPST) is at the forefront of the fintech sector, leveraging artificial intelligence (AI) to revolutionize lending through its innovative platform.

The company uses artificial intelligence to analyze credit risk, in an attempt to replace the traditional credit score as a tool that determines whether consumers are creditworthy for loans, and makes money primarily from the fees it receives for referring successful loan applicants to its network of hundreds Partner banks and credit unions.

Basic finance

Upstart’s financial journey shows remarkable growth, with revenue rising 243% from 2018 to 2022, peaking at an impressive $802.5 million.

The company improved its gross profit margin to 48.9% in 2022, which indicates operational efficiency. However, the stock fell more than 25% after missing the top and bottom line consensus estimates in its third-quarter report a few weeks ago.

Revenue for the quarter was $135 million, down 14% year over year and below consensus estimates of $139.76 million. Total fee revenue was $147 million, down 18% year over year.

The stock has recovered quickly and is currently trading at $32.37, which is up 20.96% today, and up 18.01% over the month.

UPST price performance for one month. Source: TradingView

Upstart loans were disappointing in 2021-2022 but improved in the last quarter, and strong loan performance will be crucial to getting banks to engage with Upstart more.

Innovative loan performance as of August 2023.
Source: Upstart Holdings

Investors considering the stock should stay informed of the broader economic landscape, and stay abreast of updates regarding home and auto defaults. The rise in defaults for these types of loans may indicate potential challenges for personal loans as well, indicating tough times for Upstart Holdings.

Beginners are considered a big risk when giving shares, and investors should take this into consideration before investing in the company. The company’s addressable market is worth trillions of dollars, so waiting until signs of an economic recovery to invest should not prevent significant long-term investment returns.

Ulta Beauty (NASDAQ: ULTA)

Ulta Beauty stock saw a surge on Friday after the company’s third-quarter 2023 financial results were released.

The company’s shares are up nearly 12%, and the stock is trading at $470.03 at the time of writing.

ULTA 7 days stock price performance. Source: Finebold

This strong performance can be attributed to the company’s third-quarter net sales, which were approximately $2.5 billion, reflecting 6.4% year-over-year growth. The significant increase in net sales was primarily driven by same-store sales growth of 4.5%. Ulta Beauty also opened 12 new stores during the quarter, contributing to a modest increase in overall sales.

Ulta Beauty’s gross profit margin for the third quarter was 39.9%, and operating margin was 13.1%. Both profit measures declined from the same period a year earlier.

Analysts’ expectations

A compilation of forecasts from 20 TipRanks analysts over the previous quarter indicates an average 12-month price target of $533.95 for Ulta Beauty.

This indicates a potential increase of 13.12% from its current price of $472.03 and “Moderate purchase‘Recommendation. Based on the rating for the past three months, ULTA has 15 “Buy” ratings, 4 “Hold” ratings, and 1 “Sell” ratings..

ULTA Wall Street analysts’ 12-month forecasts. Source: TipRanks

Price targets for the stock show a range from a high of $620 to a low of $400.

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Disclaimer: The content on this website should not be considered as investment advice.

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