3 Undervalued Stocks Analysts Are Loving Right Now—Should You?

Key Points

• Reddit’s unique, human-centered data positions it as a critical asset in AI development, with growing analyst support and declining short interest.
• Caterpillar stands to benefit from infrastructure and energy grid demand, with several analysts forecasting strong upside despite mixed short-term sentiment.
• Nu Holdings is rapidly expanding across Latin America with a tech-first banking model, recently earning a double upgrade from Citigroup and bullish price targets.

Every market cycle eventually hits a point where conventional thinking begins to lag behind reality. Today, several stocks are priced below their true potential, signaling a rare opportunity. Legacy views become outdated, and prices no longer reflect the true potential of certain companies.

Right now, there are several stocks showing a clear disconnect between current market valuations and their underlying fundamentals. As analysts begin to adjust their models, investors have a rare opportunity to get in ahead of the curve.

Three such companies receiving fresh attention from Wall Street analysts due to updated growth trajectories and analyst upgrades are Reddit Inc. NYSE: RDDT, Caterpillar Inc. NYSE: CAT, and Nu Holdings Ltd. NYSE: NU. When prices diverge from fundamentals, smart investors pay attention. Now is one of those times.

Reddit: AI’s Most Valuable Human Dataset

Reddit offers something most AI platforms can’t replicate: natural, human conversation.

As more and more users have AI draft their posts, many text-based social media sites have started to feel a bit “botty."  But unlike typical social media, Reddit discourages promotional content, keeping language more natural. This is truly what’s of value for these large language models (LLMs) as they strive to learn how humans truly communicate—and what makes Reddit's data a powerful, monetizable asset.

And Wall Street has noticed, with analysts giving Reddit stock a consensus Moderate Buy rating. In fact, Argus recently set a $250 price target, a possible 14% upside from current levels, citing Reddit’s strategic advantage in AI training data and its compelling growth outlook.

However, with a projected 19% downside, the broader analyst consensus tells a more complex story. That apparent contradiction can be confusing, but it reflects how analyst sentiment works: commentary, upgrades, and ratings often shift before the math catches up. Even if the consensus target suggests a near-term pullback, increasing analyst conviction, positive outlooks, and early upgrades like Argus’s may indicate longer-term bullish momentum that hasn’t yet been fully priced in. 

In addition, short sellers have started to step away from their positions, as evidenced by a 7.2% decline in short interest for RDDT over the past month alone, an initial signal of bearish capitulation.

Caterpillar: Positioned for Infrastructure and Energy Demand

Caterpillar has long been synonymous with construction, but its future lies in the energy and tech infrastructure boom. As demand surges for data centers and the energy grids to support them, Caterpillar is emerging as a critical enabler.

In Q2, Caterpillar’s Energy & Transportation segment posted a 7% year-over-year revenue increase to $7.8 billion, driven by rising demand for data center electrification and hydrogen-ready turbines. At its Lafayette, Indiana facility, the company is producing 1,000 to 6,000 horsepower generators, essential infrastructure for AI-powered data centers.

Given this momentum, analysts now rate the stock a Moderate Buy with a price target of $450, reflecting a mere 4% upside potential. However, J.P. Morgan's Tami Zakaria thinks there's more potential, assigning Caterpillar an Overweight rating with a $520 price target, implying a much more attractive 20% upside instead.

Investors should also note that Caterpillar saw $7.7 billion in institutional inflows last quarter, confirming the company's higher implied ceiling amid the current surge in new commercial construction activity.

Nu Holdings: Dominating Latin America's Digital Finance

Nu Holdings is reshaping the Brazil's financial landscape with its digital-first approach. As one of Latin America’s largest and fastest-growing economies, Brazil is home to a rising middle class demanding more accessible, efficient banking options—needs that traditional banks have struggled to meet.

Nu’s streamlined, tech-driven approach is filling that gap, driving explosive adoption and laying the groundwork for broader expansion throughout Latin America. And it would seem that the company’s current valuation doesn’t fully reflect that brighter future...yet.

With a Moderate Buy rating and a $16.60 consensus price target, NU is beginning to attract more bullish sentiment. For example, Citigroup’s Gustavo Schroden recently upgraded the stock to a Buy with a $18 price target, indicating a potential 30% upside, after the company reported an earnings per share (EPS) of 14 cents, beating expectations of 12 cents.

One of the benefits investors can gain from a company like Nu Holdings is that it still flies under the radar for many U.S. institutional investors given that it is based in Brazil. But that might not last long if it continues to provide consistent earnings growth and build its regional momentum.