Shares Down, Price Targets Up: 3 Stocks Upgraded After +10% Drops

Key Points

• After reporting earnings, three stocks saw their shares move down steeply.
• But, counterintuitively, Wall Street analysts raised their price targets on these names.
• This indicates that a window of opportunity may now exist for investors.

While the market and Wall Street analysts often agree on the implications of earnings reports, this is certainly not always the case. A stock’s price action and changes in Wall Street price targets can also diverge after these events. This can be a signal that the market is reacting too harshly to a firm’s results, providing a potential opportunity for investors.

Below, we’ll detail three stocks that fell considerably after their latest earnings but saw significant price target increases.

Analysts Eye 50% Upside in EV Chip Stock Allegro Microsystems

First up is mid-cap chip stock Allegro Microsystems NASDAQ: ALGM. Allegro has strong capabilities in magnetic sensing and power chips, which cater to electric vehicle and industrial markets. Due to the company’s technological prowess, ON Semiconductor NASDAQ: ON, one of the industry's leaders, attempted to acquire the firm. ON Semiconductor was willing to pay $35.10 per share for Allegro. This offer is a considerable premium to the stock’s Nov. 7 closing price of around $27.

The company reported earnings on Oct. 30, beating estimates on both sales and earnings per share (EPS). Shares sold off anyway, dropping 1.5% the same day. Since the report, shares have declined by more than 12%. None of this stopped analysts from raising their price targets.

The MarketBeat consensus price target for Allegro is approximately $38, implying a 41% upside. However, among analysts who issued updates on Oct. 31, the average price target increased by 16%. The average target among these updated forecasts is just under $40, implying 47% upside in shares. This indicates that analysts incorporating the latest data into their forecasts are becoming more bullish on the stock.

eBay Posts Fastest Growth Since 2021, Price Action and Targets Diverge

eBay NASDAQ: EBAY also posted beats when reporting its earnings on Oct. 29. Revenues rose by more than 9% on a non-currency-adjusted basis in Q3. This was the company’s fastest quarterly growth rate since the third quarter of 2021. At that time, many companies saw outsized growth rates. COVID-19 shutdowns in 2020 artificially lowered sales, making for easy comparison periods the following year. This makes eBay’s growth in the latest quarter even more notable.  

However, shares absolutely tanked on Oct. 30 in reaction to the results, closing down by nearly 16%. Shares remain near that level. The MarketBeat consensus price target of around $94.50 implies 13% upside. Still, analysts' forecasts updated after the results are more optimistic. Among analysts who changed their price targets between Oct. 30 and Nov. 3, the average target increased by over 7%. Among all analysts who updated or set price targets during that period, the average target comes in just over $96. This figure suggests a moderate upside potential of 15% in eBay shares.

Analysts Upgrade Walmart-Linked Chip Stock Impinj Despite 15% Earnings Drop

Lastly, we’ll discuss another mid-cap chip stock, Impinj NASDAQ: PI. Impinj specializes in radio frequency identification (RFID) chips and sensors. Companies can place these chips on items, enabling them to track their inventory more quickly than by scanning a barcode. Many expect Impinj to benefit from an RFID partnership between Avery Dennison NYSE: AVY and Walmart NYSE: WMT. Avery Dennison uses Impinj’s chips in many of its packaged RFID offerings. Impinj shares spiked over 19% on Oct. 23 in reaction to this news.

On Oct. 29, Impinj reported earnings that also exceeded expectations in terms of sales and EPS. Still, shares sold off dramatically the next day, closing down by nearly 15%. Impinj shares are now down approximately 32% since the company reported earnings.

The MarketBeat consensus price target for Impinj is approximately $226, implying a 38% upside. However, among all analysts who issued or set a price target on Impinj after the earnings announcement, the average target is just over $239. This figure implies 46% upside potential in shares, solidly more than implied by the consensus. Additionally, among the three analysts who changed their price targets immediately after the results on Oct. 30, the average price target moved up by 19%.

Allegro and Impinj: Mid-Cap Chip Stocks With Potential

Overall, Wall Street analysts clearly disagreed with the market’s reaction to the results of Allegro, eBay, and Impinj. The fact that updated targets now see nearly 50% upside potential in Allegro and Impinj is particularly noteworthy. Investors may want to conduct further research on these stocks due to their potential for substantial gains.