In recent years, Wall Street has swung between bear and bull markets, particularly impacting the growth-focused Nasdaq-100. The index, comprised of 100 of the largest nonfinancial companies listed on the Nasdaq stock exchange, experienced a significant 33% decline during the 2022 bear market, only to rebound by a remarkable 54% in 2023.
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Despite the consensus price targets indicating upside potential for leading businesses, three Nasdaq-100 components are forecasted to achieve remarkable gains in 2024, with analysts pegging the potential upside as high as 127%.
Nvidia: Potential Upside of 79%
The first Nasdaq-100 stock poised for significant gains in 2024 is semiconductor giant Nvidia (NASDAQ: NVDA). Analyst Hans Mosesmann of Rosenblatt Securities has set a bold target of $1,100 for Nvidia’s shares, implying a substantial 79% potential upside from its current price of approximately $616 per share as of Jan. 25.
Nvidia garnered attention for its advancements in artificial intelligence (AI), with its A100 and H100 graphics processing units (GPUs) serving as the foundation for AI-accelerated data centers. The company is expected to witness a substantial increase in production in 2024, contributing to an estimated surge in total sales from $27 billion in fiscal 2023 to around $93.4 billion by fiscal 2025.
Despite its promising prospects, Nvidia faces challenges, including potential margin pressure due to increased production and intensifying competition from rivals like Advanced Micro Devices and Intel. Additionally, regulatory actions by U.S. authorities that may restrict sales to China pose a threat to the company’s revenue stream.
While Nvidia’s momentum is undeniable, achieving Mosesmann’s ambitious price target in 2024 appears uncertain.
Warner Bros. Discovery: Potential Upside of 127%
Another Nasdaq-100 stock with significant upside potential is media company Warner Bros. Discovery (NASDAQ: WBD). Analyst Matthew Harrigan of Benchmark set a target of $24 for the company, suggesting a substantial 127% potential upside.
The key catalyst for Warner Bros. Discovery in 2024 is expected to be a resurgence in advertising, driven by the U.S. election cycle. Anticipated growth in U.S. political spending is poised to benefit legacy media companies, providing a positive outlook for the advertising-dependent sector.
Warner Bros. Discovery’s potential for substantial gains in 2024 hinges on operational improvements in its streaming segment. The company’s ability to raise prices for subscribers while minimizing attrition, coupled with strategic cost-cutting, presents a pathway to sustained profitability in its direct-to-consumer business within the next two years.
While these projections offer an alluring perspective for Warner Bros. Discovery, realizing such substantial gains in the year ahead remains to be seen.
The Financial Saga of Warner Bros. Discovery and Tesla
Warner Bros. Discovery’s Debt Conundrum
Warner Bros. Discovery finds itself grappling with around $42.4 billion in net debt, including debt anticipated to be paid off within the next year. The company is experiencing the ill effects of rising interest rates, which is significantly restricting its ability to engage in deals and innovations. This uphill battle is not a desirable situation, especially as interest rates soar at their most rapid pace in four decades.
Tesla’s Projected Upside in 2024
Analyst Adam Jonas of Morgan Stanley has revised his price target for Tesla to $345, indicating a potential 89% surge in 2024. Tesla’s standing as North America’s premier automaker rested on its early mover advantage, having introduced four mass-production models (3, S, X, and Y) prior to commencing 2023. The company has since achieved its production goal of at least 1.8 million electric vehicles in the previous year and is suitably equipped to potentially surpass 2 million EVs manufactured in the current year.
Tesla’s consecutive quarters of GAAP profit have set it apart, demonstrating recurrent profitability, a feat yet to be matched by any other pure-play EV manufacturer. The company concluded 2023 with a tidy sum of over $29 billion in cash, cash equivalents, and investments, signifying ample capital for an aggressive production expansion.
Red Flags for Tesla
Despite Jonas’s optimism, several telling signs point to $345 being a lofty goal for Tesla. The company is embroiled in a price war with rival EV manufacturers, eroding its operating margin. CEO Elon Musk admitted that pricing strategy is directly influenced by demand, and multiple price cuts across models since the outset of 2023 point to weakening EV demand and mounting inventory. Additionally, a significant portion of Tesla’s pre-tax income is derived from unsustainable sources. In Q4, nearly 35% of its pre-tax income resulted from regulatory tax credits and interest income, lacking in true innovation.
Musk’s penchant for delaying key projects and innovations adds another layer of uncertainty to Tesla’s stock valuation. These unfulfilled promises have been factored into the company’s valuation and could provoke a reevaluation in 2024.