Why Goldman Sachs Just Upgraded These 3 Stocks and What It Means

Key Points

• Goldman Sachs recently boosted these three stocks on the back of their 2025 macro outlook report, connecting the dots for investors.
• All the fundamentals line up to justify the double-digit upside present in all three picks.
• Other institutions agree with the theme analysts have set for these stocks.

Investors often have access to the best minds on Wall Street without even knowing it most of the time, and this is a critical piece of information everyone should keep track of to reverse engineer what analysts are suddenly becoming bearish on. When Wall Street analysts decide to upgrade a stock’s rating and valuation, it usually pays to attempt to understand the decision and its reasoning.

Because of this, investors will want to remove the list of stocks that Goldman Sachs recently decided to upgrade and boost. This is especially the case since the bank also recommended their underlying sectors within their latest 2025 macro outlook report, pointing to opportunities in the energy sector while also making it clear that robust business models will be the ones to win this year.

That being said, it is names like Spotify Technology NYSE: SPOT that come as a potential winner with double-digit upside in the technology sector, accompanied by shares of recently beaten down CrowdStrike Holdings Inc. NASDAQ: CRWD, and then topping off the list at the front of the recent crude oil breakout past $75 is drilling services provider Patterson-UTI Energy Inc. NASDAQ: PTEN that made it to Goldman Sachs’ list of stocks to upgrade recently.

Spotify: Subscription-Based Businesses Will Win in 2025

Goldman Sachs should boost a company like Spotify entering 2025, as their macro outlook report did point out potential tail risks in the broader S&P 500 due to high valuations. This means that investors will likely want to rotate their capital into companies that offer more stable and predictable financials.

This is where Spotify stock comes into play. As most of its revenue comes from subscriptions and is, therefore, recurring, both investors and Wall Street analysts can safely and accurately predict the company’s financials into the future and value the stock accordingly.

The market agrees with this as the stock has now pushed up to 93% of its 52-week high, implying that bullish momentum will help it move into the new year. More than that, Wall Street analysts now forecast up to $11.8 in earnings per share (EPS) for the coming 12 months, a net increase of 33.75% from today’s $8.8 EPS.

Right along with this double-digit EPS growth potential is the new Goldman Sachs buy rating, placed in January 2025 alongside a $550 valuation for Spotify stock. To prove these new views right, investors would have to ride the company higher by as much as 20% from today’s prices.

CrowdStrike Stock Rounded Up New Fans

Analysts at Goldman Sachs weren’t the only ones to express their optimism about CrowdStrike stock recently; those from State Street decided to boost their institutional holdings by 2.9% as of November 2024. After this new allocation, the group’s net position reached a high of $2.7 billion, or 3.9% ownership in the company.

After a major sell-off following an outage over the past few quarters, the stock had been beaten down to levels that made it an undeniable buy. However, even after recovering to as much as 88% of its 52-week high, these analysts still rate CrowdStrike stock a Buy as of December 2024. This time around, however, they also placed a $415 price target on it.

This new valuation would mean the stock needs to rally by as much as 19% from today’s price, giving investors a lot to consider moving forward into 2025. This stock is as attractive today as ever because of the way the world economy is moving now.

As more business is done online and everyone’s information is stored in company databases, companies like CrowdStrike—providing cybersecurity services—become key to future economic growth.

Patterson-UTI Energy: A Buffett Bet Is Never a Bad Bet

When Goldman Sachs mentioned that, out of all commodities, they see more upside potential in oil, a lot of traders had an “a-ha” moment and connected the dots behind Warren Buffett buying up to 29% of Occidental Petroleum Co. NYSE: OXY, and he wasn’t alone. It turns out hedge funds have also been stacking up oil futures recently in a similar bet.

The advantage for retail investors is that they can invest in smaller companies, such as Patterson-UTI, which has a market capitalization of only $3.3 billion. A company this small would be way out of Buffett’s sphere, or any other institutional buyer, for that matter, but not for retail investors.

Because it is at the forefront of the industry’s value chain, it is set to get paid first and see the benefits of EPS growth before all other peers.

This is why Goldman Sachs analysts felt so comfortable placing a $10 per share valuation on this stock along with a Buy rating as of December 2024. This new view means up to 18% upside for investors.