Goldman Sachs says these three stocks have at least 75% upside — and one has A.I. at its core

Published Thu, May 25 20238:20 PM EDT

Earnings season is over, and Goldman Sachs has identified three stocks with major upside potential. In the first quarter, the investment bank said, investors focused on the health of the global consumer and post-pandemic growth balancing with increased margins. However, looking ahead, it expects investors to focus on large companies with profitable business models. "For the second consecutive quarter, those companies that could demonstrate stable/improved topline performance while delivering on earnings upside (hiring, investment reversals) were the most rewarded with outsized positive stock market reactions to earnings releases," said the Goldman Sachs analysts, led by Eric Sheridan in a note to clients on May 19. Based on their first-quarter results, Goldman expects shares of Upwork , Expedia and Xometry to rise by more than 75%. Xometry Xometry is an online business-to-business marketplace that uses artificial intelligence to connect businesses with industrial product manufacturers. In its first-quarter earnings report for 2023, Xometry reported rising revenue and a growing number of active buyers on its platform. Goldman Sachs said it believes Xometry, which uses artificial intelligence to run its platform's core, will continue to grow by keeping AI at the heart of its platform while it expands. However, the investment bank warned that because of high interest rates, the company is likely to face short-term challenges from a slowing economy. Shares of the company, which trade with the ticker XMTR on Nasdaq, have nearly halved this year on those macroeconomic concerns. But Goldman Sachs expects the stock to rebound by 75% to $30 a share over the next 12 months. XMTR 1Y line "Unlike some of the recent shifts in platform investments across our coverage universe, we would highlight that XMTR has historically been built as a platform with AI/ML at the very core of its competitive moat," the Goldman Sachs analysts said in a note to clients on May 19. Expedia Expedia, the owner of travel portals Expedia.com and Hotels.com, reported strong earnings in the first quarter, thanks to increased travel after the Covid-19 pandemic. Goldman Sachs expects double-digit revenue growth for Expedia this year, helped by the company's plans to launch a loyalty program later this year and improvements to its vacation rental platform. The Wall Street bank is forecasting a 75% rise in its share price over the next 12 months to $165. While the stock is down by a fifth over the past 12 months, it is up by 7.4% this year to $94. Upwork Upwork provides a platform where freelancers can find work in various industries, such as software development and graphic design. The California-headquartered company's most recent earnings report highlighted some challenges in attracting new clients in light of high interest rates. But Goldman pointed to a bright spot: The company's existing clients are spending more on AI-related projects, which could indicate opportunities for its growth in the area. The investment bank expects investors will debate over the next few months whether Upwork will benefit or lose from the growth in AI. "In addition to a shorter-term debate about the macro impact and uncertainty, we would expect that investors begin to analyze UPWK through a prism of whether shifts in generative A.I. (in this particular case, in terms of form/function/demand for work) might cause a mixture of headwinds or tailwinds for that longer-term narrative," said Goldman's analysts. But although the stakes are high for the company, Goldman forecasts a 103.8% rise in its share price over the next 12 months. Upwork's stock closed at $8.31 on Thursday, down by more than a fifth this year. — CNBC's Michael Bloom contributed to this report.