Collectively, Wall Street analysts have issued more than 12,000 individual ratings on stocks in the S&P 500. By aggregating the median fair value estimates on every company, FactSet Research builds what is known as a "bottom-up" target price for the entire index.

Currently, that methodology gives the S&P 500 a one-year target of 6,920, implying gains of nearly 13% from its current level of 6,145. Investors hoping to capitalize on that possible upside should consider buying shares of Microsoft (MSFT 0.53%) and MercadoLibre (MELI 1.67%).

• Among the 59 analysts that follow Microsoft, the average target price is $510 per share. That implies 23% upside from its current share price of $415.
• Among the 25 analysts that follow MercadoLibre, the average target price is $2,300 per share. That implies 11% upside from its current share price of $2,075.

Here's what investors should know about these stocks.

1. Microsoft

Microsoft has two important growth engines in enterprise software and cloud computing. The company has added artificial intelligence (AI) features to both product ecosystems to create new revenue streams. The market has recently been disappointed with the return on those investments, as evidenced by the stock declining 9% in the last three months. But that creates an opportunity for investors.

Microsoft is well positioned to monetize AI in enterprise software given its strong position in several product categories, including office productivity, enterprise resource planning, business intelligence, and cybersecurity. Nearly 70% of Fortune 500 companies use its generative AI assistant Microsoft 365, and usage increased over 60% sequentially in the recent quarter, according to CEO Satya Nadella.

Microsoft is also well positioned to monetize AI with its cloud computing platform Azure. While Amazon Web Services is the largest public cloud, RBC Capital analyst Rishi Jaluria sees Azure as better positioned in the AI arms race due to its partnership with OpenAI. A recent survey of chief information officers (CIOs) conducted by Morgan Stanley arrives at the same conclusion: It shows Azure as the cloud provider most likely to gain market share in the next year.

Wall Street expects Microsoft's earnings to increase at 13% annually through fiscal 2026, which ends in July 2026. That consensus makes the current valuation of 33 times earnings look somewhat expensive, but that multiple is a material discount to the 12-month average of 36 times earnings. I think that creates a reasonable entry point for patient investors. The most prudent strategy is to build a position through dollar-cost averaging.

2. MercadoLibre

MercadoLibre runs the largest online marketplace in Latin America. Its market share in retail e-commerce is likely to reach 30% by 2026, up from 28% in 2024, according to eMarketer. Beyond its first-mover advantage, the company has been so successful because it supports merchants with a broad range of adjacent services, including payment processing, financing, fulfillment, shipping, and advertising.

In fact, MercadoLibre has the fastest and most extensive logistics network in Latin America. It is the largest retail media advertiser in the region with more than 50% market share. And it runs largest fintech platform in Argentina, Chile, and Mexico, and the second largest in Brazil. Those adjacent services make its marketplace more attractive to merchants, reinforcing the network effect that powers its business.

Going forward, MercadoLibre has a key tailwind at its back in the ongoing digitization of the Latin American economy. Online retail sales are projected to increase at 10% annually through 2028, which implies similar growth in digital payments. And digital ad spending is forecast to increase at 12% annually. Collectively, that implies strong double-digit sales growth for MercadoLibre for the foreseeable future.

Wall Street expects earnings to grow at 43% annually through 2025. That makes the current valuation of 73 times earnings look very reasonable. As a caveat, MercadoLibre reports financial results in U.S. dollars despite operating across 18 countries in Latin America. The U.S. dollar is particularly strong right now, so unfavorable foreign exchange rates could be a headwind in the coming quarters. In other words, earnings may grow slower than analysts anticipate.

However, investors comfortable with volatility should feel comfortable purchasing a small position today, provided they are willing to hold the stock for at least three to five years.