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For a time now, the trend has been resolutely downbeat, only reversed by periodic bouts of relief rallies, making the current environment extremely difficult for investors to gauge.
There’s a war impacting global markets, adding to the previous concerns of rising rates amidst attempts to curtail inflation.
So, where to from here? As has often been noted, the best time for an investor to bet big is when sentiment is at its lowest, to act upon the famous “blood in the street” cliché.
And according to J.P. Morgan’s chief global market strategist Marko Kolanovic, we might have reached that point.
“A lot of risk is already priced in, sentiment is depressed and investor positioning is low, so we would add to risk with a medium-term horizon,” Kolanovic said.
Moreover, fears of a recession are over blown. Buoyant labor markets, robust corporate cash flows, “continued favorable financing conditions,” are just some of the reasons why Kolanovic thinks an “outright recession” is unlikely.
With this in mind, let’s take a look at 2 stocks which Kolanovic’ colleagues at the banking giant think are primed for lift off. And by lift off we mean by the order of at least 70% over the coming months. The TipRanks database can give us a little help here and provide a fuller picture on why the Street also rates these names as Strong Buys.
Let’s start off with Shoals, a provider of electrical balance of system (EBOS) products for solar energy projects. The company manufactures various EBOS parts; these include combiners and recombiners, inline fuses, disconnects, cable assemblies and wireless monitoring systems, amongst others.
Shoals is enjoying growth as the solar sector advances. High commodity prices are encouraging more expenditure in renewable energy, and firms like Shoals will benefit from this trend.
In the company’s latest quarterly statement, for 4Q21, revenue rose by 24% year-over-year to reach $48.04 million, beating the Street’s $46 million forecast. That said, the company posted a miss on the bottom-line, with EPS of -$0.04 coming in shy of the consensus estimate of $0.02. Looking ahead, the company expects 1Q revenue between $68-74 million, representing ~56% y/y growth at the mid-point.
Missing on profit is a big no-no in the current risk-off environment, but in contrast to the market’s now customary downbeat reaction to such misses, SHLS stock enjoyed a nice uptick following the report.
J.P. Morgan’s Mark Strouse puts the positive reaction to a “significantly better than feared outlook,” while the company’s record backlog (the company saw out Q4 with $299 million in backlog, up ~94% year-over-year) is a “strong indicator” of demand and that the customer count “continues to build.”
There’s also further market expansion in the pipeline, according to Strouse. “SHLS received certification in February to begin selling its solutions in Europe. Backlog is expected to build during FY22, with material revenue contribution beginning in FY23. The company is also building out a sales force in LatAm,” the 5-star analyst noted.
"We continue to believe that SHLS is a core-holding for long-term investors seeking exposure to a highly-profitable growth company in the solar space,” Strouse summed up.
Accordingly, Strouse rates SHLS an Overweight (i.e. Buy), while his $35 price target makes room for 72% growth over the next 12 months. (To watch Strouse’s track record, click here)
Most on the Street agree. Based on 6 Buys vs. 2 Holds, the analyst consensus considers this name a Strong Buy. There are solid gains projected too; going by the $29.13 average target, the stock will climb ~43% higher in the year ahead. (See Shoals stock forecast on TipRanks)
C4 Therapeutics (CCCC)
Let's move on now to the biotech sector. C4 Therapeutics is a biopharmaceutical company operating in the targeted protein degrader space. That is, the company is engaged in the development of novel early-stage therapies that can potentially eliminate disease-causing proteins. These are indicated to treat cancer, neurodegenerative conditions, and other diseases.
To do so, the company utilizes its TORPEDO discovery platform which creates a new class of small molecule therapies with the ability to selectively and efficiently remove disease-causing proteins, including in areas previously thought to be unreachable.
As with any biotech company, it’s the pipeline of drugs in development that matters. Leading the way for C4 is CFT-7455, a novel degrader targeting IKZF1/3 and indicated as a therapy for multiple myeloma (MM) and non-Hodgkin’s lymphomas (NHL). The drug has now entered Phase 1/2 testing, and initial data from Cohort A will be presented next month (April) at the American Association for Cancer Research (AACR) Annual Meeting.
The company also received IND clearance for CFT8634, a degrader aimed at BRD9; A Phase 1 trial in Synovial Sarcoma and SMARCB1-null Solid Tumors is expected to kick off in 1H22, while orphan drug designation (ODD) for the treatment of soft tissue sarcoma was granted by the FDA earlier this month. There are other prospective cancer treatments which are in still in the pre-clinical stages.
It might still be early days for the pipeline, but J.P. Morgan’s Eric Joseph has high hopes for this biotech stock. He writes: “In keeping with our generally bullish outlook on the differentiated therapeutic potential targeted protein degraders (TPDs), we view C4 as a compelling and underappreciated name within the broader space. Pursuing both monofunctional (aka molecular glues) and heterobifunctional compound formats, we believe the company’s TORPEDO discovery platform has potentially greater flexibility to generate multiple shots on goal with ideal drug-like properties across a diversity of cancer indications.”
All of this prompted Joseph to rate C4 shares a Buy rating along with a $43 price target. This target conveys his confidence in C4's ability to climb ~84% higher in the next year. (To watch Joseph’s track record, click here)
Like Shoals above, C4’s Strong Buy consensus rating is based on 6 Buys vs. 2 Holds. The average target is even more bullish than Joseph will allow; at $49.13, the shares are anticipated to be changing hands for ~111% premium a year from now. (See C4 stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.