March has entered the frame and comes in the wake of two contrasting months. The year started off with stocks in a hurry to put 2022’s miserable action to bed, pushing higher right out of the gates. Yet, February proved a wake-up call for those anticipating a full-on bull market, as many stocks pared back a big chunk of those gains.
So, what’s next? Morgan Stanley’s Chief Investment Officer Mike Wilson says 2023’s early rally was a ‘bull trap.’ Wilson predicts more pain ahead for investors, calling March a “high risk month for the bear market to resume.”
That said, Wilson’s analyst colleagues at the banking giant have identified an opportunity in certain stocks they believe could offer protection from the bear’s snarl. We ran two of their recent recommendations through the TipRanks database to see what other experts make of these choices.
Coursera, Inc. (COUR)
We’ll start with Coursera, one of the world’s largest online learning platforms. The company connects people with online college-level courses, for degree credit, for professional development, and even for fun. The company boasts over 118 million registered learners taking courses with more than 300 university and industry partners, including such names as Duke University, University of Michigan, and Google.
The peak of the COVID pandemic in 2020 put a huge premium on remote activities, for work, school, and leisure, and while the pandemic has receded, demand for those remote activities remains high. Coursera has leveraged that fact into steadily rising revenues.
In the last reported quarter, 4Q22, the company showed a top line of $142.18 million, for a year-over-year gain of 23%. For the full year 2022, Coursera’s revenue showed 26% y/y growth, to reach $523.8 million.
While the company’s top line is growing, and even beat the forecasts for Q4, investors have been wary. Coursera typically runs a net quarterly loss, and the recent Q4 release was no exception – although the loss did moderate. In Q4, the company reported a non-GAAP loss of $6.5 million, about 1/4 of the $24.1 million net loss reported in the year-ago quarter. This most recent net loss translates into 4.6% of revenue.
The company also offered disappointing guidance. Coursera is predicting 1Q23 revenues in the range of $136 million to $140 million, compared to a forecast of $142.8 million; for all of 2023, the guidance is $595 million to $605 million, against a forecast of $618.5 million.
Morgan Stanley analyst Josh Baer acknowledges that this company whiffed on the latest financial update, but he points out several important factors supporting an upbeat take on Coursera. He writes, “While we have a mixed take on Q4 results overall, we continue to see Coursera as 1) one of the best positioned platforms to enable digital transformation in the large Education industry, 2) a company approaching FCF breakeven, with a steadily improving EBITDA margins on a path toward >20% EBITDA longer-term, and 3) low investor sentiment and expectations – all together creating an attractive risk/reward.”
Taking this together, Baer sees fit to rate COUR shares an Overweight (i.e. Buy), with an $18 price target to indicate room for 55% upside growth this coming year. (To watch Baer’s track record, click here)
The Morgan Stanley view is far from the only bullish take here. Coursera has 8 recent analyst reviews, breaking down 6 to 2 in favor of Buy over Hold for a Strong Buy consensus rating. The stock is trading for $11.61 and its $19 average price target suggests a strong 64% one-year upside potential. (See COUR stock forecast)
Neurocrine Biosciences, Inc. (NBIX)
The second Morgan Stanley pick we’ll look at is Neurocrine, a commercial- and clinical-stage biopharmaceutical company focused on creating new treatments for neurological, neuroendocrine, and neuropsychiatric disease conditions. The company has four approved medications on the market, two as wholly-owned products and two in conjunction with AbbVie, as well as an active pipeline of Phase 2 and Phase 3 clinical studies.
The company’s leading approved product – and its main headline maker – is ingrezza (valbenazine), an approved medication on the market for the treatment of adults with tardive dyskinesia, a movement disorder causing uncontrollable movements of the face and tongue, and sometimes other body parts. The drug was approved in 2017, and has since become the main driver of Neurocrine’s product revenues. In the last reported quarter, 4Q22, the company showed a total of $404.6 million in product sales; of that total, $399 million came from sales of ingrezza. For 2022 as a whole, ingrezza sales brought in a total of $1.43 billion.
Having a solid money-maker not only gives Neurocrine a ready income stream but also sees the company show a positive net earnings. The company’s non-GAAP diluted EPS for Q4 was $1.24, up from just 4 cents in the year-ago quarter, although the figure fell shy of the $1.44 forecast. That said, for all of 2022, non-GAAP diluted EPS came to $3.47, compared to just $1.90 in 2021.
On the clinical side, Neurocrine has additional research tracks underway for valbenazine, as a treatment for multiple conditions, including chorea due to Huntington disease, dyskinetic cerebral palsy, and schizophrenia. The key catalyst expected from these relates to the Huntington disease track; the company submitted the New Drug Application to the FDA this past December, and has a PDUFA date of August 20, 2023.
Also, at the Phase 3 stage, are adult and pediatric studies of crinecerfont, a treatment for congenital adrenal hyperplasia in adults and children. The company has announced that enrollment in both studies is complete, and top-line data is expected in 2H23.
Analyst Jeffrey Hung, in his comments on Neurocrine for Morgan Stanley, explains clearly why he believes the company is set up for continued success.
“We think Neurocrine is well-positioned for continued Ingrezza performance in 2023 with favorable upside potential from multiple data readouts,” Hung explained. “We are encouraged by the company’s expectations for SG&A leverage of 300bps in 2023 and additional growth potential in future quarters from the long-term care setting. Although expectations for continued robust Ingrezza sales remain high, we continue to see a favorable setup for NBIX shares with multiple data readouts expected later this year.”
These comments support Hung’s Overweight (i.e. Buy) rating on NBIX shares, while his $130 price target implies a one-year gain of ~28% waiting in the wings. (To watch Hung’s track record, click here)
Out of 19 recent analyst reviews for this stock, 12 are to Buy and 7 to Hold, for a Moderate Buy consensus rating. The shares are currently trading for $101.18, and the $125.83 average price target indicates room for 24% growth in the year ahead. (See NBIX stock forecast)
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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.