The calendar might have flipped to 2020, but that doesn’t mean everything has changed. Investors are still scouring the Street in search of the most compelling investment opportunities, the names that could see 2020 be their year.
These aren’t just any run of the mill stocks. We’re talking about tickers that are set to outperform the broader market and can hand over substantial returns in the year ahead. Having said that, tackling this job isn’t always easy. With so many options out there, it can seem overwhelming. Luckily, Wall Street analysts are here to lend a hand.
Often experts in the industries that they cover, a nod of approval from the Street’s seasoned pros can signal that a certain stock should be on investors’ radar. Bearing this in mind, we turned to the analysts at investing firm Cowen for some inspiration as we started our own search. Using TipRanks, which assembles a comprehensive database of stock performance information, we were able to take a closer look at 3 of the firm’s top picks for 2020. To top it off, each has the support of the rest of the Street as well, boasting a “Strong Buy” consensus rating.
Alexion Pharmaceuticals (ALXN)
Alexion is best known for developing innovative therapies to improve the lives of patients battling rare diseases. While the company stumbled a bit in 2019 as a result of concerns about competition from biosimilars, Cowen thinks that 2020 could see a major turnaround for the company.
Analyst Phil Nadeau tells investors that the market has been “overly harsh” about ALXN’s potential, noting that the shift from its Soliris drug to Ultomiris should bode well for the company. “Our DCF analysis suggests that the current stock price assumes that worldwide sales of ALXN’s C5 franchise in atypical hemolytic uremic syndrome (aHUS) and paroxysmal nocturnal hemoglobinuria (PNH) in 2024 and after are 75% below our current projections. We think that this is an overly pessimistic view of its sustainability. Based on Ultomiris' benefits over Soliris we think that ALXN's franchise is far more defensible than most investors give it credit,” he explained.
According to Nadeau, the fact that ALXN has made significant progress in terms of rebuilding its pipeline and transferring the C5 franchise to Ultomiris could drive a re-rating for the healthcare name. Not only does Ultomiris offer improved potency and convenience, but it also has a lower annual price. Additionally, the maturation of its pipeline could contribute to gains in 2020.
As a result, the five-star analyst left the Outperform rating and $165 price target as is. At this target, shares could climb 55% in the twelve months ahead. (To watch Nadeau’s track record, click here)
What does the rest of the Street have to say? As it turns out, Wall Street is also in favor of ALXN. 12 Buy ratings and 3 Holds received in the last three months make it a Strong Buy. While lower than Nadeau’s estimate, the $145.67 average price target puts the upside potential at a respectable 37%. (See Alexion stock analysis on TipRanks)
Alnylam Pharmaceuticals (ALNY)
Using RNA interference (RNAi), Alnylam is changing the way debilitating diseases are treated. Based on the Nobel Prize-winning science, the company offers five late-stage programs that could address the large unmet need. Even with shares up 58% in the last year, Cowen’s Ritu Baral believes even more gains are in store.
The analyst cites ALNY’s patented GalNAc construct science as well as its clinical strategy as helping it become a “dominant” player in the space. Its ONPATTRO (patisiran) drug for hATTR familial amyloid polyneuropathy (FAP) has already impressed with its performance and has seen consistent growth since its initial launch. In its third quarter, sales came in at $46.1 million, up 21% quarter-over-quarter with 600 patients currently using the therapy. Part of this success is thanks to its partnerships with 23andMe and genetic testing through the Alnylam Act Program, which has increased physician education, disease awareness and helped improve diagnostic methodology.
The good news doesn’t stop there in Baral’s opinion. “The company is further de-risked by its late-stage compounds including just-launched GIVLAARI, inclisiran, and lumasiran that should significantly increase recurrent revenues within the next 24-months and drive top-line growth. This is coupled with multiple early stage programs (most wholly owned, some partnered) in both orphan disorders and more prevalent diseases which should yield multiple catalysts in the same time frame,” the five-star analyst commented.
Baral argues that the company is transitioning to a “self-sustainable large cap biotechnology”, with this potentially attracting a broader group of investors. It’s no wonder, then, that the analyst boosted the price target from $120 to $154 in addition to maintaining the Outperform rating. This conveys her confidence in ALNY’s ability to surge 33% in the next twelve months. (To watch Baral’s track record, click here)
Similarly, the rest of the Street takes a bullish approach when it comes to ALNY. A Strong Buy consensus rating is broken down into 13 Buys, 1 Hold and 1 Sell. Based on the average price target of $136.47, the upside potential lands at 18%. (See Alnylam stock analysis on TipRanks)
Argenx SE (ARGX)
With a novel approach that combines the diversity of the llama immune system and antibody engineering, Argenx develops treatments for cancer and severe autoimmune diseases. On the heels of a stellar 2019, Cowen is expecting a similar performance to be slated for 2020.
Analyst Yaron Werber highlights the company’s lead candidate efgartigimod (anti-FcRn antibody fragment) as having a “potentially best-in-class profile with a first mover advantage across several indications.” The drug is targeting lucrative multi-billion dollar markets, with his estimate putting peak sales at $2.3 billion.
While there are treatment options currently available for autoimmune disorders like Myasthenia Gravis (MG), pemphigus vulgaris (PV), idiopathic thrombocytopenic purpura (ITP) and chronic inflammatory demyelinating polyradiculoneuropathy (CIDP) such as steroids and immunosuppressants, they aren’t always tolerated well and IVIg is expensive, inconvenient and faces capacity constraints. “Efgartigimod is the most advanced FcRn antagonist in development and we anticipate that positive data in PV (POC Ph2: H1:20) and MG (Ph3: H2:20) should drive stock appreciation,” Werber noted.
In addition, the company has partnered with Johnson & Johnson, which could speed up the development of cusatuzumab, its anti-CD70 antibody currently in Phase 2.
Werber added, “With a deep pipeline, multiple catalysts in FY20 and clear path for near- and longer-term value creation, the stock has ample room for appreciation based on data readouts, derisking clinical milestones, and boosting confidence in new indications.” To this end, Werber reiterated the Outperform rating while also attaching a new $191 price target. Should the five-star analyst’s target be met, shares are looking at a twelve-month gain of 20%. (To watch Werber’s track record, click here)
In general, other Wall Street analysts are on the same page. With 10 Buys compared to a single Hold, the word on the Street is that ARGX is a Strong Buy. Given the $180.90 average price target, the upside potential amounts to 14%. (See Argenx stock analysis on TipRanks)