Markets are plunging, taking a serious hit as the coronavirus spreads rapidly throughout the world. So far, the worst of the outbreak is in China, but large-scale viral cases are on the rise in Italy, Iran, and South Korea. Medical restrictions and quarantines are disrupting global trade and travel patterns, with shutdowns in Chinese factories impacting global supply chains in everything from electronics to the containerized shipping industry. The S&P 500 is down 12.8% from its peak on February 19, completely erasing earlier gains and putting the index at an 8.6% loss for the year to date.
But as per usual in the stock markets, risky times also present opportunity for daring investors – and while the market as an aggregate is falling, any one stock’s individual performance may be very different. In short, a savvy investor can find stocks with serious growth potential, even in today’s market conditions.
We’ve used TipRanks’ Stock Screener tool to pull up some stocks with serious growth prospects. Setting the filters to show us only mid- to large-cap stocks, with upwards of 20% upside potential, 6,100 stocks were reduced to a far more manageable 293. Let’s dive in and examine three of them in detail.
Copart, Inc. (CPRT)
We’ll start with Copart, the online automotive auction site. The Texas-based company boasts a global reach, with services in the US and Canada, UK and Ireland, Germany, Spain, and the UAE. The company offers services to sellers looking to unload used and salvaged vehicles, primarily in the dismantling, parts, and export markets. A limited number of vehicles are sold as used cars for the general public, but most of Copart’s customers are insurance companies.
No matter what the stock market does, there will always be a market for used auto parts. That basic fact is reflected in Copart’s success. In the company’s most recent fiscal quarter, Q2 2020, reported last month, CPRT beat the forecasts and the year-over-year numbers, but the margins were narrow. Revenues came in at $575.1 million, up 18.6% year-over-year but only half a percent over estimates. EPS landed at 65 cents, right on the forecast.
The earnings result for Q2 was the sixth in a row that the company met or surpassed the expectation, but shares slipped on an ominous sign: EPS growth was flat from Q1 to Q2. CPRT is down 19% since the quarterly report. It’s important to note here, however, that the quarterly earnings came out on February 19, the same day that markets started sliding on coronavirus fears.
The combination of a general market slump and apparently slowing sales put a damper on the stock’s recent gains, but an important – and overlooked – point in today’s automotive market bodes well for CPRT. In the past 40 years, the rate at which cars are declared a ‘total loss’ after an accident has increased from 4% to 20%. At the same time, the number of cars on the road has increased dramatically. This puts a much larger population of sellable vehicles in Copart’s universe.
At least one analyst sees CPRT’s current state as a good point of entry to the stock for investors. Craig Kennison, of Baird, writes, “Copart's earnings and revenues fell short of expectations and the modest slowdown was sufficient to break the momentum in the shares. We remain bullish on the shares as the fundamentals remain.”
Along with his Buy rating, Kennison increased his price target on the stock by 4%, to $100. His new target suggests an upside potential of 18%. (To watch Kennison’s track record, click here)
Overall, CPRT’s Strong Buy consensus rating is based on 3 Buys and 1 Hold, all set in the last two weeks. Shares are selling for $84.47, and the $106.33 average target price implies an upside growth potential of 26%. (See Copart stock analysis on TipRanks)
Alnylam Pharmaceuticals, Inc. (ALNY)
Next on our list is Alnylam, a biotech research company focused on RNAi commercialization for the treatment of genetic diseases. Biotechs are famously volatile, and companies are notorious for running steep losses until striking gold with a new drug approval. Alnylam falls squarely into that pattern, with the EPS loss at $2.47 in Q4 2019.
Revenues, however, were up, coming in at $71.7 million. This beat the forecast by just under 1%. ALNY shares are up 46% in the past six months. The company has two drugs on the market, Onpattro and Givlaari, approved in 2018 and 2019, respectively, and reports growing sales revenues on both. Alnylam reported $55.8 million in Onpattro revenue for Q4 (up 21% from Q3), along with solid initial interest in Gilvaari. With another eight drugs in various stages of pipeline development, Alnylam has a firm foundation for future prospects.
Chardan Capital analyst Keay Nakae is impressed by the growth potential here. He writes, “We believe that Alnylam is the clear leader in the RNAi space, as its scale, experience, patents, breadth of pipeline, and access to capital place it in an advantageous position relative to its competitors developing small RNA therapeutics. The Company's RNAi platform has been validated by the approval of two products (Onpattro and Givlarri), multiple positive phase III study results, including six last year…”
Nakae puts a $190 price target behind his Buy rating, indicating confidence in a robust growth potential of 61% for the coming year. (To watch Nakae’s track record, click here)
Alnylam has no fewer than 10 Buy ratings, outweighing the 1 Hold and 1 Sell as well as giving the stock a Strong Buy consensus rating. The average price target of $143.08 suggests a premium of 22% from the current share price of $117.55. (See Alnylam stock analysis on TipRanks)
Anaplan, Inc. (PLAN)
Anaplan is another company that had the bad fortune of reporting solid Q4 numbers just as the market hit a correction. The San Francisco-based company inhabits the cloud software ecosystem, offering customers event planning applications for business use. With the company’s platform, users can build and maintain strategic and operational business performance management systems.
Like many high-tech companies, PLAN has been operating at a net loss, but the Q4 numbers showed the loss is narrowing. In non-GAAP reporting, PLAN posted a loss of 7 cents per share, comparing favorably to the 13-cent loss one year earlier. At the same time, total revenue rose by 42% to reach $98.2 million – that number included a 50% year-over-year increase in subscription revenue to $89.5 million.
Writing from RBC Capital, 5-star analyst Alex Zukin says of this company, “We believe Anaplan is at the tip of the spear for digital transformation of financial and operational planning systems, a $21 billion-plus market with high barriers to entry and no pure-play competitors... With the company steadily building a broader strategic value proposition as a ‘System of Insights’ that can pull operational data from various systems of record we see the opportunity for the company to successfully scale to billions in revenue…”
Zukin backs his Buy rating on the stock with a $75 price target, implying room for an impressive 67% upside growth this year. (To watch Zukin’s track record, click here)
Zukin’s optimism is slightly higher than the consensus view of this stock. PLAN shares have a Strong Buy consensus rating, based on 4 Buys and 1 Hold set in recent weeks. The stock is selling for $44.88, and the average price target, $66.20, suggests a robust 48% upside potential. (See Anaplan price targets and analyst ratings on TipRanks)