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‘Load Up,’ Says J.P. Morgan About These 2 ‘Strong Buy’ Stocks

September is traditionally known to be a challenging month for the stock market, with historical data showing it is usually the worst month of the year for stocks.

However, when considering year-to-date activity, J.P. Morgan’s Global Investment Strategist, Madison Faller, points out that this may not be the case this year.

“A closer look shows that in the 10 times since 1950 that the S&P 500 has been up at least 10% year-to-date and it’s been down in August (just like this year), September has been higher 8 of those times – with a median return of +2.6%,” Faller explained.

But it’s not only for September that Faller has an upbeat outlook. On whether the markets can see out the rest of the year on a positive note, the strategist also makes some reassuring noises.

“Can 2023 still finish strong? Faller asks, “We think so,” she rhetorically answers. “While there are still things we don’t know, the read across the key players – the Fed, Wall Street, Main Street and the C-Suite – suggests that the outlook feels brighter today than it did a year ago.”

So, with that positive outlook in tow, the question is, which equities should investors be loading up on at present? The JPMorgan analysts have been busy seeking out those names and have homed in on two they think make good additions to a portfolio in this environment. And they are not alone, according to TipRanks’ database, both are also rated as ‘Strong Buy’s by the analyst consensus. Let’s see why they are drawing plaudits across the board.

Establishment Labs (ESTA)

For our first JPMorgan-backed stock, we’ll look at a company that has been making a name for itself in the global breast augmentation and reconstruction industry. Establishment Labs is a medical tech firm specializing in advanced breast aesthetics and reconstruction technologies.

The company’s core offering is its breast implant brand, Motiva, which includes three products: Ergonomix, Motiva Round, and the Anatomical TruFixation implant. Additionally, the company touts its Motiva Flora tissue expander as being the sole regulatory-approved expander in the world, employed to enhance results in breast reconstruction procedures performed after breast cancer treatment.

This year, the company also added to the product line its Mia Femtech product, which offers a minimally invasive experience where a breast can be shaped in a 15-minute process without requiring general anesthesia.

The company’s portfolio helped generate revenues of $48.6 million in Q2, amounting to an 18% year-over-year increase while beating the forecast by $1.23 million. Likewise on the bottom-line, EPS of -$0.65 came in $0.06 better-than-expected.

It should also be noted that, so far, the company’s products lack presence in two of the largest augmentation and reconstruction markets, although that could all be about to change. ESTA is targeting a Q4 approval and launch of Motiva in China while it also confirmed on the Q2 earnings call that the FDA had given it an investigational device exemption, so a US launch could be imminent too.

This partly informs JPMorgan analyst Allen Gong’s bullish thesis. He states, “With a unique offering already enabling meaningful share capture against entrenched players in the company’s current markets, we see multiple paths to growth with major near-term catalysts like: (1) the impending launch of Motiva in the US and China, two of the largest markets by volume and dollars for breast augmentation and reconstruction; and (2) the ongoing launch of Mia Femtech, a minimally invasive offering that significantly shortens both procedure and recovery time at a significant mix premium,” writes Gong. “With multiple shots on goal to support 30%+ revenue growth in the coming years and potential profitability within the same time-frame, we like the setup for ESTA at today’s valuation.”

Accordingly, Gong rates ESTA shares an Overweight (i.e. Buy) while his $75 price target makes room for 12-month returns of ~39%. (To watch Gong’s track record, click here)

Overall, 4 other analysts have recently chimed in with ESTA reviews, and like Gong, they are all positive, naturally making the consensus view here a Strong Buy. The average target is more bullish than Gong will allow; at $95.2, the figure implies investors could be recording gains of 76% a year from now. (See ESTA stock forecast)

Remitly Global (RELY)

For our next JPM pick, we’ll switch lanes and turn to an entirely different industry. Remitly Global is a leading financial tech company that provides international money transfer services to individuals and businesses around the world. Founded in 2011, the company has rapidly grown to become a trusted player in the global remittance industry.

Remitly’s mission is to make the process of sending and receiving money across borders faster, more affordable, and more convenient, particularly for immigrant communities and individuals who rely on remittances as a crucial lifeline. Its user-friendly digital platform and mobile app offer its customers a seamless and secure way to send funds to more than 150 countries.

It has been a good year for the stock so far. RELY shares have gained 118% year-to-date, thanks in part to strong results, including those from the most recently reported quarter – 2Q23.

Boosted by active customers rising 47% from the same period a year ago and Send volume increasing by 38%, revenue climbed by 48.8% (51% FXN) to reach $234 million, coming in above the Street’s call by $18.21 million. At the other end of the scale, EPS of -$0.11 beat the analysts’ forecast by $0.05.

The outlook was also strong, with revenue for the year now expected in the range between $915 million to $925 million (amounting to 40% to 42% y/y growth), up from the prior $875 million to $895 million range.

For JPMorgan’s Tien-tsin Huang, the strong metrics on display required a tweak to his RELY model, and a good one at that.

“FXN revenue growth impressively stayed above the 50% level for the second consecutive qtr., decelerating only 2ppt sequentially to +51% for 2Q , exceeding our 38% est., similar in magnitude to last quarter,” the analyst explained. “We’re raising our estimates to assume 42% revenue growth in FY23 (a touch above guidance), making it a top grower in our coverage, and we continue to recommend RELY as our favorite small-cap growth idea.”

These comments underpin Huang’s Overweight (i.e. Buy) rating while his $34 price target suggests the shares will push 35% higher in the months ahead. (To watch Huang’s track record, click here)

Looking at the consensus breakdown, the rest of the Street agrees with Huang’s assessment. With 6 Buys and no Holds or Sells, the word on the Street is that RELY is a Strong Buy. The $28.40 average price target implies shares could further climb ~14% in the next year. (See RELY stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

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