Is it time to take the bull out of the pen? The noises emanating from the policy makers indicate a willingness to possibly change the aggressive rate hike stance taken in the ongoing efforts to quell inflation.
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In a speech on Wednesday, Fed Chair Jerome Powell laid the groundwork for a possible 50-basis point rate hike when the Fed meets in December to discuss its policy. This will be a welcome change from the previous 75-basis point hikes.
His speech went down well with the markets, which spiked in response and provided hope for investors who will be keen to see an end to the Fed’s aggressive rate-hiking endeavors.
Meanwhile, it’s been doubly hard finding the stocks that will outperform in the current climate, but this is where some assistance from the analysts at leading investment banks such as Goldman Sachs can come in handy.
The firm’s experts have recently pinpointed a pair of stocks that could gain over 40% in the next year. After running the tickers through TipRanks’ database, it’s clear the rest of the Street is in agreement, with each earning a “Strong Buy” consensus rating. Let’s check the details.
On Holding AG (ONON)
Over the past decade, one of the major themes delivering growth in sportswear has been that of casualisation, a trend given an additional boost by the pandemic. With the rise of athleisure fashion, rather than being a specialist segment, sportswear has become a part of the wider fashion world. Tapping into this opportunity is Swiss-based sportswear brand On.
On was founded in 2010, since when its focus has been on bringing to market groundbreaking sports footwear targeting athletes and hobbyists. Running enthusiasts have taken to the company’s patented CloudTec and Speedboard technologies, and the products’ popularity have spread by word of mouth. At the same time, with the help of marketing nous and celebrity partnerships – such as the ‘The Roger’ shoe franchise, set up with Roger Federer – the company has raised its fashion profile.
The strong traction has resulted in sales grow at an impressive rate over the past few years. In the latest quarterly report, the company generated record revenue of CHF 328.01 million ($344.54 million), amounting to a 50% year-over-year increase, while adjusted EBITDA rose by 48.5% from CHF 37.9 million ($39.81 million) to CHF 56.3 million ($59.14 million).
For the full year outlook, the company raised its sales forecast (again) by CHF 25 million to CHF 1.125 billion ($1.18 billion), which represents a year-over-year uptick of around 55% vs. 2021.
Like many others, however, On shares have suffered badly this year and are down 49% year-to-date.
However, Goldman Sachs analyst Richard Edwards expects the stock to claw back those losses and views On as offering a “differentiated product proposition in the competitive sportswear landscape.” He notes the company’s “attractive business model, supported by mega trends.”
Expounding on this, Edwards writes: “1) we expect On’s strong product proposition centred on innovation to drive continued rapid growth and best-in-class gross margins 2) On is set to benefit from structural tailwinds as Sportswear fashion market penetration rises and 3) shift to DTC provides strong margin tailwinds.”
All the above are reasons why Edwards rates On shares a Buy while his $28 price target suggests growth of ~46% in the year ahead. (To watch Edwards’ track record, click here)
The analyst community mostly agrees; based on 7 Buys vs. 1 Hold, the stock claims a Strong Buy consensus rating. The average target is almost the same as Edwards’ objective; at $27.86, the figure makes room for 12-month gains of 42%. (See ONON stock forecast on TipRanks)
4D Molecular Therapeutics (FDMT)
There are no gains like biotech gains, something the next Goldman-endorsed stock can attest based on its recent performance.
4D Molecular Therapeutics targets the development of next-generation gene therapies through the use of targeted synthetic vectors. The work is guided by the company’s proprietary Therapeutic Vector Evolution platform.
4D Molecular shares are up 166% over the past month with the market applauding recent developments in its pipeline following the release of positive readouts from early-stage clinical-trials of two experimental treatments.
For one, in the phase 1/2 study of gene-therapy candidate 4D-710, indicated to treat cystic fibrosis (CF), the data showed a clinically meaningful expression while no adverse events were noted by the first three patients treated with the drug.
However, the real jump came with the more recent results of the Phase 1/2 trial of 4D-150, the company’s therapy for patients with wet age-related macular degeneration (AMD). For older folks, wet AMD is a somewhat common cause of blindness. Currently, billions of dollars are made from drugs that halt the growth of AMD, but they must be taken often. 4D-150 aims to induce retinal cells to start synthesizing their own Eylea, an injectable medicine that last year generated sales of almost $8 billion.
The readout showed that amongst the first group treated with 4D-150, none displayed any serious side effects and only one of the five patients treated to-date has been given additional injections of Eylea.
Other drugs in the company’s pipeline include 4D-125, indicated to treat X-linked retinitis pigmentosa (XLRP), and currently in an ongoing Phase 1/2 dose-escalation clinical trial, 4D-110, which is in an ongoing Phase 1 dose-escalation clinical trial in patients with choroideremia (CHM), and 4D-310, being tested in an ongoing Phase 1/2 clinical trial in adult patients with classic (severe) Fabry disease.
Assessing the recent results, Goldman analyst Salveen Richter sees plenty to get excited about.
“While early, these are promising signals of FDMT’s differentiation, which could include the potential for redosing. In 2023, we look to additional Ph1/2 dose escalation data in wAMD, enzyme activity and cardiac benefit data in Fabry disease (potentially at WORLD Symposium 2023), clinical activity and biopsy data in CF, and program updates in XLRP and choroideremia, while noting the cash runway to 1H25. In 2031, we model for peak global sales of ~$7.7bn across six programs,” Richter wrote.
Despite the recent gains, Richter’s $68 price target makes room for additional returns of 206% in the year ahead. It hardly needs a mention, but the 5-star analyst gives FDMT shares a Buy rating. (To watch Richter’s track record, click here)
So do most of her colleagues. While one analyst is sitting this one out, with 3 additional Buys, the stock claims a Strong Buy consensus rating. The forecast calls for one-year gains of 71%, considering the average target stands at at $37.80. (See FDMT stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
