Let’s step back and take a look at the big picture, while keeping stocks in focus. Both the S&P 500 and the Nasdaq hit a series of record highs — mainly due to increasing investor confidence that the current inflationary environment will be a transitory event rather than a sustained trend. Clearly, investors are not shy about stocks, even though the Commerce Department’s inflation indicator for May hit 3.4%, it’s fastest rate of increase since the 90s.
Given this alarming disconnect, it has become more challenging to predict where the market might be heading. Economic and political forces are pulling in different directions, and the greatest certainty for now is uncertainty.
That’s not to say there aren’t any compelling plays out there. Against this backdrop, the pros from investment firm JPMorgan argue that a select few stocks stand to gain, pointing to three in particular that represent exciting opportunities. Not to mention potential upside gains starting at 70% are on the table.
We ran them through TipRanks database to see what other Wall Street analysts have to say about them. Let’s take a closer look.
Day One Biopharmaceuticals (DAWN)
We’ll start with Day One Biopharma, a clinical stage medical company focused on developing new treatments for genetically defined cancers. Day One takes an ‘all-ages’ approach to its new drug development, working on medications that will benefit the largest cohort of patients, from youth to adults.
Day One’s leading drug candidate is DAY101, an orally dosed, selective type II pan-RAF kinase inhibitor, under evaluation in a pivotal Phase 2 trial (the FIREFLY-1 trial) that has enrolled pediatric, adolescent, and young adult patients. All the patients in the study suffer from recurrent or progressive low-grade glioma (pLGG).
DAY101 has received two important designations from the FDA, the breakthrough drug designation and the orphan drug designation, and the company has additional clinical trials planned. The Phase 1 FIREFLY-2 trial, will test the drug against frontline pLGG, and there is a Phase 1 monotherapy trial for adults with RAF-altered solid tumors. Day One also has plans to initiate a Phase 1/2 trial, testing DAY101 in combination with primasertip in patients over age 12 and diagnosed with recurrent, progressive, or refractory solid tumors with MAPK pathway aberrations.
The company held its IPO in late May, putting 10 million shares on the market at $16 per share. The event raised gross proceeds of $160 million. DAWN is now listed on the NASDAQ index, and has a market cap of $1.24 billion.
JPMorgan analyst Anupam Rama likes the fundamental of this newly biotech stock. The analyst rates DAWN an Overweight (i.e. Buy) along with a $38 price target. Shares could appreciate by 89%, should the analyst’s thesis play out in the coming months. (To watch Rama’s track record, click here)
“Our Overweight thesis is driven by lead asset DAY101 (type 2 pan-RAF kinase inhibitor) which is initially being developed in the lead indication of BRAF-associated relapsed pediatric low-grade glioma. Indeed, in our view, known data, which have shown early anti-tumor activity and a clean safety profile, do de-risk the ongoing phase 2 registrational FIREFLY-1 study in BRAF-associated relapsed pLGG (initial data anticipated in 1H22),” Rama opined.
Looking ahead at future milestones, Rama noted, “Other key development milestones to monitor for DAY101 monotherapy include an adult RAF-altered solid tumor phase 2 study initiation (mid-2021) and DAY101 BRAF-associated front-line pLGG phase 3 trial initiation (1H22). The company will also start phase 1b/2 study of DAY101 + pimasertib in adult MAPK-altered solid tumors in 1Q22.”
Overall, there is broad agreement on Wall Street with Rama’s view, as indicated by the unanimous Strong Buy consensus rating, supported by 4 recent positive reviews. Shares in DAWN are selling for $20.11 and their $37.33 average price target implies a one-year upside potential of ~86%. (See DAWN stock analysis on TipRanks)
Altice USA, Inc. (ATUS)
The next JPM pick we’re looking at is a telecom company, Altice USA. Altice is a cable TV provider, with 4.9 million customers across 21 states. The bulk of these customers receive service through two of Altice’s brands, Optimum and Suddenlink. Altice’s business has been solid over the long term, and the stock is up 52% in the last 12 months. The company is consistently ranked in the top 5 cable TV companies in the US market, by customer base.
Over the past two years, since 1Q19, Altice’s revenues have been fairly steady, with the quarterly top line continually registering between $2.4 billion and $2.54 billion. In the most recent quarter reported, 1Q21, the top line was $2.48 billion. EPS told an even better story; at 58 cents per share, it was down 2 cents (or 3%) from Q4 but up strongly from the 1 cent EPS loss reported in 1Q20.
In a key metric, Altice reported strong cash flows in Q1. Operating cash flow grew more than 17% year-over-year, reaching $862 million. This was driven partly by earnings growth and partly by reduced capital expenditures.
JPMorgan’s Philip Cusick is impressed by Altice’s solid business foundation, noting: “We continue to like ATUS on solid fundamentals, strong capital returns, and an attractive valuation based on a 10.3% fully-taxed 2021 FCF yield and low-single digit revenue growth… Altice remains on track to achieve its 2021 residential broadband subscriber growth target of in line with or better than 2019 and 2018 growth.”
To this end, Cusick rates ATUS an Overweight (i.e. Buy) along with a $62 price target. This figure implies an upside of 80% for the next 12 months. (To watch Cusick’s track record, click here)
What does the rest of the Street think? Looking at the consensus breakdown, opinions from other analysts are more spread out. 5 Buys, 3 Holds and 1 Sell add up to a Moderate Buy consensus. In addition, the $42.33 average price target indicates ~23% upside potential from current levels. (See ATUS stock analysis on TipRanks)
Similarweb (SMWB)
We’ll wrap up this list of JPM picks with Similarweb, a digital intelligence and web analytics company founded back in 2007 and catering to the small- to mid-sized business market. Similarweb brings its customers a ‘comprehensive and detailed view of the digital world,’ developed with proprietary analytic technology. In aggregate, Similarweb analyses over 100 million websites, 4.7 million mobile apps, and 3 million brands across 210 industries. The company gathers data on 550 million keywords every month, along with over 1 billion search terms.
Similarweb’s revenue hit $93.5 million last year, and the company went public this past May. The IPO saw the company offer 7.5 million shares on the market, at a price of $22 per share. This was above the initial pricing range of $19 to $21. The event raised approximately $165 million in gross proceeds.
This newly public stock caught the attention of JPM’s 5-star analyst Sterling Auty, who sees a $34 billion addressable market in Similarweb’s niche.
“The increasing shift towards digital routes to market including e-commerce is forcing a wide range of stakeholders to search for reliable alternative data sources to run and invest in businesses. Similarweb has established itself as a leading digital intelligence platform for data across Internet, mobile Internet, and mobile application data. That position, we believe, will lead to continued fast revenue growth and increasing operating leverage that can drive share outperformance,” Auty wrote.
In line with these bullish comments, Auty gives SMWB shares an Overweight (i.e. Buy) rating, and his $31 price target indicates confidence in a 70% upside for the next 12 months. (To watch Auty’s track record, click here)
This new digital analytic stock has, in its short time on the public market, picked up 7 reviews from Wall Street’s analysts, with a breakdown of 5 to 2 Buy versus Hold giving the shares a Moderate Buy consensus rating. The stock is selling for $18.34 and the $27.67 average price target implies an upside of 52% for the upcoming year. (See SMWB stock analysis on TipRanks)
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.
