If there’s one piece of consistent advice that every investor gets, it’s to never try to ‘time’ the market. Don’t try to buy or sell just at the stock’s inflection point when the momentum turns, because those turning points are impossible to predict. However, when it comes to the stock’s momentum during an upward run, it’s an entirely different tale altogether.
Buying in while a stock is on a red-hot run, building momentum, is not only possible, it’s far easier than trying to time a turning point. Momentum stocks typically feature long runs as they build up value, and investors can capitalize on those opportunities. The main trick is to identify a true momentum stock that has ample potential for further appreciation.
This is where Goldman Sachs comes in. The banking giant’s analysts have identified two stocks that they believe are poised to achieve more gains on top of their impressive year-to-date performance.
To verify if other Wall Street analysts concur, we turned to TipRanks, the world’s largest database of analysts and research, for insights. Let’s delve deeper into the details.
WW International (WW)
The first stock we’ll look at is a well-known name, Weight Watchers. This company has achieved a strong brand penetration in the diet and weight loss space, making it easily recognizable even beyond its core customer base – a significant advantage for any company. Weight Watchers’ core products include a series of guided weight loss programs, fitness programs, and aids for diet and healthy habits. The company aims to promote not only weight loss but also overall health and wellness.
Founded back in 1963, Weight Watchers currently boasts a subscription customer base of over 3.5 million, who make use of the company’s unique combination of technology and community. WW can leverage this customer base to generate over $1 billion in annual revenues.
Tapping into a lucrative market is not Weight Watchers’ only accomplishment. Last month the company announced it would acquire the digital health platform Sequence, which is focused on clinical weight management. The acquisition, which was completed this past April 10, was conducted in a stock and cash transaction worth $132 million. This total included $26 million in cash from Sequence, leaving a net purchase price of $106 million.
Sequence, founded in 2021, generates over $25 million in annual revenue and is designed for the treatment of obesity. In just two years of operation, Sequence has achieved positive cash flow and has gained over 24,000 paying members. The combination of Sequence’s clinical weight loss platform with Weight Watchers’ established, large-scale reach holds high growth potential. Since news of the Sequence closing broke, Weight Watchers shares have jumped over 100%.
Indeed, the Sequence acquisition was a welcome development for the company – and it prompted Goldman Sachs analyst Jason English to revise his outlook on the stock.
“WW’s subscriber base and earnings power has been shrinking, but we believe a catalyst for a turnaround has emerged with its new obesity drug on-ramp solution. With the now completed acquisition of Sequence, WW will begin to offer a pharmaceutical based clinical subscription service that it can integrate with its legacy behavioral based weight management offering. With this new service offering we expect a cohort of consumers to turn to it for help navigating what is poised to be an increasingly complex field of pharmaceutical solutions,” English opined.
We do not believe this potential is adequately captured in consensus estimates or the stock price,” the analyst summed up.
To this end, English rates WW shares a Buy, while his $13 price target suggests ~57% upside for the coming year. (To watch English’s track record, click here)
The rest of the Street is less confident, however; based on 2 Buys, 3 Holds, plus 1 additional Sell, the stock has a Hold consensus rating. (See WW stock forecast)
Apellis Pharmaceuticals (APLS)
Shifting our focus to the biotech sector, let’s now take a closer look at Apellis, a biopharmaceutical company that specializes in developing therapeutic agents that target the C3 system, also known as the complement system, within the body’s immune system. The complement cascade plays a crucial role in clearing the body of pathogens and damaged cells. However, when it becomes overactive, it can lead to the destruction of healthy tissues and cells, resulting in various disease conditions. The cascade is initiated by the C3 protein.
Apellis is focusing on C3 as the initial target for developing therapeutics to address retinal and neurological conditions with significant unmet medical needs, where excess complement activity plays a prominent role. Building on this approach, Apellis has a robust development pipeline that includes extensive pre-clinical research and four late-stage clinical trials. Furthermore, Apellis has achieved FDA approval for two drugs that are currently on the market.
The first of those, approved, in May 2021, was empaveli, a treatment for adults suffering from paroxysmal nocturnal hemoglobinuria (PNH) and switching from C5 inhibitors. In 2022, for the full year, empaveli generated $65.1 million in US net product revenues.
But the big news for Apellis was the more recent approval, in February of this year, of syfovre, an injection formulation of pegcetacoplan used to treat geographic atrophy (GA), a severe retinal condition that is a leading cause of blindness. Syfovre has a well-established safety profile and efficacy, as demonstrated by the recently concluded Phase 3 OAKS and DERBY clinical trials, and was approved for all patients with GA.
Since obtaining FDA approval, shares of APLS have risen by 24%, and have surged by 59% year-to-date.
In the view of Goldman Sachs’s 5-star analyst Madhu Kumar, the syfovre approval is a game-changer for Apellis. He write, “We continue to view Syfovre as a first-in-class and potentially best-in-class asset in GA, an ophthalmology condition with a 1M patient prevalence in the US and 5M patient prevalence worldwide, believe early launch metrics could drive APLS share upside…
“As a commercial-stage biotech with an approved drug in an emerging ophthalmology indication, we note that a hypothetical acquisition would be consistent with the trend of commercial-stage/later-stage biotech deal announcements involving large cap pharma. Moreover… a first-in-class and potentially best-in-class asset in GA would be a reasonable target for large strategics interested in ophthalmology markets,” Kumar added.
Overall, Kumar is optimistic about the future prospects of APLS stock and has assigned a Buy rating, with a $141 price target indicating a potential one-year upside of 71%. (To watch Kumar’s track record, click here)
In the bigger picture, APLS shares have a Strong Buy from the Street’s analyst consensus, based on 12 recent reviews – including 10 Buys against just 2 Holds. (See APLS stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a 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.