The markets have the tendency to overdramatize, and events are often blown out of proportion. With the stock market having experienced a pullback since the mid-summer peaks, there have been fears the bull market seen for most of the year is about to go up in smoke.
But that is not the case at all,” argues Matt Orton, Chief Market Strategist at Raymond James. Throughout the year, the markets have been “pushing back” against the Fed’s narrative that interest rates will need to stay elevated for an extended period. And what we’re seeing now, says Orton, is just a “process of normalization.
“What I’ve been reminding our clients is that we haven’t had a 5%-plus pullback since SVB (Silicon Valley Bank collapse) in early March of this year,” Orton expounded on the issue. “It’s been a really, really long uptrend for this market, and investors really should be opportunistic because the economy is still, I’d say, in good enough shape, and what we’re seeing is that there are a lot of opportunities for those who actually want to look and do their homework. Valuations are compelling in a lot of parts of the market.”
The analysts at Raymond James are running with that sentiment and have been busy pointing out those compelling equities primed for gains. Specifically, they have identified two names they consider as ‘Strong Buys,’ which they believe have up to 85% upside potential.
But it’s not only the Raymond James experts that are showing confidence in the pair. Checking in with the TipRanks database, we find the analyst consensus rates both as ‘Strong Buys’ as well. Let’s see why investors might want to consider loading up on these stocks right now.
Customers Bancorp (CUBI)
We’ll kick off with Customers Bancorp, a financial holding company that operates primarily through its subsidiary, Customers Bank. Calling itself a “super-community bank,” CUBI has over $22 billion in assets and is a full-service commercial bank catering to both individual and business customers.
CUBI operates in Florida, Illinois, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, and Texas while also focusing on digital banking solutions. The bank provides a wide range of financial products and services, including commercial lending, mortgage banking, and wealth management.
In a year of turmoil for banks, CUBI’s latest quarterly report was a strong one. In Q2, the company showed a top-line of $181.27 million, amounting to a 20.8% year-over-year increase while beating the consensus estimate by almost 7%. Adj. EPS of $1.65 also fared better than the $1.42 per share anticipated on Wall Street.
CUBI has managed to sidestep the carnage associated with the multiple bank collapses seen in the early part of the year, even showing market-beating year-to-date gains of 23%. In fact, it actually stands to gain from the mess, having acquired, from the Federal Deposit Insurance Corporation (FDIC), a $631 million venture banking loan portfolio at roughly 85% of book value.
This is a point picked up by Raymond James analyst Steve Moss. “CUBI is positioned to benefit from market disruption post the failure of SIVB and SBNY with its FDIC acquisition of venture and capital call loans, which should support significant loan and deposit growth opportunities that can meaningfully enhance franchise value,” writes the 5-star analyst. “These opportunities should allow CUBI to remix its balance sheet, which should support a significantly higher TCE/TA ratio by YE24 as we expect profitability will remain strong. With the stock at 76% of TBV, earnings and core deposit growth likely to continue, and capital likely to improve, we expect the stock will steadily re-rate higher as management executes on its strategic priorities.”
These comments form the basis for Moss’ Strong Buy rating on CUBI, while his $60 price target suggests shares are set for gains of ~85% over the coming year. (To watch Moss’ track record, click here)
Elsewhere on the Street, barring one skeptic, all 6 other analyst reviews are positive, providing this stock with a Strong Buy consensus rating. Going by the $49.83 average target, a year from now, investors will be sitting on returns of ~53%. (See CUBI stock forecast)
Ionis Pharmaceuticals (IONS)
Let’s switch gears now, and for our next Raymond James-backed name, let’s take a look at something completely different. Ionis Pharmaceuticals is a biotech firm that develops and brings to market RNA-targeted therapies, with a focus on antisense technology. Antisense therapies are engineered to precisely locate, attach to, and degrade mRNA molecules in an extremely specific manner. This results in a significant reduction in the levels of disease-causing proteins.
In contrast to many biotech companies, Ionis is an established name with commercially available products generating a regular income stream. And the company also has licensing deals and collaborators such as AstraZeneca, Biogen, GSK, Novartis, via which it receives royalty payments. In Q2, revenue increased by 40.3% year-over-year to reach $188 million, while beating the Street’s forecast by $46.08 million. EPS of -$0.60 also outpaced analyst expectations by $0.28.
Additionally, Ionis has a pipeline with plenty of activity going on. The company recently announced that rare disease therapy olezarsen met the primary endpoint with a statistically meaningful drop in triglyceride levels compared to the placebo in a Phase 3 trial of patients with familial chylomicronemia syndrome (FCS), a genetic condition defined by fatal pancreatitis attacks. Ionis plans to submit a New Drug Application with the FDA early next year to gain marketing authorization for the drug.
Enrollment has also been completed in the Phase 3 OASIS-HAE study of donidalorsen in patients with hereditary angioedema. A data readout is planned for 1H24
Furthermore, there is anticipation surrounding the potential approval of eplontersen, an investigational antisense therapy designed to address hereditary transthyretin-mediated amyloid polyneuropathy (ATTRv-PN). The PDUFA date is fast approaching on December 22.
With all this to come, it’s no wonder Raymond James analyst Gary Nachman thinks investors should pay attention. He writes, “IONS is well positioned to compete in the high-value and largely untapped ATTR market with Eplontersen (partnered with AZN), which has potential to be best-in-class (PN and CM), and IONS is transitioning to commercial self-sufficiency with its wholly-owned Ph3 assets Olezarsen (FCS and SHTG) and Donidalorsen (HAE), which have very strong clinical profiles and represent sizable market opportunities, and with favorable risk/ reward on the data.”
“Valuation appears attractive when considering likelihood of success for the later-stage pipeline, significant optionality on earlier-stage pipeline, and a strong balance sheet. With important catalysts materializing near-to-medium term, if positive, we could see strong acceleration in the stock,” Nachman went on to add.
Keeping up his optimistic view, Nachman rates IONS a Strong Buy, and his $63 price target implies a one-year upside potential of ~42%. (To watch Nachman’s track record, click here)
Most of Nachman’s colleagues on Wall Street are also in agreement. The stock boasts a Strong Buy consensus rating, backed by 6 Buy recommendations and 2 Holds. The average target price stands at $54.11, offering a one-year upside potential of ~22% from its current levels. (See IONS 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.
