Bouncing back with incredible force, the S&P 500 has gained 50% over the past 12 months, with the index now landing just shy of its 52-week high. This impressive charge forward has come as investors shrug off COVID-19’s devastating impact on the economy.
Going ahead, Raymond James strategist Tavis McCourt believes we’re looking at a prolonged period of higher interest rates, higher taxes, and abundant economic growth.
“[It] seems very likely the puck is going to be in a very strong economy, low unemployment, with higher long term rates, and likely higher tax rates in the next 6-12 months. The bias for EPS this year is likely higher as re-openings occur, as any EPS misses are likely to be driven by supply issues or inflation, not lack of demand,” McCourt noted.
Sustained improvement in the economic indicators paint a rosy picture, and McCourt believes that some of the potential negatives (the Biden Administration’s policy preference toward higher tax rates, for example) are already priced in.
As the tide rises, we remember one of JFK’s famous lines: “A rising tide lifts all boats.” We’ll take a look at a piece of that rising tide, through the stock picks by some of McCourt’s Raymond James colleagues. They’ve pointed out equities with upwards of 60% gains in store for the year ahead.
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.
Pioneer Natural Resources (PXD)
We’ll start in Texas, in the oil patch of the Permian Basin, where Pioneer Natural Resources is a major landholder and hydrocarbon exploration and extraction company. Pioneer has over 1.27 billion barrels of oil equivalent in proven reserves on its holdings; that number includes 357 million barrels added through exploration in 2020.
Operations on its holdings yielded Q4 earnings of $1.07 per share, beating consensus estimates of $0.69 per share. For the full-year 2020, Pioneer reported a net loss of $1.21 per share; this number was heavily impacted by disruptions due to the COVID pandemic crisis.
Furthermore, 2020 saw operating cash flow reach $2.1 billion, with a free cash flow of $689 million. The company used that free cash flow to fund a capital return program totaling $521 million. A large part of the capital return is made through the company dividend, which in the last declaration was raised one penny to 56 cents per common share, paid quarterly.
The company has built on its solid position by acquiring, effective this month, competitor DoublePoint Energy. The acquisition cost Pioneer the equivalent of $6.4 billion – divided up as 21.2 million shares of PXD common shares, $1 billion in cash, and the remainder, $900 million, in the assumption of debt and liabilities.
Covering PXD for Raymond James, analyst John Freeman writes of the acquisition: “We anticipate meaningful efficiency improvements from longer laterals on the acquired acreage in addition to the typical G&A and interest synergies. The 97,000 net acre acquisition increases PXD’s Permian leasehold to >1M net acres.”
The analyst added, “With the acquisition of DoublePoint Energy, Pioneer further establishes itself as the leading Permian Basin pure-play E&P with top-tier acreage position and balance sheet. The company’s ability to generate meaningful FCF should be more than sufficient to fulfill its intentions to return meaningful returns to shareholders…”
In line with his comments, the analyst rates PXD a Strong Buy, with a target price of $245 to indicate a one-year upside of 67%. (To watch Freeman’s track record, click here)
Overall, the word of the Street is an overwhelmingly bullish one for this oil stock, as TipRanks analytics exhibit PXD as a Strong Buy. Out of 24 analysts polled in the last 3 months, 19 are bullish, and 5 remain sidelined. With a return potential of ~29%, the stock’s consensus target price stands at $190.57. (See PXD stock analysis on TipRanks)
Shifting gears, we’ll move from the energy industry to the biotech field, where NexImmune is an early-stage biotechnology company in oncology, developing T-cell immunotherapies. In short, the company researches ways to stimulate the patient’s own immune system to fight cancer.
The company has a development pipeline featuring two lead drug candidates, NEXI-001 and NEXI-002, which are in Phase 1/2 clinical trials as treatments for acute myeloid leukemia (AML), relapsed after allogeneic stem cell transplant or multiple myeloma refractory to >3 prior lines of therapy, respectively. The company has another four programs in various stages of early preclinical development.
In the fourth quarter last year, NexImmune announced that the first patient has been dosed in the Phase 1/2 trial for NEXI-002. Also in 4Q20, initial results on the first 5 patients treated with NEXI-001 showed ‘early signs’ that the drug candidate is safe and prompts a robust immune response. NexImmune anticipates additional data on these trials in 2Q21, and a more complete set of results by the end of this year.
In a move to raise capital, NexImmune in February of 2021 held an initial public offering (IPO) on the US stock exchange NASDAQ. The company put 7.441 million shares up, at a price of $17 per share. The sale, before expenses, grossed $126.5 million for the company.
NexImmune’s move to the NASDAQ prompted Raymond James analyst Steven Seedhouse to initiate coverage on the stock. The analyst rates NEXI an Outperform (i.e. Buy) along with a $30 price target, which implies a 64% upside over the coming year. (To watch Seedhouse’s track record, click here)
“Individually, we view NexImmune’s programs as high risk/high reward (i.e. low PoS but high unadjusted revenue potential), plus in aggregate we view the platform as likely to yield a successful therapeutic with guidance by an experienced management team,” Seedhouse opined.
The analyst added, “NexImmune’s AIM ACT technology is related to a cell therapy called tumor infiltrating lymphocytes (TILs) and [rival] Iovance has shown promising data in Phase 2 study of TIL lifileucel in metastatic melanoma. Unlike the more targeted NEXI-001, lifileucel consists of a highly variable mix of T cell clonotypes. We think Iovance’s market cap north of $4B is an aspirational target for NexImmune.”
This company has only had time to pick up three analyst reviews since it started trading on the US markets – but all three are to Buy, making the analyst consensus on the stock a Strong Buy. The shares are currently priced at $18.28 and have an average target of $33.33, which suggests an upside of ~82% this year. (See NEXI stock analysis on TipRanks)
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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.