We’re now in the heart of earnings season, and investors are paying close attention as companies report their financial results from the first quarter of 2021. It’s a routine, in some ways, but in others, there has never been an earnings season quite like this. It’s the first one post-pandemic, but perhaps more importantly, the results are coming out during a time of nearly unprecedented government stimulus spending. There’s no real comparison to tell just how the inflows of cash are going to impact the bottom lines.
Weighing in from Raymond James, strategist Tavis McCourt has put his finger on some of the key points for investors to take cognizance of. First, McCourt notes that the “S&P 500 2021 consensus EPS continues to move higher, almost on a daily basis, and has increased another 2% in the first two weeks of earnings season.”
McCourt identifies the correct historical setting to the current conditions: “We normally see forward earnings revisions positive in the first 1-2 years of an economic recovery…” The comparison breaks down, however, as the estimate revisions just keep moving higher.
“…analysts/management teams/this strategist, continue to underestimate the positive impact fiscal support (not ‘modelable’ as it’s never been done in this fashion before) is having on corporate earnings,” McCourt added.
Bearing this in mind, we wanted to take a closer look at three stocks that have earned Raymond James’ stamp of approval. Accompanying a bullish rating, the firm’s analysts believe each could climb over 100% higher in the year ahead. Running the tickers through TipRanks’ database, we got all the details and learned what makes them such compelling plays.
Landos Biopharma (LABP)
We’ll start with a newcomer to the markets. Landos Biopharma held its IPO just this past February, when it started trading on the NASDAQ. The company is a clinical-stage biopharma firm, with a focus on autoimmune diseases.
Landos uses a proprietary computational platform to develop new drug candidates, and has identified seven so far. The lead candidate is BT-11 (omilancor), a new treatment for patients with ulcerative colitis. BT-11 is a small molecule that targets the Lanthionine Synthetase C-Like 2 (LANCL2) pathway, an action designed to limit gastrointestinal impact. In January of this year, Landos reported positive results from BT-11’s Phase 2 proof-of-concept trial, with remission rates of 11.5% at week 12 for patients with once-daily oral dosing. Landos plans to expand the omilancor clinical trials, with a Phase 3 study in ulcerative colitis patients and a Phase 2 study in Crohn’s disease patients scheduled for later this year.
The company’s other drug candidates are at earlier stages of the development pipeline, but it did have positive results to report from its candidate NX-13, another potential for ulcerative colitis. In a Phase 1 tolerability trial on healthy volunteers, the company reported no adverse results while meeting all primary and secondary endpoints. A Phase 1b study is planned for the second half of 2021.
Among the fans is Raymond James analyst Steven Seedhouse, who sees the value factor in the company’s novel approach.
“[New] mechanisms particularly in chronic immune disorders 1) carve out a potentially larger slice of the TAM pie in the leading indication (in this case UC) and 2) open the door to follow-on indications once the new mechanism is validated in one immune disorder. The value proposition for BT-11 in theory is it could be like Otezla (PDE4 inhibitor), which was acquired by Amgen for $11.2B net of tax benefits at 7x prior year (2018) sales of $1.6B,” Seedhouse opined.
Looking ahead, to the longer term, Seedhouse believes that Landos has charted a profitable path.
“Mild UC patients comprise >50% of patients with active disease. The vast majority drugs approved or in development for UC over the last 20 years target the highly competitive (but smaller) ‘moderate to severe’ patient market, while the larger ‘mild to moderate’ population remains largely untapped outside of 5-ASAs and corticosteroids. Substantial efficacy and safety in 5-ASA refractory mild to moderate patients will help BT-11 reach our estimated unadjusted peak sales of ~$1B,” the analyst added.
In line with these comments, Seedhouse rates LABP an Outperform (i.e. Buy), and his $33 price target suggests room for an impressive 219% upside in the coming year. (To watch Seedhouse’s track record, click here)
Landos Biopharma has caught the analysts’ attention in its short time as a public company, and already has 4 reviews on record. These break down to 3 Buys and 1 Hold, for a Strong Buy consensus rating. Shares are priced at $10.18, and their $25.50 average price target implies an upside of 146%. (See LABP stock analysis on TipRanks)
Haemonetics Corporation (HAE)
Haemonetics Corporation is major player in the blood business. It produces a full range of blood collection and separation products, along with the software to run the machines and service agreements to maintain them. The US market for blood products has hit $10.5 billion last year, and its largest segment, plasma products and blood components, makes up some 80% of that market. Haemonetics’ product line is designed to meet the needs of that segment.
HAE shares showed steady growth from last August through this February – a sustained period of 85% share appreciate. Earlier this month, however, HAE dropped 35%, to its lowest level in over three years, on news that CSL Pharma had declared intent not to renew its supply agreement with Haemonetics. The agreement, for supply and use of the PCS2 plasma collection system, provided Haemonetics with $117 million in revenue – or nearly 12% of the company’s total top line. In addition to the lost revenue, Haemonetics will have to swallow an additional $32 million in one-time losses related to the cancellation. The current supply agreement expires in June of next year.
Analyst Lawrence Keusch, watching Haemonetics for Raymond James, saw fit to maintain his Outperform (i.e. Buy) rating on the stock, even after the CSL announcement.
“We concede that Haemonetics has turned into a ‘show me’ story as it will be important for investors to understand the evolution of the corporate strategy in light of the loss of the CSL contract… we believe that Haemonetics can mitigate the estimated $0.85 impact to earnings from the contract loss (the company has ~14 months to right-size the organization) and move toward additional market share gains. We anticipate that it will take some time to gain visibility on a renewed course of growth,” Keusch noted.
Keusch is willing to give HAE the time it needs to recover and return to a growth trajectory, and his $155 price target shows the extent of his confidence – a 128% upside for the stock over the next 12 months. (To watch Keusch’s track record, click here)
Overall, Haemonetics shows a 5 to 2 breakdown in Buy versus Hold recommendations from the Wall Street analysts, giving HAE shares a Moderate Buy consensus rating. The stock has a $122 average price target, suggesting ~79% upside from the current trading price of $67.96. (See HAE stock analysis on TipRanks)
Maxeon Solar Technologies (MAXN)
Let’s shift gears, and look at the solar technology sector. Maxeon manufactures and sells solar panels world-wide, under the SunPower brand outside the US and in its own name inside the States. The company spun off of SunPower last summer, when the parent company split off its manufacturing business. Maxeon, the spin off company, is a solar panel maker, with a product line worth $1.2 billion in annual revenue, more than 900 patents in the solar industry, and over 1,100 sales and installation partners operating in over 100 countries.
In the fourth quarter of 2021, the last one reported, Maxeon showed a solid sequential revenue gain, from $207 million to $246 million, an 18% gain. Earnings, which had been deeply negative in Q3 – at a $2.73 per share loss – were positive in Q4, when EPS came in at 11 cents.
Raymond James’ Pavel Molchanov, rated 5-stars by TipRanks, is impressed by the company’s overall position in the market, and sees positives outweighing negatives.
“This is a commodity story, with a near-term margin structure that is weighed down by legacy polysilicon supply. We are fans of the company’s above-average exposure to the European market, soon to be bolstered by the European Climate Law; as well as its joint venture participation in China, whose already world-leading PV newbuilds may get a further boost from the newly launched carbon trading program,” Molchanov wrote.
To this end, Molchanov rates MAXN an Outperform (i.e. Buy), and sets a $45 price target indicating room for 127% growth in the year ahead. (To watch Molchanov’s track record, click here)
MAXN shares have managed to slip under the radar so far, and have only garnered 2 recent reviews; Buy and Hold. The shares are priced at $19.86, with a $34 average target that indicates room for ~71% growth by year’s end. (See MAXN 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.