Both PTC Therapeutics, Inc. (NASDAQ:PTCT) and NVIDIA Corporation (NASDAQ:NVDA) stocks are on the rise today following CHMP’s recommendation and positive earnings release, respectively. Let’s explore why analysts remain sidelined on the biotech firm and chip maker despite recent surges forward in the market:
PTC Therapeutics, Inc.
PTC stock is skyrocketing almost 80% after the committee for Medicinal Products for Human Use (CHMP) announced it has renewed conditional marketing authorization for Translarna (ataluren), designed to treat nonsense mutation Duchenne muscular dystrophy (nmDMD) in ambulatory patients five years and older.
Additionally, the committee indicated confirmation of the drug’s benefit/risk profile would be necessary to redeem full authorization. In relation with the authorization, the agency has asked for another placebo-controlled study with OLE to be able to offer support for full marketing approval.
On the heels of the EU conditional approval renewal and with expectation for a new trial to commence come 2017, Cowen analyst Ritu Baral reiterates a Market Perform rating on shares of PTCT without listing a price target.
At a prior time, the biotech firm had highlighted possible “increased risk” to achieving this renewal and did not provide the analyst with further information during her discussion with management.
The analyst notes, “However, they did indicate that the driving issue behind this risk was resolved with this current vote and is unlikely to increase risk of the annual renewal of conditional approval going forward.”
“While full protocol details have not yet been finalized, the proposed confirmatory trial would include an 18 month randomized placebo-controlled portion followed by an 18 month OLE period. We expect trial endpoints of interest to include functional assessments such as 6MWT, NSAA and respiratory function as well as dystrophin quantification. The confirmatory trial is expected to initiate by mid-2017, likely in countries without current commercial access to Translarna. Data from the randomized portion of the trial are expected in 1Q21. We think there is a chance that results from this trial could support re-filing of the Translarna NDA in the US, depending on final design (which we expect PTCT may likely try and harmonize between the two agencies, should their FDA appeal fail),” Baral concludes.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, four-star analyst Ritu Baral is ranked #671 out of 4,200 analysts. Baral has a 40% success rate and realizes 3.7% in her yearly returns. However, when recommending PTCT, Baral loses 69.5% in average profits on the stock.
TipRanks analytics demonstrate PTCT as a Buy. Out of 8 analysts polled by TipRanks, 2 are bullish on PTC Therapeutics stock and 6 remain sidelined. With a return potential of nearly 25%, the stock’s target consensus price stands at $12.83.
NVIDIA shares are soaring close to 26% after the chip maker posted what Brean Capital analyst Mike Burton commends as a “blowout” third-quarter report coupled with “strong” fourth quarter guidance. Nonetheless, though confident on the company’s long-term prospects, Burton remains cautious on near-term margins.
As such, the analyst reiterates a Hold rating on NVDA with a fair value range adjustment to $66 to $83, which represents just under a 23% downside to an approximately 3% downside from where the shares last closed.
For the quarter, NVDA posted $2 billion in revenue, a “record” for the chip maker marking a solid beat compared to the Street’s expectations for $1.69 billion. Revenue saw an “impressive” 40% quarter-over-quarter rise, outperforming corporate guidance calling for 17% quarter-over-quarter in revenue growth. The analyst attributes the stellar revenue to NVDA’s robust Gaming business segment, which saw a 59% quarter-over-quarter increase thanks to a fully ramped segment with Pascal-based GPUs.
“We note the launch of its Pascal-based products is one of the most successful launches in the NVDA’s history,” Burton adds.
Additionally, the analyst underscores strength in NVDA’s Datacenter business, whose products are used by esteemed companies of the likes of Amazon, IBM, Microsoft, and Alibaba. Non-GAAP margins of 59.2% rose this quarter and with respect to operating expenses (OPEX), “the company was disciplined,” leading to non-GAAP EPS of $0.94, trouncing consensus expectations that called for $0.57.
Burton believes, “The Company continues to execute well and has growth drivers / levers as it is seeing one of the most successful product launches in the company’s history with its Pascal-based GPUs that are targeting Gaming markets. In addition to Pascal, NVDA’s Data Center products, posted significant growth in the quarter as the company’s R&D efforts have resulted in its products being used in servers that support the ‘who’s who’ of cloud services.”
Overall, “While we are positive on NVDA’s long-term prospects, we remain on the sidelines at current levels given the high multiple relative to its peers and some concern about NVDA’s margins, which seem to have peaked as it is guiding non-GAAP margins flattish sequentially in the January 2017 quarter despite the higher revenues. In addition, given the shares’ big run up into the quarter and where the stock is trading at in the after-market off a break-out quarter, NVDA is trading near its peak earnings multiple from the last 2 years,” Burton contends.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, five-star analyst Mike Burton is ranked #169 out of 4,200 analysts. Burton has a 63% success rate and gains 9.8% in his yearly returns. However, when rating NVDA, Burton loses 0.1% in average profits on the stock.
TipRanks analytics exhibit NVDA as a Buy. Based on 24 analysts polled by TipRAnks, 13 rate a Buy on NVDA, 10 maintain a Hold, while 1 issues a Sell. The 12-month price target stands at $77.64, marking an 8% downside from where the stock is currently trading.