The premise is simple; Investors are after plentiful returns. What is entirely more complicated is the execution of the idea. Macrotrends, unforeseen headwinds, internal conflicts and disappointing quarterly statements, all have the potential to derail what at first appeared like a winning choice of investment.
So, how to know which of the 3000’s of stocks Wall Street has on offer, present the most compelling opportunities? There multiple ways to find out, of course, but a well-trodden path is to follow the trail laid down by those in the know.
To cut through the fog, banking giant J.P. Morgan has been releasing reports on three stocks that it believes will bring returns to investors despite a cloudy economic horizon. Interestingly, its research arm sees each surging by at least 20% in the year ahead.
Running each stock through the Stock Screener tool at TipRanks, we’ve confirmed that J.P. Morgan is in the majority on Wall Street in recommending these equities. Let’s take a closer look.
Beam Therapeutics (BEAM)
Fresh out of the box, we’ll start with Beam Therapeutics. Listed publicly only last month, this biotech developing precision genetic medicines, has been turning heads on the Street. Beam is up 26% above its offering price of $17, and some believe that further appreciation lies ahead.
The company is building a diverse portfolio of treatments for various diseases, including sickle cell disease (SCD), acute myeloid leukemia (AML), and liver diseases. While still in early stages of research, the company’s unique approach is what could set it apart in the long run.
Beam’s novel base editing technology differs from other gene editing CRISPR-based platforms in that it can accurately target the DNA’s single base pair and edit the DNA letter without cutting the molecule. CRISPR-based platforms, on the other hand, make double-stranded cuts to DNA which count on cellular mechanisms to repair the molecule and complete the edit, and therefore, are less accurate and efficient.
J.P. Morgan’s Eric Joseph notes Beam’s “attractive commercial opportunity in likely lead SCD program, with best-in-class potential within the gene therapy landscape.”
The 4-star analyst took the plunge and initiated coverage of the promising biotech with an Overweight rating and a price target of $31. With Beam currently trading at $23.55, a 30% gain could be in place should Joseph’s thesis play out. (To watch Joseph’s track record, click here)
Joseph notes the high level of unmet need for the 25,000 patients in the US suffering with severe SCD. Beam’s proprietary base-editing gene therapy platform has the potential to address this issue.
Joseph said, “Looking to sickle cell disease (SCD) as the likely lead indication from the ex vivo cell therapy portfolio (expected IND in 2021), we see an attractive ~$1.5B US peak opportunity, with differentiated manufacturing and clinical potential. Combined with a diverse array of programs in heme-onc, liver-mediated disease and retinopathy, we see an attractive setup for long-term value creation from the platform, with current share levels ascribing conservative success assumptions to the earlier stage pipeline.”
The Street concurs. 3 additional Buy ratings add up to a Strong Buy consensus rating for BEAM. The average price target is $31, and implies upside movement of 34%. (See BEAM stock analysis on TipRanks)
1Life Healthcare (ONEM)
The next company on our list is another which only recently went public. 1Life Healthcare has been on the market since the end of January and made an instant splash, surging by 58% on its first day. The stock has pulled back since, but the company’s disruption of the primary care market could provide further upside in 2020, according to J.P. Morgan’s Lisa Gill.
1Life (or One Medical as it is also known) is a membership-based primary care platform. By paying a $200 annual fee, members get access to more than 70 clinics across the country and 24hr digital health services, including telehealth appointments.
According to fortune business insights, the global telehealth market size was valued at $49.8 Billion in 2018 and is projected to reach $266.8 Billion by 2026, exhibiting a CAGR of 23.4% between 2018 and 2026. As the demand for telehealth services grows, so could 1Life’s customer base.
As with the majority of early stage healthcare technology companies, 1Life Healthcare currently operates at a loss. The primary care disruptor, though, has some heavyweights backing it up; Carlyle Group and Alphabet’s Google Ventures are investors, with the latter also a big client, providing 10% of 1Life’s revenue.
J.P. Morgan’s Lisa Gill foresees “significant addressable market opportunity with substantial runway for growth.”
The 5-star analyst notes, “One Medical’s unique offering is highlighted by a superior in-office patient experience vs. traditional primary care (convenient and inviting offices, longer, more high-touch visits), enhanced access (same/next day appointments, 24×7 digital access and coordination with health system partners for specialist care). The company delivers high quality care based on a longitudinal approach that treats patients more holistically, and can drive lower costs through fewer ER/urgent care visits, the avoidance of unnecessary specialist visits and also via improved employee productivity.”
Gill pulls the trigger on ONEM with an Overweight rating and a $28 price target, indicating potential upside of 30%. (To watch Gill’s track record, click here)
Out on the Street, 1Life receives a Moderate Buy from the analyst consensus, based on 5 Buys and 3 Holds. Should the average price target of $26.71 be met over the coming months, investors stand to pocket a 24% gain. (See 1Life stock analysis on TipRanks)
Baidu Inc (BIDU)
Shares of Baidu, or as it is commonly referred to in the west, China’s Google, have tumbled nearly 10% in the past 30 days. According to J.P. Morgan’s Alex Yao, the recent sell-off is too much of a good opportunity. The 4-star analyst believes the share price weakness and increasingly clear visibility on 2020 financials suggests a favorable risk-reward scenario for Baidu.
Baidu’s recent fourth quarter print was strong; Revenue of 28.9 billion yuan ($4.15 billion)indicated an increase by 6% year-over-year and came in close to the high end of Baidu’s guidance. EPS of 26.54 yuan ($3.81), more than doubled from the same quarter last year, and beat the analysts’ expectations of $3.66 EPS. Subscriber numbers for Baidu’s streaming business, iQiyi, continued to rise, too; up 22% year-over-year with total subscribing members reaching 106.9 million.
Concerns about the company’s advertising outlook, along with the unknown impact the coronavirus will have on future earnings have been noted as the likely reasons for the recent pullback. Yao notes, though, that while search engine marketing has entered a mature stage and, long-term, will probably lose ad market share to feed ad operators, the increased clarity provided by Baidu is the clincher.
“The value of the 4Q19 print to investors is not in revealing the strength of the 2020 revenue outlook. Rather, the weak but more certain 1Q20 revenue guidance narrows the range of the possible revenue growth rate in 2020 (JPMe Baidu core revenue-2% in 2020 vs. +10% prior to the print). The reason that a weaker revenue growth outlook makes us more positive on the share price is a much stronger visibility, which plays a more important role in determining Baidu’s core multiple,” he said.
Accordingly, the 4-star analyst upgraded his rating from Neutral to Overweight along with a hiking up of the price target. The figure rises from $130 to $150 and presents potential upside of 23.5%. (To watch Yao’s track record, click here)
All in all, 8 Buys and 3 Holds provide Baidu with a Moderate Buy consensus rating. At $159.75, the average target price could provide upside of 35%, should the figure be met in the year ahead. (See Baidu stock analysis on TipRanks)