In light of the recent market volatility last week, William Blair issued a note to investors on August 27 highlighting the firm’s top stocks that are best positioned to outperform the market over the next 12-months. Three stocks included on the firm’s list are Celgene Corporation (NASDAQ:CELG), Google Inc (NASDAQ:GOOGL), and Palo Alto Networks, Inc. (NYSE:PANW).
Celgene is known for developing treatments for hematology, oncology, and autoimmune diseases. The company’s flagship product is called Revlimid, used as a therapy for multiple myeloma.
William Blair’s John Sonnier believes “Celgene’s business model is one of the most balanced in the biotechnology industry, highlighted by the number of drugs in various stages of development and commercial products that range from young to more mature.” The analyst, who currently has an Outperform rating on the stock, ranks Celgene “among the best in the sector” as the company “has proved highly effective in clinical, commercial, and strategic execution.”
Sonnier sees long term growth for Celgene, projecting “a top-line growth rate of 18% and a bottom-line growth rate of 24% through 2020.” The analyst outlines three core drivers that will lead to his projected growth by 2020: “First, flagship product Revlimid is being increasingly entrenched in the multiple myeloma space… Second, management is increasingly focused on the company’s autoimmune franchise… Third, we believe that Celgene’s distributed research model (the industry’s largest), which leverages partners’ promising early-stage compounds and drives synergistic success, will continue to fill a productive pipeline and provide the next phase of growth going into 2020 and beyond.”
However, Sonnier also acknowledges some risks associated with investing in Celgene, including, “completion and reimbursement threats against the company’s hematology franchise… clinical trial risk, regulatory risk, and commercial risk.” The analyst also believes “Celgene shares would be vulnerable to any policy affecting premium pricing in oncology.” Furthermore, “while the company has a growing late-stage pipeline, Celgene will continue to look for new growth opportunities through acquisitions… and the appropriate merger-and-acquisition-related risks should be considered.”
On average, John Sonnier has a 63% success rate recommending stocks and a +28.5% average return per recommendation when measured over a one-year horizon and no benchmark.
Out of 14 analysts polled by TipRanks within the past three months, 11 are bullish on Celgene and 3 are neutral. The average 12-month price target for the company is $157.23, marking a 26.76% potential upside from where the stock last closed.
William Blair’s Ralph Schackart covers Google for the firm, who currently has an Outperform rating on the stock. The analyst believes “Google is uniquely positioned among other large-cap tech stocks because it is tied to the $80 billion global search advertising market.”
The analyst notes that “search spending has proved more durable than other forms of advertising spending” in the midst of “economic distress.” As such, “Google has maintained nearly 55% global market share in search advertising over the past three years despite consumers’ transition to mobile devices.”
Schackart sees long-term growth opportunity for Google with the help of “the fast-growing online video advertising market through YouTube.” The analyst believes “the search advertising market is forecast to grow at about 10% over the next four years, and [he] believe[s] Google’s search revenue should mirror that growth.” Additionally, “industry forecasts call for online video advertising spending to grow nearly 30% over the next four years, potentially reaching $40 billion in 2019.”
One risk to Schackart’s thesis would be if “advertising spending slows significantly as a result of an economic downturn.” While the analyst believes “search will be less affected than other forms of advertising,” he warns that “its growth rate could still slow.”
On average, Ralph Schackart has a 53% success rate recommending stocks and a +9.4% average return per recommendation when measured over a one-year horizon and no benchmark.
Out of 31 analysts polled by TipRanks within the past three months, 28 analysts are bullish on Google and 3 are neutral. The average 12-month price target for the technology giant is $773.29, marking a 17.22% potential upside from where shares last closed.
Palo Alto Networks, Inc.
William Blair’s Jonathan Ho covers cybersecurity company Palo Alto Networks and currently has an Outperform rating on the stock. Ho believes “Palo Alto Networks has been a leader in the next-generation firewall market, taking share from incumbent vendors, and has extended its solution set to become a broad platform player, including its Wildfire (advanced threat detection) and Traps (next-generation endpoint security) offerings.”
Ho also believes Palo Alto’s “cybersecurity spending should increase regardless of the economic environment, driven by increasing levels of cyber threats and the headline risk that has occurred from several high-profile breaches in the last two years.” Additionally, the analyst notes that Palo Alto “has little exposure to China,” and thus expects the company’s “top-line growth to remain very healthy through 2016.”
Ho names a few risks that could impact his thesis, such as “the company’s high-growth revenue trajectory could underperform investors’ expectations” and the fact that “the company’s innovations may not be enough to continue to drive its consistent market share gains in the next-generation firewall market and its growing adoption in the advanced threat detection arena.”
On average, Jonathan Ho has a 62% success rate recommending stocks and a +16.3% average return per recommendation when measured over a one-year horizon and no benchmark.
Out of 9 analysts polled by TipRanks within the past three months, all 9 are bullish on Palo Alto Networks. The average 12-month price target for the company is $207.86, marking a 23.73% potential upside from where shares last closed.