A strong downtrend defined the markets in the first half of the year; since then, the key point has been volatility. Stocks bottomed out in June, when the S&P 500 fell to 3600. That has proven to be a support level for the past three months, and at least one strategist believes the market won’t go much lower from here.
JPMorgan Global Market Strategist Marko Kolanovic takes a cautiously optimistic view of the year ahead, noting, “We think any downside from here would be limited given: 1) better-than-expected earnings growth and signs of that revisions may be bottoming out, 2) very low positioning from retail and institutional investors, and 3) declines in long-term inflation expectations from both survey and market-based measures.”
Equity analysts at JPMorgan are advancing that thesis and have selected 3 stocks that they see poised for strong upside potential in the year ahead. We ran them through TipRanks Database to see what other Wall Street analysts have to say about them. Let’s take a closer look.
bioatla, inc. (BCAB)
We’ll start in California, where San Diego-based BioAtla is a clinical-stage biopharmaceutical company focused on developing novel monoclonal antibodies and cell-based therapies for use in treating various types of cancer. The company is developing its drug candidates through a proprietary platform, Conditionally Active Biologics (CABs), and is looking for ways to selectively target cancer cells and tissues, even when they are embedded in normal tissue.
BioAtla’s project portfolio includes both preclinical and clinical stage tracks. The two main programs are in phase II testing. Mecbotamab vedotin, or BA3011, is under investigation as a treatment for non-small cell lung cancer, with interim data expected in 4Q22. The drug is also being tested in the treatment of undifferentiated pleomorphic sarcoma (UPS) and osteosarcoma; Part 2 of a Phase II study is in preparation, with enrollment expected to begin before the end of this year.
The company’s second lead drug candidate is ozuriftamab vedotin, BA3021. This drug is in phase II studies in the treatment of squamous cell carcinoma of the head and neck, as well as non-small cell lung cancer, for which an interim update is expected in 2H22. The company also expects to begin enrolling patients in a melanoma study in the fourth quarter of this year.
by JPMorgan brian cheng has been covering this biopharmaceutical company and sees the flurry of upcoming updates as the key point. He writes: “Sentiment around his pipeline has changed dramatically as investors begin to appreciate his outlook on an attractive part of the NSCLC market for AXL’s primary target asset, BA3011… We believe the current valuation remains off. of what is conditionally active biological technology (CAB) and the rest of the portfolio could offer. Catalysts in the remainder of 2022, particularly the interim readings of BA3011 and BA3021 on AXL+ NSCLC and ROR2+ NSCLC, respectively, will continue to keep investors engaged and hold significant upside potential.”
To this end, Cheng sets an overweight (ie buy) rating on BioAtla stock, with a $23 price target to suggest a strong ~172% one-year upside. (To see Cheng’s background, Click here)
Small-cap biotechs don’t always get a lot of attention from Wall Street, but four analysts have weighed in on BCAB, with their reviews including 3 buys vs. 1 hold, for a strong buy consensus rating. The stock is trading at $8.46 and the average target of $16 implies an 89% gain over the next 12 months. (See BCAB stock forecast on TipRanks)
sterling check (ESTER)
In business for nearly 50 years, Sterling Check is a leader in the global background check market—not the financial instruments, but the daily routine of conducting background searches on job applicants. The company serves a wide range of industries, including construction, technology, government, financial services, labor recruitment, with services that include everything from driving background checks to general background checks, criminal records and credit reports. Sterling will also conduct social media checks.
Sterling uses cloud-based technology that allows you to adapt your services to any scale. The company has more than 50,000 global customers, including more than half of the Fortune 100 companies. Sterling writes more than 95 million checks each year and is headquartered in New York City.
Last month, Sterling released its financial results for 2Q22, showing $205.6 million on the top line. This was a 29% gain year over year. Adjusted earnings grew even faster, by 43% YoY, to $32.5 million, with Adjusted EPS of 33 cents per diluted share. EPS increased 32% from the prior year quarter.
Also in the second quarter report, Sterling updated its full-year revenue guidance, raising the forecast by $15 million from the midline to the range of $785 million to $795 million. Achieving this will deliver 22% to 24% year-over-year growth.
Analyst Andrew Steinerman, in his coverage of Sterling for JPMorgan, writes of the company and its positioning within the industry: “A key differentiator driving this still rapid revenue growth is the contribution of earnings from new customers (i.e., “new logos”). ) of +12% in 2021 and +10% in 1H22… We believe that investors have assessed that the recent strong growth of background screeners is mostly cyclical, and that the onus is on companies to demonstrate that they can accumulate in addition to recent strong growth. That said, we recognize that Sterling has increasingly demonstrated strong execution on factors under its control and continues to gain market share…”
“We expect larger providers like Sterling to continue to gain market share based on technology-enabled customer compliance, improved response time and accuracy from automation, excellent customer service and the ability to perform checks at world level”, summed up the analyst.
In Steinerman’s view, the above justifies an overweight (ie buy) rating, and puts a $27 price target on the stock, suggesting a 32% gain in one year. (To see Steinerman’s background, Click here)
Once again, we are looking at a stock with a strong buy rating from the Wall Street consensus. That rating is based on 6 recent analyst reviews, including 5 to buy vs. 1 to hold. The average target price of $26.75 indicates 31% upside potential from the current share price of $20.39. (See the STER Stock Forecast on TipRanks)
funko, inc. (FNKO)
No matter where you go or what you do, you can’t escape pop culture, and Funko is part of the reason. This company makes and distributes collectible items, the kind of fun pop culture stuff that is sold under license. We’re talking bobbleheads and vinyl figurines, action figures and retro throwbacks, all branded by icons like Marvel and DC Comics, Harry Potter, the NBA and Disney. Funko products can be found around the world or ordered online, making the company a leading pop culture lifestyle brand.
By the numbers, Funko has some interesting and impressive stats to share. The company boasts over 1,000 licensed properties with over 200 content providers and has sold over 750 million products since 1998. The company can put a new item into production in as little as 70 days from concept and has earned over $1 billion in sales last year.
Funko is on track to surpass that annual sales number this year. The company posted $315.7 million in revenue for 2Q22; add to that the $308 million from the first quarter, and 1H22 has generated more than half of last year’s total. Despite strong revenue, Funko’s earnings per share have declined. Adjusted EPS was reported at 26 cents in 2Q22, compared to 40 cents in the prior year quarter. At the same time, EPS beat the forecast of 23 cents by 13%.
In a major move for investors, Funko acquired Texas-based collectible company Mondo earlier this year. The move gives Funko a high-profile presence in the industry; Mondo is best known for limited edition vinyl records and screen printed posters. The companies did not disclose details of the deal, but Funko does not expect it to affect financial results in 2022.
So overall, Funko is in a strong position, and that strength has caught the attention of the JPM analyst. megan alexanderwho says: “As for stocks…they remain attractive value (10x P/E and 6x EV/EBITDA in our 2023 forecast) as we continue to see consensus estimates for 2022 and 2023 on the upside. The company effectively de-risked the 2023 guidance, while we view the primary outlook conservatively given the potential for mergers and acquisitions (which is not included in current targets).”
“While we believe investors remain skeptical about the hockey stick margin recovery in the second half of 2022 (and going forward to 2023), we continue to expect the gross margin to turn positive in the third quarter after 4 quarters of declines, which should provide a catalyst for higher earnings revisions,” the analyst added.
Alexander continues to give FNKO an overweight (ie buy) rating, plus a $32 price target to indicate ~42% upside potential over a one-year horizon. (To view Alexander’s history, Click here)
Overall, this funky toy maker has collected 7 recent analyst reviews, and these include 5 buys and 2 holds for a moderate buy consensus rating. The stock is priced at $22.49 and the average target of $31.93 suggests ~42% gain potential in the coming year. (See the FNKO Stock Forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the leading 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.