A strong bearish trend defined the markets in the first half of the year; since then, the main point is volatility. Stocks hit bottom back in June, when the S&P 500 fell into the 3,600s. That has proven to be a support level over 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 is taking a defensively optimistic view for the coming year, noting: “We believe any downside from this would be limited due to: 1) better-than-expected earnings growth and revisions may be emerging, 2) very low. retail and institutional investor position, and 3) declines in longer-term inflation expectations from both survey and market-based measures.”
The stock analysts from JPMorgan are going ahead with that thesis, and have selected 3 stocks that they think could be solid upside in the coming year. We ran them through the 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 BioAtla, based in San Diego, is a clinical-stage biopharmaceutical company focused on the development of novel monoclonal antibodies and cell-based therapies for use in the treatment of various cancers. The company is developing its drug candidates through a proprietary platform, Conditionally Active Biologics (CAB), and is looking for ways to selectively target cancer cells and tissues, even when they are embedded in normal tissues.
BioAtla’s pipeline includes both preclinical and clinical milestones. Both 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 the Phase II study is being prepared, and enrollment is 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 for 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.
Brian Cheng of JPMorgan is covering this biopharmaceutical firm, and the main point is the abundance of updates to come. He writes, “The sentiment around its pipeline has changed significantly as investors begin to appreciate its prospects in an attractive slice of the NSCLC market for AXL’s lead asset, BA3011. active biological technology (CAB) and the rest of the pipeline that could offer. The catalysts in the remainder of 2022, particularly the interim readings from BA3011 and BA3021 in AXL+ NSCLC and ROR2+ NSCLC, respectively, will continue to keep investors engaged and with meaningful upside potential.”
To that end, Cheng sets an Overweight (ie Buy) rating on BioAtla shares, with a price target of $23 to suggest a strong one-year upside of ~172%. (To view Cheng’s track record, Click here)
Small-cap biotech companies don’t always get much attention from Wall Street, but four analysts have weighed in on BCAB – and their reviews include 3 Buys to 1 Hold, for a consensus rating of Strong Buy. The shares are 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)
Check Sterling (STER)
In business for nearly 50 years, Sterling Check has been a leader in the global market for background checks – not the financial instruments, but the grind of the workday when it comes to doing background searches on job applicants. The company serves a wide range of industries, including construction, technology, government, financial services, workforce recruitment, with services that include everything from driving record checks to general background to criminal records to credit reports. Sterling will also do social media checks.
Sterling uses cloud-based technology that allows it to adapt its services to any scale. The company has over 50,000 clients worldwide, including more than half of the Fortune 100 companies. Sterling processes more than 95 million checks each year, and is based in New York City.
Last month, Sterling released its financial results for 2Q22, showing a $205.6 million top line. This was a 29% gain year on year. Adjusted earnings grew even faster, 43% y/y, to reach $32.5 million, for adjusted EPS of 33 cents per diluted share. EPS was up 32% from the year-ago quarter.
Also in the Q2 report, Sterling updated its full-year revenue guidance, raising the forecast by $15 million at the midpoint to the $785 million to $795 million range. Achieving this will result in y/y top line growth of 22% to 24%.
Analyst Andrew Steinerman, in his coverage of Sterling for JPMorgan, writes about the company, and its position within the industry: “A key differentiator driving this rapid revenue growth is the contribution of new client wins (ie “logs new”). of +12% in 2021 and +10% in 1H22… We think that investors have assessed the recent strong growth of background filters as largely cyclical, and that it is up to the companies to create that they can cope with the recent strong growth of growth. That said, we recognize that Sterling has shown strong performance on factors within its control and continues to gain market share…”
“We expect that larger providers like Sterling will continue to gain market share based on technology-enabled client compliance, improved turnarounds, and accuracy from automation, excellent customer service, and the ability to perform checks on worldwide,” the analyst summarized.
In Steinerman’s view, the high above justifies an Overweight (ie Buy) rating, and he places a price target of $27 on the stock, implying a 32% year-to-date gain. (To view Steinerman’s track record, Click here)
Once again, we’re 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 versus 1 to Hold. The average target price of $26.75 indicates a potential upside of 31% from the current share price of $20.39. (See 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 manufactures and distributes collectibles, the kind of fun pop-culture stuff sold under license. We are talking about bobble-head dolls and vinyl figurines, action figures and retro throwbacks, all branded by such icons as Marvel and DC Comics, Harry Potter, the NBA, and Disney. Funko products can be found worldwide or ordered online, making the company a leader in pop culture lifestyle branding.
By the numbers, Funko has some interesting and impressive stats to share. The company boasts over 1,000 licensed properties with over 200 content suppliers, and has sold over 750 million products since 1998. The company can put a new item into production just 70 days from concept, and saw well over $1 billion in. sales last year.
Funko is on track to surpass that annual sales number this year. The company saw $315.7 million in revenue for 2Q22; add to that the $308 million from Q1, and 1H22 generated well over half of last year’s total. Despite strong revenue, Funko’s earnings per share are falling. Adjusted EPS was reported at 26 cents in 2Q22, compared to 40 cents in the year-ago quarter. At the same time, EPS beat the 23-cent forecast by 13%.
In an important move for investors, Funko acquired Texas-based collectibles company Mondo earlier this year. This move gives Funko a high-level presence in the industry; Mondo is best known for limited edition vinyl records and screen printed posters. The companies did not disclose the details of the agreement, but Funko does not expect it to affect financial results in 2022.
So, overall, Funko is in a sound position – and that soundness has caught the eye of JPM analyst Megan Alexander, who says, “On the stock… it’s still attractively valued (10x P/E and 6x EV/EBITDA on our 2023 forecast) as we continue to beat 2022 and 2023 consensus estimates. Additionally, the company has effectively targeted 2023 guidance as we view the top line outlook conservatively given M&A potential (not included in current targets).
“While we believe investors remain skeptical of hockey stick margin recovery in 2H22 (and the roll to 2023), we continue to expect gross margin to turn positive in 3Q after 4 quarters of decline, which should be a catalyst for upward earnings. revised,” said the analyst.
Alexander continues to give FNKO an Overweight (ie Buy) rating, as well as a price target of $32 to indicate ~42% upside potential for the one-year horizon. (To view Alastair’s track record, Click here)
In total, this funky toy maker has received 7 recent analyst reviews, which include 5 Buys and 2 Holds for a Moderate Buy consensus rating. Shares are priced at $22.49 and the average target of $31.93 suggests ~42% gain potential for the next year. (See FNKO stock forecast on TipRanks)
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Disclaimer: The views 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.