Markets are volatile this month, with the S&P bouncing around a 200-point trading range and the Dow Jones down nearly 1500 in the last three weeks. It’s enough to make your head spin, especially if you’re trying to allocate your investments.
Volatility, however, is the norm in stock trading. According to Richard Selvala, of New York’s Harvest Volatility Management LLC, “We have had abnormally positive conditions for the last three, five, seven years. We are transitioning to more normal conditions.”
Finding the bullish options in these ‘more normal’ market conditions isn’t easy, so it’s tempting to turn to the professionals. We can look into the TipRanks database to see what analysts have to say about several of today’s most highly rated stocks, with a particular focus on Oppenheimer’s analysts and the stocks that they believe show upward potential.
Twilio, Inc. (TWLO – Research Report)
The cloud communications Platform as a Service (PaaS) company has made waves in recent weeks, with news breaking that it would acquire email marketing platform SendGrid for $2 billion followed by Q3 earnings that surpassed expectations. Twilio stock surged $25 – a hefty 35% – after the Nov 6 Q3 report.
In detail, the Q3 results showed a revenue beat of $18.5 million, or 12%. Total revenue was $168.9 million, and the forward guidance for Q4, of $161.4 million, was also well above expectations. The SendGrid deal was also seen as a net positive, in that it will combine two proven online communication systems.
TWLO has taken a hit with the recent market downturn, but not the body blow that has afflicted less fortunate companies. Twilio has regained 14% from its recent bottom, and now stands at $86 per share. The average target price of $99 represents a 14% upside potential. The stock holds a ‘Strong Buy’ consensus, based on 12 recent ‘buy’ ratings.
One of those ‘buy’ ratings came from Oppenheimer’s Ittai Kidron (Track Record & Ratings). He cites the SendGrid deal specifically, when he says of TWLO that he “continues to see strong core business upside and compelling SendGrid deal rationale/synergies.” Kidron is bullish on the stock, setting an aggressive 28% upside on a $110 target price.
Salesforce.com, Inc. (CRM – Research Report)
Like Twilio, Salesforce also beat expectations in the third quarter, although after four quarterly beats in a row, it might be safer to say that beating expectations has become the expectation. CRM’s Q3 report showed earnings of 61 cents per share against the estimate of 50 cents – a 22% beat, and also far ahead of the 39 cents EPS from Q3 2017.
CRM’s Q3 report was released on November 27, so it’s still early for the stock to show a strong reaction, but the company has been ticking up in the markets since November 20, and it gained 0.9% in trading on the 27th. The current share price is $127, and the average price target of $172 gives a 35% upside potential. CRM has 27 ‘buy’ ratings versus 2 ‘holds,’ making the analyst consensus a ‘Strong Buy.’
Oppenheimer’s Brian Schwartz (Track Record & Ratings) issued a report directly after the Q3 results were published. He got right to the point: “We see salesforce.com’s F3Q results and improved outlook supporting our bull thesis on the customer engagement opportunity.” His price target of $180 is well above the average and suggests a 41% upside to this stock.
Vertex Pharmaceuticals, Incorporated (VRTX – Research Report)
Vertex Pharma is best known for its work in the treatment of cystic fibrosis. This incurable genetic lung disease affects hundreds of thousands people in the US, and more worldwide. Available treatments can ameliorate symptoms, but not arrest the disease progress. Currently, the most effective course of treatment is a lung transplant, and many patients die in their early to mid-twenties.
Vertex has three medications – Kalydeco, Orkambi, and Symdeko – on the market for treatment of the disease. Kalydeco was the first drug designed to treat CF’s causes, rather than symptoms. Along with Orkambi and Symdeko, it treats the incorrect protein expression caused by the genetic mutation underlying the disease. The company has another 12 drugs in development, also pursuing treatment of genetic causes for CF.
Market analysts are optimistic about the success of Vertex’s medications and pipeline. The company holds 8 ‘buy’ ratings, and the average price target of $207 is an 18% upside from the current share price of $175. The consensus on this stock is a ‘Strong Buy.’
Hartaj Singh (Track Record & Ratings) from Oppenheimer sets out the bullish case for Vertex in clear language: “The data continues to impress, with 4- week efficacy being incrementally better than phase 2 results published in the NEJM recently. Safety looks to be in line with previous results.” Singh’s price target is a conservative $200, slightly below the average but still a 14% upside potential.
Loxo Oncology, Inc. (LOXO – Research Report)
Loxo uses the rationally designed compound approach to drug development – starting with the underlying cause of the disease to be treated, and developing a tailor-made medication to treat exactly that, rather than seeking medical uses for existing compounds. The approach has already proved successful – Vertex used it to develop its CF treatments – and Loxo is applying it to cancers with genetically based causation.
Loxo’s Q3 earnings were disappointing, with a net loss of $27.1 million and an EPS loss of 89 cents. The company’s reported revenue of $42.5 million was below the expectation of $43.1. That was three weeks ago; two days ago, Loxo received FDA approval for larotrectinib, a drug shown to be effective against a variety of cancers caused by the TRK fusion mutation. Larotrectinib will be the first commercial medicine marketed by Loxo.
The new drug approval, and the five other medications in various stages of development, give Loxo a firm base for its stock. LOXO holds a ‘Strong Buy’ consensus rating, based on 5 ‘buys’ and 1 ‘hold.’ The average price target is $213, a whopping 53% upside from the current share price of $139.
Oppenheimer’s Leah R. Cann (Track Record & Ratings) sets out the reasons for the upbeat outlook on this stock. She cites the sales projections for larotrectinib, and their expected impact on Loxo’s bottom line: “The timing of this FDA approval for larotrectinib (Vitrakvi) was as expected, and we continue to estimate that larotrectinib will launch in the US in Q4 2018, sales will increase to $1.12 billion in 2024, and that Loxo will receive 50% of these sales.”
She now estimates Larotrectinib sales will account for 21.6% of total product sales by 2024. Her price target is $185, less aggressive than the average but still a 33% upside.
Author: Michael Marcus