Out on Wall Street, things are always changing. Share prices fluctuate, new players make their market debuts, the macro environment gets shaken up and long-term trends shift.
That said, one thing remains the same: growth is the name of the game. Growth stocks consistently score a spot on investors’ wish lists, given their potential to deliver returns. This growth potential goes above and beyond the norm, as these plays have already posted some spectacular gains in 2020, with the upside set to keep on coming in the long run.
Knowing what you’re looking for is one thing, but how are investors supposed to find these opportunities? One strategy is to take a cue from Wall Street pros.
Bearing this in mind, we used TipRanks’ database during our search for exciting growth names, according to the analyst community. Locking in on three stocks that fit the bill, each analyst-backed ticker stands to notch more gains on top of their impressive year-to-date climbs. Here are all of the details.
Sunnova Energy International (NOVA)
First up we have Sunnova Energy International, which is one of the top providers of residential solar and energy storage services. Even though it has already jumped 160% year-to-date, several analysts think this name has more room to run.
After speaking with NOVA’s founder and CEO John Berger, five-star analyst Joseph Osha, of JMP Securities, is even more confident in its long-term growth prospects, noting the “stock appears significantly undervalued.” Highlighting the storage business in particular, the analyst believes it is a major point of strength.
“NOVA has been effective at driving storage attach rates higher, and has managed to make its dealer-focused business model perform well. The demand environment for storage has strengthened during the last 60 days, and we believe that we may be at an inflection point for the industry,” Osha commented.
Looking more closely at attach rates, the figure landed at 34% in Q2. Part of this strong result was driven by the company’s move into island markets, with Berger mentioning that the attach rates in Hawaii, Guam, Saipan and Puerto Rico are effectively 100%. Additionally, rates are improving in Texas and Florida.
Expounding on this, Osha stated, “Aggregating all of that together yields a 34% number that Mr. Berger believes is going to grow, albeit with very different dynamics in different markets. We also note that NOVA is selling storage to existing customers, and those sales are not reflected in the stated attach rate.”
Reflecting more positives, Osha says NOVA’s relationships with Tesla and Generac set it apart, with it also choosing the ideal dealer partners. What’s more, the overall storage market appears solid, and cell manufactures are struggling to keep up with the demand. To this end, Berger argues the space is “as strong as you think it would be with attach rates continuing to rise in new geographies and revenue per customer growing as well.”
While some investors have brought up concerns regarding competition from Sunrun (RUN), Osha thinks that even though RUN’s approach is working relatively well, the “smaller developers may lose out” in the end. As a result, the analyst sees room for a larger valuation for NOVA.
In line with his optimistic approach, Osha stayed with the bulls, reiterating a Market Outperform rating and $43 price target. Investors could be pocketing a gain of 48%, should this target be met in the twelve months ahead. (To watch Osha’s track record, click here)
Are other analysts in agreement? They are. Only Buy ratings, 10 to be exact, have been issued in the last three months. Therefore, the message is clear: NOVA is a Strong Buy. Given the $33.70 average price target, shares could surge 16% in the next year. (See Sunnova Energy International stock analysis on TipRanks)
Big Lots (BIG)
As a closeout retailer, Big Lots offers its customers everything from groceries and household essentials to furniture and electronics at an affordable price. With a solid standing going into 2021, some members of the Street believe its 87% year-to-date gain is only the beginning.
Representing Piper Sandler, five-star analyst Peter Keith tells clients that going forward, “the set-up remains highly favorable.” The company’s guidance for Q3 comps was above his estimate, but the call for EPS of $0.50-$0.70 (versus Keith’s $0.12 forecast) was a major surprise.
“Not only has Q3 historically been a negative EPS quarter, but also BIG is guiding huge EPS upside despite ~$12 million of incremental rent expense (from selling its DC's) and ~$10 million of COVID expenses,” Keith noted.
To this end, the analyst bumped up his Q4 comp estimate. Keith explained, “Q4 is setting up to be quite strong, the move back into discretionary closeouts couldn't be better timed, our survey work continues to show elevated demand for home furnishings, and any positive impact from the new Chief Merchant (who joined in late July) has not yet impacted the sales trend.”
When it comes to closeout activity, new CMO Jack Pestello has helped strengthen BIG's efforts in closeouts, with Keith already noticing compelling offerings during store checks. Additionally, the reduction of promos should bode well for the retailer. BIG has cut the number of promo days in half in Q3 2020, when compared to Q3 2019.
Therefore, although BIG is guiding for flattish gross margins year-over-year, there is room for upside, in Keith’s opinion.
On top of this, its inventory position could be on the mend. According to management, most categories have had some inventory constraints in Q3, but vendors are catching up with demand, especially in key segments like furniture, home office and small appliances.
Adding to the good news, a $500 million share repurchase authorization was announced, which Keith argues should “add some juice to EPS over the coming quarters.”
Everything that BIG has going for it convinced Keith to maintain his Overweight rating. In addition to the call, he left the price target at $75, suggesting 40% upside potential. (To watch Keith’s track record, click here)
Turning to the rest of the Street, opinions are split evenly. With 3 Buys and 3 Holds assigned in the last three months, the word on the Street is that BIG is a Moderate Buy. At $60.33, the average price target implies 12% upside potential. (See Big Lots stock analysis on TipRanks)
Amicus Therapeutics (FOLD)
Last but not least we have Amicus Therapeutics, which develops therapies for ultra-orphan diseases, including lysosomal storage disorders (LSDs). Up 77% year-to-date, even more growth could be on tap for this healthcare name, so says multiple Street pros.
Even though it boasts a next generation enzyme replacement therapy in Phase 3, one of its gene therapy assets has received significant attention.
During the CNSA conference, FOLD presented additional follow-up data from its Phase 1/2 CLN6 Battens gene therapy program. The program is evaluating AT-GTX-501, its gene therapy designed for use in CLN6 Batten disease, which is a fatal condition where children experience rapid and progressive decline in cognitive and motor function. It has a worldwide population of roughly 1,000 patients.
The presentation included incremental interim safety and efficacy data. Based on the safety data for 13 patients treated with the candidate, the therapy was well tolerated. It should be noted that five patients reported eleven Grade 3 SAEs, including four that were considered to be potentially treatment-related. These included vomiting, fever and upper abdominal pain, which are symptoms frequently seen with AAV gene therapy administration.
Weighing in for Cowen, five-star analyst Ritu Baral argues the fact that immunogenicity to AAV9 or CLN6 was not observed is an important takeaway.
As for the efficacy data, the results for twelve patients that reached the 12-month timepoint and eight that hit the 24-month timepoint were analyzed against age-matched natural history. On the Hamburg Motor and Language (HM&L) Aggregate score, which assesses ambulation and speech, the mean rate of decline in treated patients was much lower compared to natural history over the same time period.
Digging a bit deeper, at the 12-month timepoint, the mean rate of decline in treated subjects was 0.4 points, versus 1.2 points in natural history subjects. At the 24-month timepoint, the mean rate of decline was 0.6 points in treated subjects, compared to 2.4 points in the natural history participants. What’s more, management stated that 63% of natural history patients saw an additional 2-point drop on the HM&L score two years after their first decline, while only 13% of AT-GTX-501 gene therapy recipients experienced the same.
What does all of this mean? “We think this update is incrementally positive and demonstrates the durability of AT-GTX-501's efficacy out to two years. Interim efficacy results show nominally statistically significant and very likely clinically meaningful slowing of disease progression over 24 months in CLN6 Battens... The natural history dataset was collected was a relatively recent chart review by the same investigator as the FOLD study, and therefore we believe is likely reliable,” Baral commented.
If that wasn’t enough, the natural history control analysis could be enough for U.S. registration. “We believe given the rarity and severity of CLN6, that a prospective PBO controlled trial is not feasible. We believe the natural history data in the disease is rapidly solidifying into a body of evidence that will be meaningful to both FDA and EMA,” Baral explained.
Given all of the above, Baral has high hopes. Along with an Outperform rating, she keeps a $31 price target on the stock. This target puts the upside potential at 81%. (To watch Baral’s track record, click here)
Other analysts seem to echo Baral’s sentiment. 3 Buys and no Holds or Sells add up to a Strong Buy consensus rating. Based on the average price target of $23.67, the upside potential comes in at 38%. (See Amicus Therapeutics stock analysis on TipRanks)
Disclaimer: The opinions 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.
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