Summer has wound down, the Q3 earnings reports will be coming in over the next few weeks, and every investor can see that the market is hitting a rolling boil.
For investors in search of a bright spot, Canaccord Chief Market Strategist Tony Dwyer believes the increasing volatility in the market could lead to attractive entry points.
"Our core fundamental thesis remains positive, our tactical indicators coupled with history suggest any further weakness should prove temporary, and we expect the year to end like it began — with a market advance driven by the economic recovery theme," Dwyer said.
Given the volatility that has ruled the markets over the last few weeks, how are investors supposed to gauge when a name is flirting with a bottom? That’s where the Wall Street pros come in.
These expert stock pickers have identified three compelling tickers whose current share prices land close to their 52-week lows. Noting that each is set to take back off on an upward trajectory, the analysts see an attractive entry point. Using TipRanks’ database, we found out that the analyst consensus has rated all three a Moderate or Strong Buy, with considerable upside potential also on tap. Let's take a closer look.
Purple Innovation (PRPL)
We will start with Purple Innovation, a pillow company. Well, a comfort tech company, according to Purple. The company brings a high-tech outlook to the market for pillows, mattresses, and seat cushions, using hyper-elastic polymers to create softer fillings and covering, allowing for better heat dissipation – and greater comfort. Purple manufactures its products in the US, and in addition to mattresses, its product line includes pajamas, and even cushion beds for pets.
Purple markets its products through a variety of channels, including brick-and-mortar retailers, company-owned retails showrooms, third-party e-commerce sites, and direct-to-customer through its own online channels. The combination of sales channels brought in $182.6 million in total revenue in 2Q21, the most recent reported. This total was up 10.5% year-over-year, and up an even more impressive 77% from 2Q19. Quarterly EPS was a 3-cent loss, which compared favorably to the 11-cent EPS loss in the year-ago quarter.
Even though the Purple’s business showing was generally sound, the company’s stock is down 37% year-to-date.
Oppenheimer’s 5-star analyst Brian Nagel likes what he sees in Purple, saying: “We look upon PRPL as a compelling, digitally-driven up and comer in the market for higher-end mattresses and the consumer sector, broadly. Over the past few quarters, a collection of management communication errors have weighed somewhat upon shares, in our opinion. That said, underlying strategic execution of PRPL has remained strong. We continue to believe that at current depressed levels, shares under-appreciate near and longer-term sales and profit potential for the company."
Nagel's upbeat outlook leads him to put an Outperform (i.e. Buy) rating on PRPL, and his price target, of $45, implies an upside of 121% for the year ahead. (To watch Nagel’s track record, click here)
All in all, Purple's Strong Buy consensus rating is based on 6 recent reviews, that break down to 5 Buys against a single Hold. The shares are priced at $20.60 and their $34.33 average price target suggests room for 66% growth in the year ahead. (See PRPL stock analysis)
Now let’s shift gears and take a look at GoDaddy, the $11 billion web hosting company and domain registrar with over 20 million customers worldwide, operating on more than 82 million domain names. GoDaddy will be reporting its Q3 earnings next month, but we can get an idea of where it is by taking at look at the Q2 numbers now.
For 2Q21, the company reported $931.3 million in total revenue, up more than 15% year-over-year. GoDaddy’s high revenue – the highest in over two years – was supported by more than $1 billion in total bookings (a 12.7% yoy gain), domain revenue of $436.7 million (up 18.2% yoy), and delivered more than $209 million in net cash from operations (up 24.6% yoy). At the same time, the EPS of 27 cents, while far better than the 2Q20 EPS loss of $4.06, missed expectations by 10%.
GoDaddy is moving to innovate and expand its offerings to customers, and last month announced the release of two point-of-sale devices that will expand its GoDaddy Payments service. The expansion will allow small business customer to improve their capabilities in selling, tracking, and managing online transactions.
Despite the increasing revenues and expanding footprint, GoDaddy’s shares have slipped 18% this year. The stock has been volatile throughout 2021, experiencing several major swings in share value, both up and down.
Aaron Kessler, 5-star analyst with Raymond James, is bullish on the stock and says bluntly: “GoDaddy delivered solid 2Q21 revenues with strength across all product lines…” He goes on to delineate several points indicating strong performance going forward: “1) our expectation for continued bookings strength driven by increased demand for digital presence solutions; 2) accelerating traction for subscription software tools; 3) expect continued double-digit top-line growth and mid-teens uFCF growth; 4) we see the valuation as attractive…”
To this end, Kessler rates GDDY a Strong Buy with a price target of $108, suggesting ~57% upside in the next 12 months. (To watch Kessler’s track record, click here)
Overall, GoDaddy has a Moderate Buy rating from the Wall Street consensus, based on 9 reviews that include 6 Buys and 3 Holds. The $96.38 average price target implies ~40% upside from the trading price of $68.97. (See GDDY stock analysis)
Incyte Corporation (INCY)
Last but not least is Incyte, a biopharmaceutical company whose operations have moved on to the commercialization stage for new therapeutics – although it maintains an active pipeline of new drug candidates in both preclinical discovery and clinical trials stages. The company’s portfolio of approved products includes Opzelura, in the dermatology space, and targeted therapies, including Jakafi for Myelofibrosis and polycythemia vera, Pemazyre for Cholangiocarcinoma, Monjuvi and Minjuvi for Diffuse large B-cell lymphoma, and Iclusig for several types of leukemia. And finally, in the company’s most recent FDA approval, ruxolitinib was approved in September as a treatment for chronic graft versus host disease (cGvHD).
Having a strong line-up of approved drugs on the market is the goal for any biopharma company. Therapeutic sales provide a revenue stream, with corporate profits, returns to shareholders, and income to fund additional research. In the last reported quarter, 2Q21, Incyte reported total revenue – from all sources – of $705.7 million. This was up from $688 million in the year-ago quarter. Revenues for Jakafi led the way, at $529 million for the quarter, up 12% year-over-year.
The company has not sat on its laurels, however, and maintains its active development pipeline and clinical trials. Since the Q2 results were released, Incyte has published updates on two of those trials. In September, the company released data from two pivotal Phase 3 trials of Olumiant, a once-daily oral JAK inhibitor under study as a treatment for adult patients with atopic dermatitis and alopecia areata. Results showed hair regrowth to 80% scalp coverage in patients with the latter condition.
Earlier this month, Incyte released results from the TRuE-V Phase 3 study of ruxolitinib cream as treatment for vitiligo. The trial lasted 24 weeks and showed significant positive results, with greater than 75% of patients seeing improvement from baseline, achieving the primary endpoint of the study.
Incyte has had many positive catalysts recently, but the shares remain under pressure. The stock has lost 34% of its share value in the last 12 months.
That share depreciation hasn’t discouraged JMP analyst Reni Benjamin, who writes: “Recently, Incyte announced the approval of ruxolitinib (rux) cream in atopic dermatitis under the brand name Opzelura, followed by the approval of rux tablets in chronic graft versus host disease (cGvHD). Despite the generic boxed warning of oral JAK inhibitors, we expect these two approvals to usher in new avenues for growth given rux cream’s and Jakafi’s safety profile. With rux expected to generate approximately $2.13B-$2.17B in net product sales in 2021, the expansion into the multi-billion dollar dermatology space, partners Novartis and Eli Lilly driving increasing royalties from worldwide sales, a growing pipeline of advanced-stage products, and a cash position of $2.1B, we continue to recommend shares and would especially be buyers of the stock in light of the recent weakness.”
In line with his optimistic approach, Benjamin gives INCY an Outperform (i.e. Buy) rating and his $124 price target suggests an impressive 92% potential upside for the coming year. (To watch Benjamin’s track record, click here)
Looking at the consensus breakdown, 7 Buys and 5 Holds have been published in the last three months. Therefore, INCY gets a Moderate Buy consensus rating. The current trading price is $64.36 and the average target of $95.67 suggests ~48% one-year upside from there. (See INCY stock analysis)
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.