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All Contents © 2019The Kiplinger Washington Editors
By Harriet Lefton, Contributing Writer
| July 11, 2018
Growth investors have the same simple goal: Jump into a stock before it skyrockets. Naturally, the solution isn’t as simple: Making the right stock picks takes patience, monitoring, a little bit of luck … and a lot of knowledge.
In the volatile, fast-paced world of Wall Street, knowledge is power. After all, super-investor Philip Fisher — the author of Common Stocks and Uncommon Profits — believed “the stock market is filled with individuals who know the price of everything, but the value of nothing.”
Fortunately, TipRanks’ stock screener tool can help investors harness the collective knowledge of Wall Street’s top analysts. Today, for instance, we have searched for stocks that 1) boast a consensus “Strong Buy” analyst rating (revealing roaring confidence on Wall Street); and 2) that analysts believe have sizable upside potential.
Today, we’ll dive into seven stellar growth-stock picks that hooked Street-wide confidence.
Data is as of July 4, 2018. Companies are listed alphabetically.
Market value: $45.5 billion
TipRanks consensus price target: $65.80 (41% upside potential)
TipRanks consensus rating: Strong Buy
Chip equipment maker Applied Materials (AMAT, $46.74) is coming into focus amid the Semicon West annual conference of the semiconductor industry, held July 10-12. The monster event draws semiconductor companies across the globe, and is anticipated to magnetize close to 30,000 in attendance.
There’s a little apprehension circling the conference, predominantly from concerns related to Samsung DRAM stalls in production. However, AMAT is solidly in the bull camp, and that includes Morgan Stanley analyst Joseph Moore (view Moore’s TipRanks profile).
The broader environment has forced Moore to dial down his price target on Applied Materials just a bit, from $60 to $58, but it still reflects 25% upside potential from current prices. That wariness stems from memory prospects, leading Moore to anticipate a 4% revenue dip for the industry. “Still, memory cash flows remain exceptional,” Moore writes, adding, “We think that remains hidden potential for U.S. semicap stocks, who will remain critical to any buildout, and gives the stocks a measure of hedging against ongoing trade tensions.”
Jim Cramer of CNBC’s Mad Money, after speaking with AMAT President and CEO Gary Dickerson, said, “This stock is so great.” Cramer might not “pound the table,” but he will go ahead and “say that it’s OK to buy here.”
Dickerson had cheered his company’s “speed of innovation” in his conversation with Cramer.
Market value: $4.1 billion
TipRanks consensus price target: $197.00 (36% upside potential)
U.K.-based biotech firm GW Pharmaceuticals (GWPH, $145.32) just scored a first-ever green light from the FDA for a pot-derived drug. The company recently received American approval for Epidiolex, designed for the treatment of two rare drug-resistant epilepsy syndromes: Lennox-Gastaut Syndrome (LGS) and Dravet Syndrome (DS). Epidiolex is primed to meet a significant unmet need for patients with these debilitating conditions.
“While Epidiolex is derived from cannabidiol (CBD), the FDA noted it does not cause intoxication or euphoria that is seen in tetrahydrocannabinol (THC). Additionally, Epidiolex is the first FDA approval for the treatment of patients with Dravet syndrome, and the first in a new category of anti-epileptic drugs (AEDs),” says Cantor Fitzgerald analyst Elemer Piros (view Piros’ TipRanks profile), who sees a clear advantage in the drugmaker’s corner: no formal boxed warning.
Epidiolex is anticipated to launch in the fall, with a European Medicines Agency ruling forthcoming in the first quarter of 2019. The drug also earned a rare pediatric disease priority review voucher.
The stock’s momentum has led Piros to boost the price target on GWPH from $205 to $235 (61% upside potential) and maintain his “Overweight” rating.
Market value: $3.0 billion
TipRanks consensus price target: $51.88 (36% upside potential)
Specialty pharma company Heron Therapeutics (HRTX, $38.25) caused rival Pacira Pharmaceutical (PCRX) to take a 12% hit in June. That’s because Heron Therapeutics’ pain drug, HTX-011, produced compelling data from two mid-stage trials – the kind of promising results that made PCRX investors nervous over the market opportunity of Pacira’s flagship drug, the painkiller Exparel.
Additionally, the results earned HTX-011 a Breakthrough Therapy designation from the FDA. Heron Therapeutics’ drug outclassed standard-of-care bupivacaine when evaluated 72 hours after surgery in breast augmentation and knee replacement patients. Against the placebo arm, HTX-011 decreased pain intensity by 19%; bupivacaine lessened pain by 11%.
Worthy of note, HTX-011 is a treatment designed to scale back patient dependency on opioids for pain following surgery. Janney’s Ken Trbovich warns Pacira investors that “if approved,” HTX-011 looms “as a huge competitive threat that is likely to significantly alter the future trajectory for Pacira’s Exparel” (view Trbovich’s TipRanks profile).
“In total Pacira’s procedure, which requires physician training, requires no less than 50 needle sticks. By comparison, HTX-011 is instilled into the surgical site via a needle-free syringe.” Trbovich explained.
Look for the company to submit its New Drug Application in the back half of this year, with approval on the horizon by the second half of 2019.
Market value: $11.04 billion
TipRanks consensus price target: $28.17 (24% upside potential)
Marvell (MRVL, $22.66) produces storage, communications and consumer semiconductor products. This tech player is raring to bolster its standing in the chip arena thanks to a recent takeover of competitor Cavium. The deal is forecasted to realize $150 million to $175 million of yearly run-rate synergies in a span of 18 months.
Cowen analyst Karl Ackerman (view Ackerman’s TipRanks profile) sings the praises of a deal that lays the groundwork for a “formidable powerhouse in networking.” Marvell stands to make its high-end networking portfolio more robust, Ackerman writes: “With Cavium, the combined company will have an extensive product portfolio across data center networking and storage markets, and Marvell has the opportunity to expand its presence in automotive.”
The deal also should “facilitate share gains for those data center customers needing a second source for switching silicon to Broadcom,” Ackerman adds.
The analyst rates MRVL stock at “Outperform” and suggests a price target of $29 (28% upside potential).
Market value: $9.4 billion
TipRanks consensus price target: $65.09 (21% upside potential)
Nutanix (NTNX, $53.65) is a worldwide pacesetter in the cloud software market. The company also has built a reputation by paving the way for hyperconverged infrastructure solutions.
This enterprise cloud firm recently inked a colossal $45 million contract with the Air Force through an anonymous channel partner. Under the terms, Nutanix is primed to supply hyperconverged kits to the U.S. Air Forces Central Command. The agreement shines as Nutanix’s “largest single deal” on record, praises William Blair analyst Jason Ader (view Ader’s TipRanks profile).
Ader believes the win “reflects the tremendous momentum that Nutanix is seeing in the federal vertical.” While the benefits of the deal’s value won’t all flow to Nutanix, Ader wagers the tech player stands to gain roughly a $30 million to $35 million slice “split between product revenue and a five-year services agreement.”
The analyst determined that Nutanix has racked up nearly 100 new U.S. government customers to its base as of last year. This brings Nutanix’s total in the sector up to roughly 320.
NTNX shares have vaulted nearly 190% in the past year, and Wall Street still thinks it has momentum to spare.
Market value: $7.6 billion
TipRanks consensus price target: $213.00 (30% upside potential)
Clinical-stage biopharma company Sage Therapeutics (SAGE, $163.82) develops novel drugs to treat life-altering central nervous system disorders. Specifically, oral drug SAGE-217 has captured Wall Street’s attention for the treatment of major depressive disorder (MDD) as well as postpartum depression (PPD).
“We view SAGE-217 as a potential game-changer if the company successfully demonstrates that depression can be treated episodically vs. current practice that relies on chronic treatment,” writes Canaccord analyst Sumant Kulkarni (view Kulkarni’s TipRanks profile).
Kulkarni is bullish on SAGE-217 and its opportunity to score approval in postpartum depression and major depression, hiking his expectations from a 50% chance to 55%. Additionally, the analyst believes Sage Therapeutics has a 50% chance at winning an FDA nod as an insomnia treatment.
The major depressive disorder indication is the standout stock driver for SAGE, says Kulkarni, who rates the stock a “Buy” and sees 38% in upside potential.
The FDA in June backed expedited development of the drug; SAGE intends to kickstart a Phase III study in major depressive disorder in the back half of this year.
Market value: $9.1 billion
TipRanks consensus price target: $192.06 (39% upside potential)
Biotechnology firm Sarepta Therapeutics (SRPT, $138.04) could have a game-changer therapy for children with Duchenne muscular dystrophy (DMD), which can have life-threatening complications. In fact, the rare-disease-focused company has built its name in the biotech market on the back of its DMD franchise.
Between 10,000 and 15,000 boys and young men in the U.S. have Duchenne muscular dystrophy. That’s not a wide market, but the rarity of the condition and a lack of treatments still could make its AAVrh74.MHCK7 a lucrative one.
June was a big month for Sarepta. The company posted robust Phase 1/2 DMD clinical results evaluating AAVrh74.MHCK7 in three boys ages 4 to 7. That data alone sent the stock racing about 50% – just one of several highlights in a 2018 that has seen SRPT shares race ahead by 138%.
Gene therapy production reached a mean of 38.2% of normal microdystrophin levels – three times expectations. Microdystrophin is the muscle protein absent in boys suffering from DMD.
JMP analyst Lisa Bayko (view Bayko’s TipRanks profile) called the results “unprecedented.” Sarepta’s drug exhibited an impressive level of microdystrophin expression that outclassed expectations. (Microdystrophin is the muscle protein absent in boys suffering from DMD. The analyst rates SRPT at “Outperform” and, after the data was reported, hiked her price target to $275 – almost a doubler from current prices.