Even accounting for recent losses, the tech-heavy NASDAQ index is up 28% so far this year, leading the way in an overall bullish market. The surge in the NASDAQ has been fueled by investors gravitating towards tech giants.
According to Chris Harvey, head of equity strategy for Wells Fargo, the rally is solid, and it will remain so until the Federal Reserve cranks up interest rates enough to kill it. Harvey notes that inflation, while falling, remains persistently above the central bank’s 2% target rate, and the Fed will almost certainly have to raise rates again later this year – a move that will likely contract available credit and set off a recession.
As Harvey puts it, “Tech is not going to roll over, the major theme isn’t going to roll over until you crack the economy. That’s what happened back in 1999, that’s likely what’s going to happen now. And I don’t think you can crack the economy until the Fed gets more aggressive. So we’ll have some wiggles, I think we’ll have a pullback in the market, we’ll have a pullback in big tech, but that overall theme is still in place and not until the economy breaks.”
This presents investors with a window of opportunity. The stock analysts at Wells Fargo are pointing out stocks with solid upside potential, up to 125% in some cases, that currently exhibit a bullish outlook. We have consulted TipRanks’ database to gather the latest details on two of their recommendations, which are presented below along with the accompanying Wells Fargo commentaries.
This gives investors a window of opportunity. The stock analysts at Wells Fargo are pointing out stocks with solid upside, up to 125% in some cases, that are looking bullish now. We’ve used TipRanks’ database to look up the latest details on two of their picks. Here they are, along with the Wells Fargo commentaries.
Bio-Rad Laboratories (BIO)
Say ‘biotech,’ and most of us will automatically assume medical research, especially cutting-edge research into new drugs and medical treatments. Bio-Rad Laboratories, however, occupies a different, but equally important, niche in the biotech realm. The company is a developer and manufacturer of innovative lab products for the scientific research and clinical diagnostic fields. Bio-Rad has been in business for more than 70 years, and has built a reputation for delivering the quality products and research tools that keep the nation’s biotech labs on that cutting edge.
A look at Bio-Rad’s product line tells much of the story. The company offers products in five categories: Life Science; Clinical Diagnostics; Quality Controls; Food & Beverage Testing; and Classroom Education. A small sampling of the company’s products includes a variety of chromatography tools, testing systems for autoimmune diagnoses, diabetes, infectious diseases, and blood type screening, barcoded quality control tools, data management solutions, and kits for veterinary diagnostics and water quality testing. In all, Bio-Rad provides all the instruments, software, consumables, reagents, and content needed for a modern biotech lab.
In the recently reported 1Q23, Bio-Rad generated a top line of $676.8 million, down 3.3% year-over-year and missing the forecast by $12.48 million. The company’s EPS, in non-GAAP measures, came in at $3.34, 14 cents below expectations. Looking at the company’s two largest segments, we find that Life Sciences revenue fell 6.8% y/y, while Clinical Diagnostics was essentially flat. Together, these two segments accounted for $675.7 million of the total revenue.
Shares in BIO fell more than 16% after the release of the Q1 numbers, but Wells Fargo analyst Timothy Daley sees this a chance for investors to buy into a quality stock at a relatively low price. Daley writes, “Investors underestimate the company’s long-term growth opportunity to enhance their earnings and margins, supported by solid business fundamentals and their ability to position themselves opportunistically to benefit from secular growth tailwinds despite near-term sector and macro headwinds that are temporary in nature.”
“BIO has a compelling portfolio targeting high-growth areas in their end markets (i.e., process chromatography, ddPCR, IH-500). They continue innovating to support growth (i.e., QX Continuum 2H23) and have unique long-term margin expansion opportunities,” the analyst added.
For Daley, this adds up to an Overweight (i.e. Buy) rating, and his $550 price target implies that a one-year gain of ~51% is waiting for BIO shares. (To watch Daley’s track record, click here)
Daley is hardly the only analyst to take a long-term bullish view of Bio-Rad. The company’s stock has picked up 4 recent analyst reviews, all positive, and gets a Strong Buy from the analyst consensus. The shares are currently trading for $365.80, and the $540.25 average price target suggests a potential one-year appreciation of ~48%. (See BIO stock forecast)
MorphoSys AG (MOR)
Next up is a biopharmaceutical company, MorphoSys AG. This firm, based in Munich, Germany, operates in the US through its Boston-based, wholly owned subsidiary, MorphoSys US, Inc. The company is focused on the development of new treatments for cancer, especially cancers that have proven resistant to current drug therapies.
MorphoSys is operating at both the clinical and commercial stages, making this biopharma a double-barreled opportunity for investors. The company boasts FDA approval for its drug, tafasitamab, specifically for treating relapsed or refractory diffuse large B-cell lymphoma, marketed under the brand name Monjuvi. Monjuvi is also currently being evaluated in various clinical trials for its effectiveness against other types of cancers. Additionally, MorphoSys is actively developing pelabresib, a targeted BET inhibitor, as a treatment for myelofibrosis.
A look at the clinical pipeline shows two important catalysts on the near horizon. The company has completed enrollment in two Phase 3 studies – the MANIFEST-2 trial of pelabresib in the treatment of myelofibrosis, and the frontMIND study of tafasitamab/Monjuvi in the treatment of first-line diffuse large B-cell lymphoma. Data releases for these studies are expected in 4Q23 and 1H24, respectively.
Analyst Derek Archila, in his write-up of MorphoSys for Wells Fargo, sees high potential. He is particularly bullish on pelabresib, writing, “Once in a while you can find deep value in SMID biotech, and we like MOR for this reason. With a de-risked Ph3 read out for pelabresib in 4Q23, and ~$1B in peak sales potential—this is a compelling story to us… Looking ahead, docs are interested in pairing pela with other JAKs such as pacritinib and momelotinib, particularly if pela demonstrates disease mod. This is what we think is underappreciated by the Street.”
Archila is less enamored of Monjuvi, but points out that the company’s existing commercialization structure for that drug sets it up nicely to introduce pelabresib to the US market. He describes the current valuation of the stock as ‘an attractive entry point.’
At the bottom line, Archila gives MOR shares an Overweight (i.e. Buy) rating, with a $17 price target that predicts a robust 125% one-year upside potential. (To watch Archila’s track record, click here)
Overall, this stock has a Moderate Buy consensus rating from Wall Street, based on 4 analyst reviews that include 3 Buys and 1 Sell. The shares are currently priced at $7.50 and their $11.38 average price target suggests a 12-month upside of ~52% from that level. (See MorphoSys stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.
#Wells #Fargo #Predicts #Rally #Stocks #Heres #Solid #Upside