Farewell Julie, it was my pleasure. Sentiment may finally be turning on Wall Street after the stock market posted its best month since November 2020, buoyed by better-than-expected quarterly results from the tech giants and the prospect of the Fed easing future rate hikes.
Major indices are still down for the year but we are clearly in the middle of a rally.
Where this rally will lead is anyone’s guess. Right now, Wall Street analysts are busy picking the stocks they think are best positioned to post gains through the end of the second half of the year. These “top picks” are an interesting group of recommended buy stocks, all of which are forecast to have strong upside potential.
So are they the right stocks for a confused time? We can take a look at the latest details from the TipRanks database and check out the latest analyst comments to find out. Each of these three stocks has been named a “Top Pick” in recent weeks.
TechnipFMC Plc (FTI)
First on our list is TechnipFMC, a technology provider in the energy sector that serves both traditional producers and new energy customers. TechnipFMC delivers a wide range of fully integrated projects, products and services ranging from onshore hydrocarbon exploration and extraction to offshore rigs and platforms to petroleum refining. The company operates a fleet of 18 technologically advanced ocean-going industrial vessels, operates in 41 countries and had sales of US$6.4 billion in 2021.
A look at TechnipFMC’s earnings over the past two years shows a sharp decline from Q4’20 to Q1’21 — but that’s an artifact of the spin-off of the company’s petrochemical and liquefied natural gas businesses into a separate company. Since the spin-off, revenue has remained stable between $1.53 billion and $1.68 billion. Until last Q2.
For Q2’22, the company announced revenue of $1.72 billion, a sequential jump of 10% over Q1’22 and a more modest 3% year-on-year increase. The revenue increase was driven by solid gains in both key aspects of the business, including a 9.7% sequential increase in subsea revenue and a 13% sequential increase in the Surface Technologies segment.
The story goes on
Solid performance allowed the company to make improvements to its capital structure, including a $530 million reduction in overall debt, now at $1.5 billion. The company used $684.9 million in cash and cash equivalents at the end of the quarter. In addition to improving its balance sheet, the company also announced a $400 million share repurchase authorization, representing approximately 15% of its total outstanding shares. The authorization marks the beginning of a capital return policy to shareholders.
Covering Piper Sandler, analyst Ian Macpherson points to the increasing momentum in subsea as a forward driver for FTI stocks, writing, “After surprising $1.9bn in Q1, our FY estimate of $6.7bn is overshadowed. The volume of work that FTI is not bidding on this year is unprecedented in the past decade. This alone is a strong indicator that pricing power is finally returning to normal at sustainable levels. These cyclical tailwinds, when combined with the embedded margin levers associated with FTI’s relentless business model innovation over the past 5 and the last 1-2 years, suggest reasonable upside potential for the recently outlined subsea margin roadmap… “
Convinced that this company will outperform going forward and bookings and deals will increase, Macpherson keeps it as a “Top Pick” and ranks the stock as Overweight (one buy). Its price target of $14.65 in US currency points to a one-year upside potential of 81% in the coming year. (To see Macpherson’s track record, click here.)
This occupation supporting player in the energy industry has 4 recent analyst ratings on record and they agree this is a stock to buy, supporting the consensus rating of “Strong Buy”. The shares trade for $8.09 and their average price target of $11.91 implies a 47% one-year gain. (See TechnipFMC’s stock forecast at TipRanks.)
Legend Biotech Corp (LEG)
Next on our list is Legend Biotech. This clinical-stage biopharmaceutical company is working on advanced cell therapies to treat hematological and solid tumors. This is a common path for biopharmaceutical companies; Legend is notable for the advanced nature of its pipeline program, which currently includes multiple phase 2 and phase 3 clinical trials. The Company’s hematology malignancy program is the most advanced with as many as 6 late-stage studies ongoing.
Regarding its clinical program, Legend made several important announcements just last June. The first of these announcements was for a new program, LB1908, for which the FDA has just approved an Investigational New Drug Application (IND), paving the way for a Phase 1 clinical trial of LB1908 in the United States . The drug candidate is a CAR-T therapy designed to target recurrent or refractory solid tumors of the stomach, esophagus and pancreas. A phase 1 study with this drug candidate is already underway in China.
In the second announcement, Legend released new data from its ongoing large-scale clinical trial program CARTITUDE with ciltacabtagene autoleucel. This is a new treatment for a dangerous blood cancer, multiple myeloma, for which there are no effective treatments and a high unmet medical need. The new data show a “deep and durable” therapeutic response in patients in several of the CARTITUDE studies, with an overall response rate of 98% at two years.
But the most exciting development was the February FDA approval of Carvykti, one of Legend’s new treatments for multiple myeloma. The FDA’s move was followed in May by the European Commission’s approval to begin marketing activities. Carvykti is a BCMA-targeted, genetically modified autologous T-cell immunotherapy, also called Cilta-Cel. Legend has an exclusive global license agreement with Janssen for the commercialization of Carvykti.
In addition to these clinical updates, Legend reported important financial results in the first quarter. This included $40.8 million in revenue derived from developmental milestones in licensed research programs. Legend also has $796 million in cash and cash equivalents compared to Q1 R&D and G&A expenses of $94 million, giving the company a cash reserve through 2024.
All of that was enough for BMO analyst Kostas Biliouris to make Legend one of his top picks in the biotech sector and give the stock an outperform (buy) rating. Its price target of $77 implies a 63% gain for the year.
Biliouris reinforces his stance, pointing to several strengths of this company: “1) Carvykti commercialization in multiple myeloma (MM) as a first-in-class late-line CAR-T therapy, which is expected to deliver a significant revenue stream and protection offers against risks; (2) Continued expansion of Carvykti’s addressable population through approvals in prior lineages and geographies outside of the US will drive additional growth and enhance long-term value; (3) Pending data reads from prior lines of therapy may drift upwards in the short term; and (4) a diversified pipeline provides options and opportunities for further upside.” (To see Bilioris’ track record, click here.)
Once again, we consider a stock with a unanimous Strong Buy consensus rating; Legend recently received 4 positive analyst reviews. LEGN shares have an average target price of $72, indicating a 52% increase from the current trading price of $47.24. (See Legend’s stock forecast at TipRanks.)
AvePoint (AVPT)
The last stock we look at here is AvePoint, one of the major players in the software industry. The company offers a cloud-based SaaS platform that provides solutions for data migration, management and protection in connection with Microsoft 365. Founded in 2001, the New Jersey-based company has adapted to the changing computing environment over the years, expanding its range of software products and solutions.
Looking at some numbers, AvePoint boasts that it managed over 125 petabytes of data and that the most recent quarter, 1Q22, saw 45% growth in SaaS revenue and 30% annual recurring revenue (ARR) growth % for a total of $167.4 million.
The increase in the company’s SaaS revenue brought total revenue for that segment to $26.6 million in the first quarter, from a total of $50.3 million at the top. While revenue was on the rise, earnings were negative with a diluted EPS loss of 6 cents, although that compares favorably with the year-ago quarter, when the EPS loss was 14 cents. AvePoint has a solid cash position with $260 million in available cash and short-term investments.
Northland Capital Markets 5-Star Analyst Nehal Chokshi made this stock a top pick after a deep dive into the company’s performance. Impressed by AvePoint’s forward potential, he writes, “We view our new long-term revenue CAGR of 25% as very conservative given that our initiation work highlights a highly differentiated capability compared to the primary cooperative player MSFT, and that our Work verifying AVPT, this is addressing all identified $6.5B TAM…. Other key parameters in our DCF include a non-GAAP OM of 30%, which is 500 basis points above the low end of management’s 25%+ guidance but consistent with the ending OM of 30%+ that we at running out of other high quality SaaS names to cover… ”
These comments support Chokshi’s Outperform (Buy) rating, while its $12 price target implies upside potential of 138% over the next 12 months. (To see Chokshi’s track record, click here.)
Both of the most recent analyst ratings for this stock are positive, resulting in a unanimous consensus rating of Moderate Buy. The shares trade for $5.03 and their average price target of $9.50 suggests an 89% upside potential this year. (See AvePoint’s stock forecast at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important that you do your own analysis before making any investment.