The holidays are behind us, the New Year is getting into full swing, and that means it’s time to figure out, if we can, just where we’re headed in 2022. Last year saw strong gains in the stock markets; the S&P 500 grew 29%, far above the 7% to 8% annual average. The big question for investors is, will the markets keep up this blistering pace?
The general consensus is, it won’t – although that doesn’t mean we’re in for a bad year. John Stoltzfus, chief investment strategist with Oppenheimer, notes that last year was the third in a row with the S&P showing a net gain, and sets forth his belief that 2022 will make four. He’s setting a target for the index of 5,330 by year’s end. Hitting that will mean a gain of about 14% on the S&P, which will be lower than last year but still higher than average.
Backing his stance, Stoltzfus writes, “We’ll credit improving fundamentals, monetary policy, fiscal stimulus (albeit somewhat excessive) as well as business and consumers doing what they do best for the markets’ performance…”
Stoltzfus’ colleagues among Oppenheimer’s stock analysts are following his lead, and picking out stocks that they see as winners in this year’s market environment. Using the TipRanks database, we’ve pulled up details on two of these picks; Strong Buy equities with at least 70% appreciation potential for the coming year. Let’s dive in and check out what makes them so compelling.
Generac Holdings (GNRC)
We’ll start with Generac Holdings, a Wisconsin-based firm producing backup electrical power generators. The company’s manufacturing facilities turn out a variety of generators for the industrial, light commercial, and residential markets. The generators range from small 800 watt units to big 9 megawatts systems. Generac reported more than $2.4 billion in total sales for 2020. In the first three quarters of 2021, total sales were up 54% year-over-year.
That brings us to the company’s most recent earnings report, for 3Q21. At the top line, the company reported record revenue of $942.7 million, along with a solid EPS of $2.35. Revenue was up a modest 2.5% sequentially and a more impressive 34% year-over-year; EPS was in line with previous two quarters, and gained nearly 13% yoy.
Over six months, Generac has made no fewer than five acquisition moves. The most recent, announced in November, was the $770 million deal to acquire ecobee, a provider of sustainable smart home systems. The purchase was made in cash and stock.
Also in November, Generac announced an expansion of its Trenton, South Carolina manufacturing facility. The expansion is planned for completion in 3Q22 and will add up to 200,000 square feet of warehousing for both raw materials and finished products.
Despite these positive signs for the company, GNRC shares are down ~37% from their late-October peak. In coverage for Oppenheimer, 5-star analyst Christopher Glynn explains why he sees this drop as an opportunity for investors.
“As GNRC’s commercial and strategic development activities remain full steam ahead, we favorably consider the significant pullback in shares in the context of logistics/ cost pressures interplay with current sentiment/rotation drivers… GNRC noted record quarter-end HSB lead times (30 weeks) with 3Q results and noted orders were especially strong in the 4-6 weeks into 11/2 reporting date continuing to push record backlog (we estimate ~$1.3B). We believe suppliers are keeping up well, with logistics and overall movement of materials/components the real friction,” Glynn opined.
Based on all of the above factors, Glynn rates Generac shares a Buy and set a $540 price target. Apparently, the analyst believes the stock is primed for ~70% over the next 12 months. (To watch Glynn’s track record, click here)
From the aggregated analyst reviews, it’s clear that Wall Street agrees with the Oppenheimer take on this stock. GNRC has 13 recent analyst recommendations, including 11 to Buy and 2 to Hold, for a Strong Buy consensus rating. The shares are priced at $312.09 and their $507.07 average target indicates room for ~60% share appreciation this year. (See GNRC stock analysis on TipRanks)
Global Blood Therapeutics (GBT)
The second stock we’ll look at is Global Blood Therapeutics, a clinical-stage biopharmaceutical firm focused on the development of treatments for sickle cell disease (SCD). SCD is a dangerous blood condition causing severe pain and reduced life expectancy. The disease is hereditary, and mostly lacks effective treatments. GBT’s pipeline features several clinical-stage drug candidates, as well as several discovery-stage research programs – but most importantly, the company’s drug voxelotor has FDA approval for the treatment of SCD patients.
Having an approved drug on the market is the goal for every biopharma, and a look at GBT’s 3Q21 report – the most recent released – shows why. Voxelotor sales (the drug is branded as Oxbryta) have been growing steadily since the initial approval and in Q3 reached $52.1 million. This was up 9.5% from Q2, and a robust 41% from 3Q20. The increase was driven by approximately 850 new Oxbryta prescriptions in the quarter. Since the drug’s launch, the number of patients taking it has increased in every quarter.
In a related development, GBT reported on December 17 that the supplemental New Drug Submission for Oxbryta had been approved by the FDA. The supplemental NDA was for a label expansion, permitting use of the drug for SCD patients as young as 4 years. Expanding the patient base bodes well for the company’s ability to maintain sales.
Furthermore, the EMA’s Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion on Oxbryta for adult and adolescent patients. This opinion could be followed by an MAA approval in 1Q22.
In recent weeks, GBT has initiated two Phase 3 studies of its second drug candidate, inclacumab. This drug showed positive data in earlier clinical trials, and the Phase 3 studies will evaluate its efficacy in addressing SCD pain crises. Both studies are currently enrolling patients.
Analyst Mark Breidenbach, in his coverage for Oppenheimer, notes the label expansion of Oxbryta, as well as the drug’s progress on its path toward European approval, as the key catalysts for GBT stock.
“Based on results from the HOPE-KIDS-1 study, we are not surprised by the label expansion, which we estimate unlocks ~16,000 US pediatric patients previously ineligible for Oxbryta… We are enthusiastic about the label expansion because a disease-modifying therapy like Oxbryta could offer the most benefit to pediatric patients who have not accumulated a lifetime of irreversible tissue and organ damage from SCD. Further, pediatric patients in the US are generally treated at well-funded, high-quality sickle cell centers of excellence, which could help improve both uptake and compliance.” Breidenbach noted.
It should be unsurprising, then, that Breidenbach rates GBT an Outperform (i.e. Buy). Not to mention the $92 price target puts the upside potential at a whopping 221%. (To watch Breidenbach’s track record, click here)
Again, we’re looking at a stock with a Strong Buy consensus among the Wall Street analyst corps. The 9 reviews here break down 8 to 1 in favor of Buys over Holds, and the $73.38 average price target implies ~156% upside this year from the current trading price of $28.63. (See GBT stock analysis on TipRanks)
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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.