It’s time to pull out the crystal ball and see what’s in store for the stock market this year. So far, it’s clear the stock has recovered somewhat from his 2022 low, and one of his Wall Street pundits says there’s more runway to the upside.
Larry Adam, chief investment officer at Raymond James, said of market conditions in 2023, “Last year saw multiple compressions for the second year in a row, but it’s rare to see a triple compression.” said. He predicts multiple expansions to “drive stock market returns” going forward. As history suggests, our view that by the end of the year the mild recession will end, inflationary pressures will ease, interest rates will fall, and the Fed will become less aggressive, the “bad news” is priced into the multiples. , suggesting that a multiple outlook has been set. Expand in 2023. ”
Adam admits earnings are likely to decline this year, but he’s still targeting the end of the year S&P 500 4,400, or about 10% above current levels. Adam, who supports this stance with multiple expansionary factors, specifically points to the prospect of inflation returning to around 3% and inflation falling. Interest rates will fall as a result, as interest rates no longer need to be raised to counteract rising prices. The Federal Reserve (Fed) has raised interest rates only two more times and will stop in March. As Adam explains, “The multiple historically hit a trough coinciding with the Fed’s last rate hike and then widened by an average of 7-8% over the next 12 months, so this timing of the final rate hike reflects multiple perspectives. important from.”
So, in Raymond James’ view, we should expect a better investment climate to start in the second half of the year, and the firm’s equity analyst Andrew Cooper thinks the gains are poised. We have singled out two stocks and recommend buying them. now. Let’s take a closer look.
Natera Co., Ltd. (NTRA)
Let’s start with Natera, a biotech company operating in the cell-free DNA testing niche (cfDNA). The cfDNA test is minimally invasive, based on a simple blood draw, and focuses on naturally occurring DNA fragments that float freely in the bloodstream. Natera’s technology captures those fragments and uses them for genetic testing.
The company’s testing platform is based on novel molecular biology techniques and AI-driven bioinformatics software, capable of detecting single DNA molecules in blood sample tubes. Natera has developed this technology into an accurate, non-invasive prenatal test (Panorama platform), a tumor-specific assay test for personalized cancer treatment (Signatera platform), and best-in-class rejection prior to kidney transplantation. Used for evaluation tests (Prospera platform). ).
Diagnostic DNA testing is big business, and Natera capitalizes on patients’ desire for a less invasive medical experience. The company’s revenue has shown steady growth over the past few years, and in its last reported quarter, Q3 2022, Natera’s top line was $210.6 million, down year-on-year. increased by 33% in Revenue growth was on top of a 27% increase in tests processed in Q3 2022 from 407,300 to 517,500. Of that total, the Oncology segment experienced the greatest growth. The company said he processed 53,000 oncology tests in the quarter, up 153% year-on-year.
Natera raised its forward guidance in its third-quarter report, forecasting full-year 2022 revenue of $810 million to $830 million. This is a midline increase from his previously published guidance of $40 million. The company expects he will report fourth quarter 2022 results in late February.
Joining the bulls, Raymond James’ Andrew Cooper is upbeat on the company and its stock.
“We are upgrading our stock to outperform as each segment grows well in the short and medium term and we have a catalyst-rich setting in 2023, especially in oncology. The leadership in the MRD field in Medium believes it could at least gain additional coverage for CRC and potentially be included in the guidelines, creating excitement, but an increasingly profitable women’s health business. has its own catalyst in the conversation around 22q. All this makes for a valuation that looks reasonably accommodative all things considered, at least in relative terms,” said the analyst. gave an opinion.
Cooper’s Outperform (or Buy) rating on NTRA has a price target of $58, which means a 35% upside potential over the course of a year. (To see Cooper’s achievements, click here)
Overall, this intriguing biotech features nine recent analyst reviews, including eight purchases to one hold, resulting in a strong buy consensus rating. increase. The stock is trading at $42.94, with an average target price of $63, and is expected to gain up to 47% over the next 12 months. (look NTRA Stock Forecast)
Flugent Genetics Inc. (FLGTMore)
Fulgent, Raymond James’ second pick, is a full-service genomic testing company focused on improving patient care in the areas of oncology, infectious and rare diseases, and reproductive health. The company operates proprietary technology behind its testing platform, creating a broad and flexible testing menu that can improve and expand its offerings as its genetic reference library grows.
The company was founded in 2011 and has since built a solid reputation for quality genomic testing. The company provides best-in-class support services for its testing platform, ensuring the best possible outcomes for the best patient care and outcomes.
In its last reported quarter, 3Q22, the company’s top line was $105.7 million, less than half of the $227.9 million reported in 3Q21. The decrease in revenue is not surprising given that billable tests decreased from 2.2 million to 952,000 year-over-year. On the positive side, core revenue, excluding COVID-19 testing products and services, grew 110% year-over-year to $56 million, accounting for more than half of total revenue. The company’s non-GAAP earnings were $32 cents per share, compared with $4.05 a year ago.
In short, Fulgent has thrived during the pandemic, when COVID testing requirements boosted demand, and has seen demand decline sharply as the pandemic recedes. While this has reduced revenue, he has two bright spots in the company. Growing core earnings and holding cash, a legacy of the COVID boom era. As of the end of Q3 2022, Fulgent’s cash and liquid assets were $918 million.
When I checked with analyst Cooper again, he sees the company is in the midst of a transition from profitable pandemic-era COVID testing to a future-ready oncology testing platform. It turns out that there is
“With a strong underlying technology backbone across both wet labs, dry labs and the broader business, we are confident that we will be able to successfully cross-sell these capabilities and add new customers to each without compromising service. The ability to scale (even if it’s not leading the turnaround time, it’s still competitive) will prove critical to its success, but the company’s total $105 billion core test Aiming for what I consider a TAM, the runway is pretty much,” Cooper wrote.
“From an investment perspective, net cash of about $26 per share not only helps set a lower floor for the stock, but also creates additional capital deployment options,” the analyst summarized.
Overall, Cooper thinks this is a stock worth holding. Analysts rate his FLGT stock as outperform (i.e. buy), and his $45 price target suggests a solid upside potential of his 34%.
Only three analysts have considered FLGT stock, and their reviews include 2 buys to 1 hold with a moderate buy consensus rating. The average price target is $45, which is in line with Cooper’s stock price. (look FLGT stock price forecast)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. This content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.