Are the markets heading up or down? Frankly no one knows, with some experts saying the following leg is down again and others calling for further upside. Finding the answer to this conundrum, one financial prognosticator thinks the markets will do each. Wells Fargo’s head of equity strategy Chris Harvey thinks the S&P 500 could reach 4,200 this 12 months, but not before it posts a decline from current levels to around 3,400. That’s a 15% drop, but from there it should swing 20% higher.
Harvey’s outlook relies on the concept we’re in something more akin to an “economic malaise” slightly than a full-on recessionary environment, believing that what’s to return is “not something that is going to be horrific.” So, essentially, loads of volatility followed by a giant move up.
Meanwhile, Harvey’s analyst colleagues at Wells Fargo have been tracking down the equities which might be primed to flourish in such an environment. They’ve homed in on two names they just like the look of. Are other analysts feeling the identical way? We’ve ran these tickers through the TipRanks database to search out out. Listed below are the main points.
O-I Glass, Inc. (OI)
Our first Wells Fargo pick is glass bottle maker O-I Glass. The corporate is one in all the world’s largest glass container manufacturers with roughly half the glass containers across the globe made by O-I, or one in all its affiliates and licensees. Tracing its roots all the way in which back to the early 1900’s, the corporate operates throughout the Americas, Europe, and Asia Pacific, catering to clients within the food, beer, wine, spirits and non-alcoholic beverages segments.
Glass packaging won’t sound like much of an exciting sector but that can matter little to investors because the stock entirely sidestepped last 12 months’s bear, generating handsome gains of 38% in the method.
Within the last reported earnings – for 3Q22 – revenue climbed by 5.6% year-over-year to $1.7 billion, beating the Street’s call by $50 million. Adj. EPS of $0.63 also got here in ahead of the $0.61 consensus estimate. Beating Street expectations on the profitability profile has develop into something of a habit over the past couple of years – the corporate has achieved this feat in nine of the last 10 quarters. For Q4, OI raised its adjusted earnings outlook from the range between $0.20 and $0.30 per share to the range between $0.28 and $0.33. The Street was on the lookout for $0.30.
While up to now the corporate was not known for its operational excellence, after a period of transformation and restructuring, that isn’t any longer the case, notes Wells Fargo analyst Gabe Hajde.
“We imagine OI has re-earned credibility over 2022 (really, the last 24-36 months), displaying solid execution (despite several external headwinds) and achieved key initiatives including: (1) finalized legacy asbestos liab.; (2) exceeded targeted margin expansion initiatives in 2022; (3) accomplished $1.5B portfolio optimization (deleveraging ahead of plan); and (4) executing on capital expansion plans. As well as, we highlight several regions (Europe + Brazil) which might be capacity-constrained, enabling a constructive pricing environment (expected to persist in 23/24). Lastly, OI is proactively managing energy disruption risk in Europe,” Hajde explained.
Expecting further consistency from the corporate, Hajde rates OI shares an Chubby (i.e. Buy), while his $24 price goal makes room for added gains of 26% within the 12 months ahead. (To observe Hajde’s track record, click here)
Taking a look at the consensus breakdown, opinions on OI are more split. The bulls are available barely ahead, with 6 Buys in comparison with 3 Holds and a pair of Sells received over the previous three months. (See OI stock forecast)
Travere Therapeutics (TVTX)
The subsequent Wells Fargo-backed stock we’ll have a look at offers a completely different value proposition. Travere Therapeutics is a biopharma company whose goal is to find, create, and commercialize life-changing treatments for people affected by rare diseases.
Travere has already achieved the feat all biotech firms are hoping to attain – getting a drug to market. The corporate has several approved products within the U.S., including Thiola and Thiola EC, a tiopronin tablet used as a therapy for homozygous cystinuria and Chenodal, an artificial oral type of chenodeoxycholic acid used to treat radiolucent gallbladder stones.
The corporate recently pre-announced 4Q22 product sales of $52 million and anticipates FY22 revenue might be roughly $212 million, barely above consensus at $211.35 million.
Product sales aside, with small biotechs it’s all about catalysts and here Travere has a giant one coming up. This 12 months, the corporate expects the primary regulatory approvals within the U.S. and Europe for sparsentan, the primary and sole Dual Endothelin Angiotensin Receptor Antagonist (DEARA) being developed to treat rare kidney disorders. The FDA is currently assessing the Latest Drug Application (NDA) for sparsentan as a therapy for IgA nephropathy (IgAN) and a PDUFA date has been set for February 17. Should the regulatory body give the go ahead, Travere anticipates a Q1 launch for what might be the one non-immunosuppressive treatment indicated to treat IgAN.
Based on the drug’s potential, Wells Fargo’s Mohit Bansal lays out the bull case.
“We predict [the company’s] lead drug sparsentan and its potential in kidney disease are underappreciated,” the analyst said. “The Street is barely giving ~65-70% credit to its ~$1B sales potential, which we expect is low… Investors are apprehensive about liver monitoring, but we see likely likelihood of regulators agreeing to quarterly monitoring, which KOLs think is manageable… Sparsentan could see a robust go-to-market, as we see revenue potential for the primary 12 months of launch exceeding that seen for Tarpeyo.”
“Moreover,” Bansal added, “the confirmatory PROTECT eGFR data (expected 2H23) could support use of sparsentan over follow-on therapies in IgAN, improving visibility for a $1B+ product. We advise these dynamics represent a clear-cut path to improved sentiment as TVTX unlocks the worth of sparsentan.”
Accordingly, Bansal rates TVTX shares an Chubby (i.e. Buy) to go alongside a $28 price goal. This figure conveys his confidence in TVTX’s ability to climb ~35% from current levels. (To observe Bansal’s track record, click here)
Bansal’s goal is definitely on the low side of expectations; the Street’s average stands at $33.20, making room for one-year returns of 59%. Reflecting that confident outlook, the stock scores a Strong Buy consensus rating based on 4 Buys vs. 1 Hold. (See TVTX stock forecast)
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Disclaimer: The opinions expressed in this text are solely those of the featured analyst. The content is meant for use for informational purposes only. It is extremely vital to do your individual evaluation before making any investment.