- The Grade
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- 26th August 2024
26th August 2024
Nick Barber
August 26, 2024
💬 ”Nobody really understands gold prices and I don’t pretend to understand them either.” Ex-Fed chief Ben Bernanke on the price of gold (which hit record highs last week).
ANALYST STOCK TIPS
Warby Parker & Chewy among this week’s bullish analyst calls.
Here’s my weekly round-up of the analyst calls that caught my eye.
Lineage Cell Therapeutics is now covered by Craig-Hallum which gave it a Buy rating and a price target of $4. Its current price is $0.95, so this represents a huge 321% potential upside. The bullish target is based on the potential of Lineage's lead program, OpRegen, an innovative therapy for dry Age-related Macular Degeneration. Craig-Hallum's endorsement follows encouraging outcomes from the Phase I/IIa trial of OpRegen, which demonstrated a strong proof of concept (POC) through enhancements in retinal anatomy and best-corrected visual acuity (BCVA). The analyst firm expects that additional data from the ongoing Phase IIa trial, in partnership with Genentech/Roche, will further validate OpRegen's efficacy.
ARS Pharmaceuticals was another medical company getting attention. Cantor Fitzgerald has given the company an Overweight rating and a price target of $30, representing a 131% upside over its current price. The company's recent surge in momentum can be attributed in part to the FDA's approval of neffy, an intra-nasal epinephrine product developed for the treatment of Type I allergic reactions. This approval has garnered considerable media coverage, underscoring the widespread impact of food and other allergies and the advantages of a non-injectable delivery method.
Varex Imaging, a leading designer and manufacturer of X-Ray components, was given a Buy rating by B. Reilly. The price target was $21, representing a 69% upside over its current price. The firm attributes the company’s competitive advantage to its expertise in designing, building, and assembling highly complex components that can endure extreme conditions. It anticipates that challenges in 2024, especially related to China and destocking trends, will shift to become tailwinds by 2025.
Chewy, the online pet food retailer, was given a Buy rating by Piper Sandler. Analyst Ana Andreeva gave it a price target of $35, representing a 31% upside over current value. She commented:
While top line trends are likely still muted, CHWY appears to be at a profitability inflection point aided by both gross margin expansion (mix shift to higher margin revenue streams, well controlled discounting—2Q24 below last year’s levels on average, according to our checks) and SG&A leverage (automation and efficiency gains).
Warby Parker, the glasses retailer, was upgraded to Outperform by JMP Securities, with a price target of $20 (a 29% bump over its current price). The firm believes the market consensus for Warby Parker could be too low and it has an optimistic outlook on the company’s future performance, driven by an anticipated shift toward corrective eyeglasses and strong market share dynamics.
Range Resources was upgraded by Scotiabank to Outperform from Sector Perform with an unchanged price target of $45. This is a 49% uplift over its current value. The firm calls Range "a high-quality option that has pulled back enough to create an attractive entry point."
PRESS STOCK TIPS
Dividend stocks with potential upside…go on then.
Recently, I’ve spotted quite a few dividend stocks being touted in the press. Some have caught my eye for offering not only solid dividends but also the potential for price appreciation.
The first three were pointed out by MarketBeat:
Ford Motor Company offers a compelling yield of 5.33%. Even with a P/E ratio of 11.18, which typically signals a value stock, Ford's shares have lagged behind this year, falling nearly 10% year-to-date. The decline followed disappointing earnings of $0.47 per share, missing the consensus estimate of $0.68. However, revenue was up 6.8% YoY.
The company recently announced a shift in strategy, replacing its plans for electric SUVs with hybrids, a move that’s anticipated to cost nearly $2 billion. Additionally, production of the next electric pickup truck has been pushed back to 2027. This pivot highlights the increasing challenges in the electric vehicle market as Ford adapts to changing market dynamics.
Ford’s consensus price target of $13.48 remains 20% higher than where the stock trades.
Pfizer was similarly named a “dividends aristocrat”, offering a compelling 5.79% dividend and for the first time in over a year, analysts have rated Pfizer a Moderate Buy, with a consensus price target of $34.54, indicating nearly 19.5% upside potential.
BP’s solid dividend yield of 5.67% was also highlighted. Its YTD performance has not been stellar (-4%), but its P/E ratio may now put it in bargain territory (it was 10.51 at the time MarketBeat was writing).
“Despite these positives, BP remains in a steep downtrend, showing relative strength in the sector. A critical level to watch is $34 and its 20-day SMA; if BP can reclaim and consolidate above this level, it could signal a shift in momentum and a potential bottoming pattern.”
The Telegraph has tipped Reckitt Benckiser - the British-Dutch multinational consumer goods company. Its share price has plummeted by 31% over the last three years, driven by high inflation. However, with inflation beginning to stabilize, consumers are less likely to turn to cheaper alternatives. Reckitt is now prioritizing its rapidly growing brands and reducing costs to improve profitability. The company is financially stable, with room for strategic investments, and it currently provides a dividend yield of 4.6%. While there are some legal challenges in the baby formula sector, the long-term prospects appear positive.
LVMH, the French luxury goods company, has been tipped by The Times of London. Its price has declined by 12% this year, driven by slower sales growth and concerns about the future of the luxury market, especially in China. Despite these challenges, LVMH remains a dominant force in the luxury sector, thanks to its vast scale, diverse brand portfolio, and design expertise. With a forward P/E of 21, a strong operating margin, and an attractive dividend, LVMH has caught the attention of investors like Terry Smith (the CEO of Fundsmith). As the industry stabilizes, the shares present a compelling value opportunity.
EXTRA GRADE
THE WEEK AHEAD
All eyes are on Nvidia’s Wednesday results.
Monday: US durable goods orders (July), UK markets are closed for the summer bank holiday.
Tuesday: US consumer confidence (August).
Wednesday: Eurozone M3 money supply (July). Earnings: Nvidia, Salesforce, CrowdStrike.
Thursday: Eurozone economic sentiment (August).
Friday: Japan retail sales and industrial production (July), Japan unemployment rate (July), eurozone inflation (August), eurozone unemployment rate (July), UK M4 money supply (July), US personal income and outlays (July).