Goodbye July, it was a pleasure. Sentiment may finally be turning on Wall Street after the stock market posted its best month since November 2020, boosted by better-than-expected quarterly results from tech giants and the prospect of the Fed easing up on future rate hikes.
Major indices are still bearish for the year, but we are clearly in the middle of a rally.
Where this rally will go is anyone’s guess. For now, Wall Street analysts are busy picking stocks they think are best positioned for gains in the remainder of 2H12. These “Top Picks” are an interesting bunch of market-rated stocks with strong upside for everyone.
Does that make them the right stocks for a confusing period? We can take a look at the latest details, sourced from the TipRanks database, and check with recent analyst commentary to find out. Each of these three stocks has been rated as a “Top Pick” in recent weeks.
TechnipFMC Plc (FTI)
First on our list is TechnipFMC, a technology provider in the energy sector, serving both traditional producers and new energy customers. TechnipFMC provides a wide range of fully integrated projects, products and services, ranging from onshore hydrocarbon exploration and extraction to offshore rigs and platforms to oil refining. The company operates a fleet of 18 technically advanced industrial ocean-going vessels, has an active presence in 41 countries, and has posted revenues of $6.4 billion in 2021.
A look at TechnipFMC’s revenue over the past two years shows a sharp drop from 4Q20 to 1Q21 – but that’s an artifact of the company’s petrochemicals and liquefied natural gas businesses being spun off into a separate company. Since the spin-off, revenue has been flat between $1.53 billion and $1.68 billion. Until this past quarter.
For 2Q12, the company reported a top line of $1.72 billion, a 10% sequential jump from 1Q22 and a more modest 3% year-over-year gain. The revenue growth came from solid gains in both major aspects of the business, including a 9.7% sequential gain in Subsea revenue and a 13% sequential gain in Surface Technologies.
The solid performance allowed the company to make improvements to its capital structure, including a $530 million reduction in total debt, which now stands at $1.5 billion. The company claimed $684.9 million in cash and liquid assets at the end of the quarter. In addition to improving the balance sheet, the company also announced a $400 million share repurchase authorization, which translates to about 15% of all outstanding shares. The authorization marks the beginning of a policy of returning capital to shareholders.
In coverage for Piper Sandler, analyst Ian Macpherson points to growing momentum in Subsea as a future boost for FTI shares, writing: “After booking $1.9 billion in Q1, we assumed an average of $1.6 billion term inbound for Q2 and wouldn’t be surprised to see our estimate for the fiscal year of $6.7 billion eclipsed. The amount of work FTI is not bidding this year is unprecedented in the past decade. This in itself is a strong indicator of price power finally normalizing to sustainable levels. This cyclical tailwind, when combined with the built-in margin drivers associated with FTI’s relentless business model innovation over the past 5 and 1-2 years, suggests reasonable upside on the recently outlined subsea margin roadmap…”
Believing that this company will outperform in the future and that bookings and business will increase, Macpherson maintains it as a ‘Top Pick’ and rates the stock as Overweight (buy). Its price target of $14.65 in US currency suggests a one-year upside of 81% over the next year. (To follow Macpherson’s history, Click here.)
This player in the energy industry supporting cast has 4 recent analyst reviews recorded and they are unanimous that this is a buy stock, supporting a consensus rating of Strong Buy. Shares are trading at $8.09 and the average target price of $11.91 implies a 47% one-year gain. (See the TechnipFMC stock forecast on TipRanks.)
Legend Biotech Corporation (LEGN)
Next on our list is Legend Biotech. This clinical-stage biopharmaceutical company works on advanced cell therapies to treat hematologic and solid tumor cancers. This is a common path for biopharma companies. Legend is distinguished by the advanced nature of its pipeline program, which currently has several Phase 2 and Phase 3 clinical trials. The company’s hematologic malignancies program is the most advanced, with at least 6 late-stage trials underway.
In its clinical program, Legend made several major announcements just last June. The first of these announcements involved a new program, LB1908, for which the FDA has just completed an investigational new drug (IND) application, paving the way for a Phase 1 clinical trial of LB1908 in the US. The drug candidate is a CAR-T therapy designed to attack relapsed or refractory cancers of the stomach, esophagus and pancreas. A Phase 1 trial of this drug candidate is already underway in China.
In the second announcement, Legend released new data from the ongoing, large-scale CARTITUDE clinical trial program of ciltacabtagene autoleucel. It is a new treatment for the dangerous blood cancer multiple myeloma, which has no effective treatments and high unmet medical needs. The new data show “profound and durable” treatment responses among patients in several of the CARTITUDE trials, with an overall response rate of 98% after two years.
The most exciting development, however, was the FDA approval in February 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-directed, genetically modified autologous T-cell immunotherapy, also called cilta-cel. Legend has an exclusive worldwide licensing agreement with Janssen to commercialize Carvykti.
In addition to these clinical updates, Legend reported significant financial results in the first quarter. These included revenue of $40.8 million, derived from development milestones in licensed research programs. Legend also has $796 million in cash and cash equivalents available, compared to first-quarter R&D and G&A expenses of $94 million, giving the company a cash runway through 2024.
All of this was enough for BMO analyst Costas Biliouris to make Legend one of his top picks in the biotech sector and assign an Outperform (Buy) rating to the stock. Its price target of $77 implies a one-year upside of 63%.
Backing up his position, Biliouris points to several advantages of this company: “1) Commercialization of Carvykti in Multiple Myeloma (MM) as a best-in-class last-line CAR T therapy that is expected to provide a significant revenue stream, providing downside protection Results. (2) Continued expansion of Carvykti’s addressable population through approvals in prior lines and ex-US territories will fuel additional growth, driving long-term value. (3) Upcoming data readings from earlier treatments can lead to short-term bullish results. and (4) Diversified pipeline offers optionality and opportunity for further upside.” (To follow the history of Biliouris, Click here.)
Once again, we’re looking at a stock with a strong buy consensus consensus. Legend has received 4 positive analyst reviews recently. Shares of LEGN have an average price target of $72, suggesting a 52% upside from the current trading price of $47.24. (See Legend’s stock prediction on TipRanks.)
The last stock we’ll 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 transfer, management and protection in conjunction with Microsoft 365. The New Jersey-based company was founded in 2001 and has adapted as the computing environment has changed over the years, expanding its range software products and solutions.
Looking at some numbers, AvePoint boasts that it has managed over 125 petabytes of data and that in its most recent quarter, 1Q22, it showed 45% SaaS revenue growth and 30% annual recurring revenue (ARR) growth, totaling 167, $4 million.
The company’s push into SaaS revenue brought that segment’s total to $26.6 million in the first quarter, up from a total of $50.3 million in the top line. While revenue was up, earnings were negative, with a narrowed profit loss of 6 cents, although that compared favorably with the year-ago quarter, when the profit loss was 14 cents. AvePoint has substantial cash reserves, with $260 million in cash and short-term investments available.
5-star analyst Nehal Chokshi, of Northland Capital Markets, selected this stock as a Top Pick after a deep dive into the company’s performance. He is impressed by AvePoint’s future potential, writing: “We view our new long-term revenue CAGR of 25% as very conservative, given our initial work highlighting a highly differentiated capability relative to the major collaborative player MSFT, and that our work that verifies the AVPT is to address the full TAM of $6.5 billion identified…. Other key metrics in our DCF include a 30% non-GAAP OM, which is 500bp above the low end of management’s 25%+ guidance, but in line with the 30%+ terminal OM we assume with other high-end SaaS names under cover…”
These comments support Chokshi’s Outperform (Buy) rating, while the $12 price target suggests a 138% upside over the next 12 months. (To watch Chokshi’s record, Click here.)
Both recent analyst reviews of this stock are positive, giving it a unanimous consensus of a Moderate Buy rating. Shares are selling for $5.03 and the average target price of $9.50 suggests an upside of 89% this year. (See AvePoint’s stock forecast on TipRanks.)
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Disclaimer: The views expressed in this article are solely those of the selected 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.