July signed off with a bang, in what turned out to be the stock market’s best month since November 2020. Best-of-expected second-quarter earnings from some of the world’s biggest companies along with comments from the Fed on the easing of future rate hikes put investors in an optimistic mood once again.
Is the rally sustainable or are we headed back to the bear market soon? From a purely technical standpoint, Oppenheimer’s Chief Technical Analyst Ari Wald sees reason to believe the wave has legs.
“For the S&P 500, positives include last week’s defense of the 50-day moving average and the new tilt in the weekly MACD,” Wald explained. “We see upside to 4,300 and are open to a higher low above 3,920 in the seasonally weak September period. Overall, we maintain our view that the index is on a recovery path and think 4,600 (~12% upside) is reasonable by the end of the year.”
With Wald’s perspective in mind, we wanted to take a closer look at two stocks that won Oppenheimer’s applause, with the firm’s analysts predicting upside potential of more than 80% for each. We used the TipRanks platform to measure the rest of the Street’s sentiment. Let’s take a look at the results.
Carlyle Group (CG)
We’ll start with global alternative asset management firm Carlyle Group. Since its founding in 1987, the firm has grown into one of the world’s most successful alternative asset managers, with assets under management (AUM) totaling $376 billion. The business is divided into three distinct divisions consisting of Global Private Equity ($169 billion AUM), Global Credit ($141 billion) and Global Investment Solutions focused on offering resources and investment opportunities to investors.
The company has a proven track record of performance in each of its categories, with annual private equity returns of 15% and private credit returns of 10%.
Like many others, Carlyle’s shares are still down significantly for the year, but the market liked the look of its latest set of quarterly results, released last week. In Q2, total segment revenue rose 26.2% year over year to $1.16 billion, beating the consensus estimate of $1.1 billion. There was also a beat in the bottom line, as adj. EPS of $1.17 was above the forecast of $1.04.
Year-to-date, total assets under management have grown to $376 billion, up 25%, while fee-based assets under management are up 34% to $260 billion.
Reflecting on the quarter and the division’s performance so far this year, Oppenheimer’s Chris Kotowski believes that within the group, CG is “particularly well positioned for more uncertain markets.”
“While the market has sold off CG and the ‘Alt’ group in general versus the S&P 500, we are convinced that these companies are extremely resilient in a downturn and are generally emerging winners,” writes the 5-star analyst. “CG’s 2Q22 results increase our confidence in this thesis. It was a strong quarter in terms of earnings and investment performance. The only thing one could pick is that fundraising at the current flagship private equity fund seems to be taking longer. In the end, though, it’s the return on investment that will drive the fundraising, and that has remained excellent.”
These comments form the basis of Kotowski’s Outperform (i.e. Buy) rating and $70 target price. If all goes as planned, according to the analyst, CG will provide one-year returns of 81%. (To watch Kotowski’s record, Click here)
The street agrees. While two analysts remain on the sidelines, all 10 other recent reviews are positive, naturally making the consensus view here a strong buy. The average target is $54, leaving room for ~40% stock appreciation in the 12-month time frame. (See CG Stock Prediction on TipRanks)
Aldeyra Therapeutics (ALDX)
Now let’s turn to something completely different. Aldeyra is a biotech focused on the development of novel therapies for the treatment of ocular and systemic immune-mediated diseases. Instead of directly inhibiting or activating individual protein targets, the company’s method is to discover pharmaceuticals that modulate immune systems, aiming to optimize multiple pathways while keeping toxicity to a minimum.
Aldeyra’s pipeline has several drugs in development. ADX-629, an orally administered RASP modulator, currently in Phase 2 studies indicated to treat several immune-mediated systemic diseases. There is also ADX-2191, which is being developed to prevent proliferative vitreoretinopathy and to treat retinitis pigmentosa and primary vitreoretinal lymphoma. But leading the way is reproxalap, which is in Phase 3 clinical trials as a treatment for patients with dry eye and allergic conjunctivitis.
For the first indication, the company just recently released data from a double-blind, vehicle-controlled crossover clinical trial in which the drug met its endpoints. Aldeyra plans to submit the data in a new drug application (NDA) for reproxalap in dry eye.
Following the positive results, Oppenheimer’s Justin Kim believes the registration setup has become “increasingly clear.” The analyst has now raised the probability of success (PoS) for the dry eye drug from 70% to 80% in the US and from 50% to 70% in the EU.
Describing his bullish thesis, Kim writes: “We believe Aldeyra’s late-stage ophthalmology pipeline in allergic conjunctivitis and dry eye diseases offers a favorable risk-reward at current stock levels, combined with the long-term pipeline option from ADX-2191 in proliferative vitreoretinopathy and RASP systemic applications. As Aldeyra reaches potential commercialization in the 2023 timeline, we expect the shares could see a significant re-rating.”
Overall, Kim thinks the stock has a ways to go, and by some, we mean 159% upside. Those are the returns investors are looking at if the stock reaches Kim’s $13 price target. No need to add, the analyst rating is Buy. (To follow Kim’s history, Click here)
And what about the rest of the way? It’s Buys all around – 7, in total – giving this name a strong buy consensus. If Kim’s goal seems optimistic, then unlike his colleagues’ predictions, it seems conservative. at $24.40 the average target gives room for 12-month gains of 386%. (See Aldeyra stock prediction on TipRanks)
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Disclaimer: The views expressed in this article are solely those of the featured analystsmall. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.