Remember back in February, when we were worried about a market correction? Back when the NASDAQ dipped 10% from its peak… Yeah, well, never mind about that. Markets are up, up, up lately. A strong jobs report last Friday has helped, showing 916,000 new positions in March, the best print since last August, and almost a quarter-million higher than expectations.
Rising markets make it a good time to look at the ‘top picks’ from Wall Street’s stock analysts. The three stocks we’re looking at are an interesting lot, and they have certain commonalities: a Strong Buy consensus rating, tangible upside potential for investors, a ‘Top Pick’ review, and a ‘Perfect 10’ smart score from the Investing Insights platform.
The platform gives every stock a single-digit score, based on a summing up from 6 separate factors. The factors used are known to correlate with future overperformance; when they align together it’s a strong indication for buyers to consider. Let’s take a closer look.
Ascendis Pharma (ASND)
First up, Ascendis Pharma (NASDAQ:), is an ‘emerging’ biotechnology company with a primary focus on rare diseases in endocrinology. The company has an active pipeline, with three drug candidates in clinical trials for endocrine diseases, including pediatric and adult growth hormone deficiency, adult hypoparathyroidism, and achondroplasia. The company develops its medications using its TransCon technology, which allows the direct application of proteins, peptides, and small molecules to target areas of the body through a carrier drug with known biological action. In addition to its primary pipeline, Ascendis also has two oncology drug candidates in preclinical development.
The company’s pediatric growth hormone deficiency (GHD) drug, TransCon HGH (lonapegsomatropin), has completed a Phase 3 trial and the company is preparing for the PDUFA date at the end of June – with expectation of launching the drug commercially on the US market in 3Q21. Ascendis anticipates a European Commission decision on use of lonapegsomatropin during 4Q21. There is an ongoing global Phase 3 trial for adults with GHD, with complete enrollment expected by early next year, and Ascendis has submitted its clinical trial notification to begin a Phase 3 trial for pediatric patients in Japan.
Furthermore, the company is preparing for Phase 3 clinical trials for TransCon PTH, a treatment for adult hypoparathyroidism. The company anticipates topline results in 4Q21. As above, the company is also proceeding with clinical trial notification in Japan, for 2Q21.
With all of that in the background, Wedbush analyst Liana Moussatos listed ASND as one of her top picks for 2021
“In 2021, we look forward to 1) TC-hGH/pediatric growth hormone deficiency (GHD; lonapegsomatropin) June 25, 2021, PDUFA date; 2) potential TC-hGH/GHD MAA approval in Q4:21; and 3) topline results from the pivotal Phase 3 PaTHway for TCPTH in adult hypoparathyroidism (HP) in Q4:21. We see these events as potential inflection points for the stock. We expect 2021 to be a transformative year for Ascendis in front of several potential value creation events,” Moussatos noted.
In line with these comments, Moussatos rates ASND shares an Outperform (i.e. Buy), and sets a $209 price target indicating a 60% one-year upside potential.
Moussatos is no outlier on Ascendis; this stock has 6 recent reviews, with 5 to Buy and 1 to Hold. The shares are priced at $130.63 and their $191.25 average price target suggests 46% growth in the next 12 months. (See ASND stock analysis)
The next company on our list, Allovir (NASDAQ:), is another cutting-edge biotech firm. AlloVir’s focus is the development of allogenic, off-the-shelf virus-specific T-cell candidates. These are drugs specifically designed to prevent or treat viral infections in immunocompromised patients with T-cell deficiencies – and limited treatment options. The company’s pipeline features five candidate agents for the treatment of twelve ‘devastating’ viruses, including HHV-6, EBV, PIV, HBV, and even COVID-19.
The most advanced drug candidate in the pipeline, ALVR105, also called Viralym-M, is undergoing trials for a range of applications, including the treatment of virus-associated hemorrhagic-cystitis, cytomegalovirus (CMV), and adenovirus (AdV). In addition, there are clinical studies of the drug candidate as a preventative for BKV, CMV, AdV, EBV, HHV-6 and others viral diseases. The clinical trials range from Phase 1b/2 to Phase 3.
The company’s lead candidate, Viralym-M, is in an ongoing Phase 3 trial for the treatment of virus-associated hemorrhagic-cystitis. The company also tests Viralym-M in two proof-of-concept Phase 2 trials. These include a clinical study of the drug candidate as a first of its kind, multi-virus preventative for HSCT recipients and a study of the drug in the treatment of BK viremia in kidney transplant patients. These trials are ongoing, and actively recruiting patients.
In addition to ALVR105/Viralym-M, the company next two most advanced programs are ALVR 109 and ALVR106. ALVR109 has entered Phase 1 proof-of-concept clinical trial as a treatment for COVID-19. Preclinical data released in December demonstrated disease specific antiviral activity. ALVR 106 has had its investigation new drug (IND) application approved, and is cleared to initiate clinical trials in the treatment of influence, PIV, and respiratory syncytial virus.
In his coverage of this stock for Piper Sandler, 5-star analyst Christopher Raymond writes, “[All] important timelines remain essentially on track. To us, the most critical of those are Phase 2 POC data for Viralym-M in the prevention setting for HSCT patients and for Phase 2 POC data for Viralym-M in the treatment of BK virus in kidney transplant recipients. Those two events remain on track for 2H21. While we do not model contribution form ALVR109 (in high-risk patients with COVID-19), we note that POC data from that program is also anticipated 2H21.”
At the bottom line, Raymond says, “[We] continue to view ALVR as an emerging leader in virus specific cell therapies… it remains a top 2021 pick.”
To this end, Raymond gives ALVR an Overweight (i.e. Buy) rating, and his $55 price target implies a robust upside of ~132% for the year ahead.
Like the Piper Sandler analyst, the rest of the Street is bullish on ALVR. 3 Buy ratings compared to no Holds or Sells add up to a Strong Buy consensus rating. At $49.33, the average price target implies upside potential of ~108%. (See ALVR stock analysis)
Western Digital (WDC)
From biotech to high-tech, we’ll change gears and look at Western Digital Corporation (NASDAQ:). The company produces hard disks and other data storage, including SSDs and flash memory. Western Digital’s products are used in the data center and cloud storage industries; Western Digital includes well-known brands like WD and SanDisk.
As can be imagined, Western Digital has seen steady business in the last 18 months, despite the COVID pandemic. The move toward remote work and virtual offices put a premium on computer chips of all sorts, including memory and cloud storage. WDC’s revenues have held steady through that period, near $4 billion quarterly. For the past two years, the company has reported quarterly revenues in the range between $3.67 billion and $4.29 billion; the most recent quarter, 2Q fiscal 21, showed $3.94 billion at the top line, with non-GAAP EPS of 69 cents per share and free cash flow of $149 million. The company presented forward guidance for fiscal Q3, projecting the top line between $3.85 billion and $4.05 billion and non-GAAP EPS between 55 and 75 cents.
Investors like predictability, and Western Digital’s performance has been just that. The company’s stock has benefited, and the shares are up 87% over the past 12 months. This is a modest outperformance compared to the NASDAQ index, which is up 73% over the same period.
C J Muse, 5-star analyst with Evercore ISI, digs deep under the hood of Western Digital, and summing up writes, “While WDC shares are up 25% YTD, we see at least another 30% upside fueled by meaningful positive revisions to forward EPS estimates…. consensus estimates are moving materially higher with potential CY21 exit run rate of ~$10+ (cons $7.60) and additional upside into CY22 (we see stretch goal of $15.00 vs. current cons $7.44)…. With vision to at least 30% upside as the NAND industry emerges from a cyclical trough, WDC remains a Top Pick.”
Muse puts a $100 price target on WDC, for a 38% one-year upside potential.
Tech companies typically garner a lot of analyst attention, and Western Digital has 21 recent stock reviews. These break down to 17 Buys against just 4 Holds, giving the stock its Strong Buy consensus rating. Shares are priced at $72.22, and the $80.26 average target implies an 11% upside from that level. (See WDC stock analysis)
To find more ideas for stocks trading at attractive valuations, visit Investing Insights.