2021 has been marked by a litany of worries; from inflation getting out of hand, to the Fed’s tapering of its stimulus program, to fears of a slowdown in economic recovery amidst global shortages, supply chain issues and rising energy prices.
Still, all these haven’t affected the stock market’s performance, with the main indexes constantly notching new highs. Even after September’s sharp drop, October has seen a swift bounce back.
So, where to now? J.P. Morgan appears confident the bull run has in no way reached its apex. The banking giant’s portfolio manager Phil Camporeale confirmed this recently. Camporeale’s latest purchases increased his overall equity allocation from 65% to 67%, in the process adding further exposure to the S&P 500 index.
Camporeale‘s optimism is fueled by the retreat of the Covid-19 delta variant and a pick up in consumer spending. The better-than-expected Q3 earnings and the Fed’s dovish monetary policy (for now) are also bullish signals and indicate the stock market rally is set to continue, according to Camporeale.
With this as backdrop, JPM’s stock analysts have pinpointed three names that are primed to confirm Camporeale’s bullish thesis. These are a varied lot, operating in different sectors, but with one theme in common; the firm’s stock pickers see these stocks rising by at least 50% in the year ahead.
We ran them through the TipRanks database to see what the rest of the Street thinks; turns out the analyst consensus views all three as Strong Buys. Let’s take a closer look.
Allegheny Technologies (ATI)
We’ll start off with Allegheny Technologies, a Pittsburgh, Pennsylvania-based specialty metals company. The company’s expertise lies in the manufacturing of high-performance materials; these include titanium and titanium-based alloys, zirconium, hafnium, and niobium, nickel-and cobalt-based alloys and superalloys, amongst others.
ATI's key markets encompass oil & gas, electrical energy, the chemical process industry and medical, but the company is increasingly pivoting toward the aerospace and defense sector, with a strong focus on commercial jet engines. ATI’s plants are spread across the US but also include several facilities in Europe and in Shanghai, China.
ATI is expected to post Q3 earnings on October 28 and will hope the results more closely align with last year’s performance than in the previous quarter. In Q2, revenue dropped by 20% year-over-year to $616.2 million, while non-GAAP EPS came in at -$0.12. Nevertheless, both results were better than the Street’s expectations.
As far as the stock is concerned, while the shares’ 12-month performance shows gains of 64%, they have actually been on a downtrend since May, a factor picked up by J.P. Morgan’s Seth Seifman.
Although the company “suffered during the reopening reversal,” the analyst finds the risk-reward paradigm “compelling.”
“Near term, ATI should see profitable HPMC (High Performance Materials and Components) growth on narrowbody engine exposure, and over time management aims to create a more appealing business through consistent execution, exiting its commodity Stainless business, removing cost, investing for growth, shoring up pension, and eventually generating cash,” the analyst wrote. “This will be challenging and may require some changes in approach but we do not see much credit for it in the stock today.”
Accordingly, Seifman rates ATI an Overweight (i.e. Buy) and backs it up with a $23 price target. Investors stand to pocket a 52% gain, should the analyst’s thesis play out in the coming months.
The Street’s average target is completely in-line with Seifman’s objective. Rating wise, 2 other analysts are bullish too, with 1 additional Hold not enough to spoil the stock’s Strong Buy consensus rating.
Remitly Global (RELY)
Let’s now take a sharp turn from the materials sector to the remittances industry. Remitly offers money transfer services, its mission is to make it easier for the world’s millions of immigrants to send money back home. It is a massive market, yet complex, clunky, and ripe for digital disruption.
The company is already making a dent and growing at a fast clip, having expanded from 250 corridors in 2019 to 700 in 2020 and now boasting over 1,700 corridors and more than 5 million customers making use of the Remitly platform.
Remitly also offers Passbook, a mobile bank account linked to a Visa debit card and has also recently partnered with Facebook’s digital wallet app Novi to pilot free remittances in the U.S. and Guatemala with the use of the USDP (Pax Dollar) stablecoin.
While the company has been operating for a decade, it is new to the public markets and held its IPO toward the end of September. The IPO price was set at $43 per share and opened at $52.9, providing the company with a market cap of approximately $8.5 billion. However, since then shares have taken a battering and have lost 40% of their value.
Some might baulk at such a swift drop but those with market nous will sense opportunity and so does J.P. Morgan’s Tien-tsin Huang.
“We like Remitly as a mission-led growth company, bringing modern digital solutions to the antiquated global remittance market,” said the 5-star analyst. “With less than 3% share of its serviceable addressable market for cross-border remittances to low-and-middle income countries, and YTD revenue growth up nearly 2x prior year or over 30x faster than the market, we see Remitly as a durable share gainer in a fragmented market dominated by legacy providers.”
To this end, Huang initiated coverage of RELY with an Overweight (i.e. Buy) rating and $57 price target, suggesting room for ~80% growth over the next 12 months.
This new stock has quickly garnered decent analyst coverage and boasts 8 ratings which break down as 7 Buys vs. 1 Hold, all coalescing to a Strong Buy consensus rating. There’s plenty of upside projected too; going by the $51.43 average target, shares will climb by 62% in the year ahead.
Relay Therapeutics (RLAY)
Let’s switch gears again and move into an altogether different segment; Relay Therapeutics is a biotech company focused on the development of precision medicines with a strong focus on cancer drugs.
The company is progressing a pipeline of candidates intended to solve problems which are considered impossible with traditional drug discovery. To do so, it utilizes its Dynamo platform, which via the combination of various leading-edge experimental and computational methods allows it to address problematic proteins.
Relay’s candidates include RLY-1971, an oral small molecule inhibitor of the protein tyrosine phosphatase SHP2 that is being tested in a Phase 1 study of patients with advanced solid tumors. There’s also RLY-2608, intended to be the first allosteric, pan-mutant (H1047X, E542X and E545X) and isoform-selective PI3Kα inhibitor, currently in pre-clinical development.
Additionally, the company is testing RLY-4008 as a treatment for bile-duct cancer. Relay recently released interim data from a Phase 1 study which showed the drug could be effective; following treatment with RLY-4008, tumors shrunk in six out of six patients with FGFR2 mutation-positive bile cancer.
It’s early days for the pipeline but the company has caught the eye of J.P. Morgan’s Eric Joseph who has been increasingly impressed with the platform and the data released so far.
“We believe the company’s Dynamo discovery engine offers differentiated experimental and computational capabilities for the development of highly selective, oral small molecule inhibitors, across a broad array of oncogenic and rare disease indications,” Joseph wrote. “With initial phase 1 data demonstrating selectivity for FGFR2 and an encouraging activity profile, we view FGFR2 inhibitor RLY-4008 as having best-in-class potential with the ability to address an array of indications driven by FGFR2+ mutations and de-risking of broader platform potential.”
To this end, Joseph rates RLAY stock an Overweight (i.e. Buy), while his $51 price target suggests shares will appreciate ~68% over the one-year timeframe.
It appears the rest of the Street sees plenty of upside, too. Based on Buys only – 3, in fact – the analyst community rates RLAY a Strong Buy. The average price target hits $31, and implies potential upside of a healthy 70% over the coming months.