HomeBusiness“Jump on the bandwagon,” says Bank of America of these two stock...

“Jump on the bandwagon,” says Bank of America of these two stock picks

This year started with a bang, fizzled out in April – but now seems to be picking up again. As we saw last year, profits are still dominated by the ‘Magnificent 7’ technology stocks. This group of mega-cap companies collectively experienced a 48% year-over-year earnings increase in recent Q1 2024 releases, as opposed to a collective 2% decline among the other S&P companies.

Going forward, however, expectations are that the remaining 493 companies in the S&P will close that gap, and Bank of America strategist Ritesh Samadhiya is calling for Mag 7 shares to achieve a 15% profit share in the fourth quarter, while the rest the index increases its share to 14%.

That prediction implies a major broadening of the base, creating more opportunities for investors. The combination of a broader base and current improved investor sentiment has the Samadhiya team feeling bullish – and their Bank of America equity analyst colleagues are joining in, telling investors it’s time to take advantage of the potential for broader profits and to jump. on the cart of two shares in particular.

A look at the TipRanks data shows that these two BofA stock picks offer very different opportunities – but Bank of America analysts predict solid upside for both. Here are the details.

Cisco systems (CSCO)

Cisco Systems is a well-known name in the world of networking technology, with a wide and varied range of product lines on the market. The company’s product offerings include switches, routers, cloud and network management, interfaces and modules, outdoor and industrial wireless access points, wireless controllers, firewalls and secure endpoints. The list is long and includes product lines for data centers, data analytics, video, IoT and software. There are few areas involved in online networking and security that Cisco is not involved in.

In an effort to strengthen its strong position in software and data analytics, Cisco has acquired analytics software company Splunk in a transaction valued at approximately $28 billion. The deal brings Splunk’s data search, monitoring and analysis capabilities to Cisco’s stable of product offerings, making Cisco one of the world’s largest software companies. New features for Cisco derived from the acquisition include security and observability solutions. The transaction was completed on March 18.

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Cisco has several options in store for the near future, including moving AI systems to Ethernet networks. This will bring the ‘shiny new thing’, generation AI, straight into one of Cisco’s core competencies. Furthermore, Cisco’s strength in optical networking will provide opportunities for the company to enter the hyperscaler ecosystem.

Despite Cisco’s solid reputation and strong market position, the company’s shares have underperformed in recent months. The company reported its second-quarter 2024 results in February, and while financial results beat expectations, the company’s guidance failed to impress.

But the results for the second quarter require a closer look. The company generated revenue of $12.8 billion, down 6% year over year, but $100 million better than expected. Ultimately, Cisco’s non-GAAP earnings per share of 87 cents came in at 3 cents per share above estimates. Looking ahead, management gave fiscal year 324 revenue guidance of between $12.1 billion and $12.3 billion, but the consensus had been for $13.1 billion. 84’s earnings per share forecast of 86 cents per share was also lower than the 92 cents analysts had hoped for.

However, at least one analyst is unimpressed with Cisco’s guidance. Tal Liani, 5-star analyst at Bank of America, believes the upside potential here – coming from Cisco’s strengths in the AI ​​and Security segments, as well as its acquisition of Splunk – simply outweighs the weaknesses.

“We expect Networking to begin to normalize and see renewed growth, driven by Cisco’s market share gains in Ethernet-based AI buildouts of hyperscalers. We expect security growth to accelerate due to firewall stabilization and recent new product launches. Finally, we see major growth synergies from the Splunk acquisition. While the next two quarters may remain under pressure, we believe this weakness is fully reflected in Street expectations and management guidance is sufficiently conservative,” Liani opined.

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Liani complements his bullish stance with a Buy rating on CSCO and a $60 price target that suggests a 25% upside over one year. (To view Liani’s track record, click here)

Bank of America’s bullish stance is a bit of an outlier here; this stock has an analyst consensus Hold rating, based on 17 recent recommendations, including 4 Buys and 13 Holds. The shares have an average price target of $53.67, which suggests a ~12% one-year upside from the current share price of $48. (To see CSCO stock forecast)

89bio, Inc. (ETNB)

The second Bank of America pick we’ll look at is 89bio, a research-oriented biopharmaceutical company with a focus on finding, developing and commercializing novel therapeutics for the treatment of liver, cardiovascular and metabolic diseases. The company’s research pipeline is organized around the advanced drug candidate BIO89-100 and includes clinical trials for the treatment of NASH (non-alcoholic steatohepatitis, now also referred to as MASH, or metabolic dysfunction-associated steatohepatitis) and SHTG (severe hypertriglyceridemia). .

The drug candidate BIO89-100, also known as pegozafermin, was specifically developed to address the underlying metabolic issues that cause NASH and SHTG. The drug is a glycPEGylated analog of FGF21, or fibroblast growth factor 21. FGF21 is a liver hormone known to act as a master metabolic regulator with broad effects, especially on glucose and lipid metabolism. Pegozafermin is designed to extend the half-life of the hormone FGF21.

89bio recently posted updates on three studies, all focused on the NASH indication. In March, the company initiated a Phase 3 study, called ENLIGHTEN, for non-cirrhotic (F2-F3) and cirrhotic (F4) patients. In addition, the company also released two data sets from the Phase 2b ENLIVEN study, in patients with advanced NASH and with cirrhotic NASH. The data sets showed statistically significant improvements in key markers of liver health. Regarding SHTG, the company continues to enroll patients in the Phase 3 ENTRUST trial to evaluate the efficacy, safety and tolerability of pegozafermin in the treatment of SHTG. Data from this trial is expected to be released in 2025.

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The robust research program into pegozafermin and its long-term commercial potential caught the attention of analyst Alexandria Hammond, writing in her reporting for Bank of America.

“Beyond the macro uncertainties, we suspect that competitive concerns in the fatty liver disease (also known as MASH) space and commercial uncertainties ahead of the market-first launch of MASH have weighed on sentiment. We recognize the uncertainties of the commercial MASH landscape, but in our view, 89Bio’s FGF21 analogue pegozafermin offers intriguing upside as a next – and potentially best-in-class – MASH agent, given a more favorable safety/tolerability profile (projected launch in 2027). in a particularly attractive and less crowded market sub-segment,” Hammond said.

Hammond adds, making a clear case for investors to buy now: “With pegozafermin well positioned to compete for the meaningful – and addressable potential of the space – along with limited downside, we believe the current risk/ returns are particularly attractive.”

These comments support the analyst’s Buy rating on ETNB, while her $30 price target implies a robust 232% one-year upside potential. (To view Hammond’s track record, click here)

Overall, this stock is a clear winner in Wall Street’s eyes, with a strong Buy consensus rating from the analysts based on five recent ‘Buy’ calls against a single ‘Hold’. The stock is selling for $9.03 and its average price target of $29.80 suggests it will see a gain of 230% over the next twelve months. (To see ETNB stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

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