Riding on the wave of positive economic developments in 2023, investors have significantly increased their exposure to the stock market this year.
The proof is in the data, as David Kostin, Goldman Sachs Chief US Equity Strategist, pointed out. The investment firm’s US Equity Sentiment Indicator rebounded from -1.8 in December to +1.5 in July. In August, however, the bears tried to gain a foothold and over the past week that value has fallen to +0.8.
Now Kostin says a common question from investors is whether the current “level of stock length will limit the upside potential for stocks.”
And here Kostin has a comforting answer for those worried about what’s to come. “We feel that US investors have room to further increase their exposure to equities,” he said. “Should the US economy continue on its path to a soft landing, we believe the recent decline in equity length will be short-lived.”
With this positive sentiment in mind, Goldman analysts have identified two names that they believe are poised to deliver as the stock market regains momentum. We ran this pair of Goldman-recommended names through the TipRanks database to find out what the rest of the street has to say about them. As it turns out, both are rated Strong Buys by the analyst consensus. Let’s see why.
Revance therapies (RVNC)
The first Goldman Sachs-backed company we’ll look at is Revance Therapeutics, a biotech company that specializes in developing innovative treatments for a variety of medical and aesthetic conditions.
Revance has made strides in the aesthetic medicine market, a segment pharmaceutical giant Abbvie has dominated for the past several decades with its anti-wrinkle treatment Botox. And it looks like Revance is up for the challenge.
To achieve the ultimate goal that every biotech company strives for, last September the FDA gave the green light to its neuromuscular blocker Daxxify, approving the injection therapy to temporarily improve moderate to severe frown lines. The approval was followed by the launch of Daxxify. In the second quarter, the treatment generated revenue of $22.6 million, an increase of 47.1% over the first quarter – the period when Daxxify was introduced to the market.
More recently, the FDA has allowed a label extension for the product. Earlier this month, based on the positive results of the Phase 3 ASPEN trial, the FDA approved Daxxify for the treatment of cervical dystonia, a condition characterized by involuntary contractions of the neck muscles. This was Daxxify’s first approval for a therapeutic indication.
This potential for different applications is the basis of Goldman analyst Chris Shibutani’s optimistic thesis for Revance.
“We remain constructive on the prospects for Daxxify’s commercial opportunity in therapeutic indications, as we believe a longer-lasting neurotoxin could be of interest to many patients, particularly those seeking regular symptom relief with neurotoxins but loss of treatment effect before 12 weeks (Botox’s label recommends dosing no more than once every three months)… We are modeling ~$140 million in peak sales and ~25% market penetration for the indication,” noted the five-star analyst.
These comments support Shibutani’s Buy rating, while his $38 price target implies that stocks will return ~121% over the next year. (Click here to view Shibutani’s track record)
Globally, eight analysts have recently come in with RVNC ratings and they’re split into 6 Buys and 2 Holds, all of which add up to a Strong Buy consensus rating. It’s not that Shibutani’s optimistic view stands out here; assuming the $36.13 average target, the stock will be up ~110% over the next few months. (To see RVNC stock forecast)
Monday. com (MNDY)
The next stock on Goldman Sachs’ radar is Monday.com, a company that offers an intuitive work operating system that streamlines collaboration and project management. Founded in 2012, the platform provides a visual workspace where users can create, manage and track various tasks, projects and workflows. Monday.com’s strength lies in the customizable nature of the platform, allowing teams to design their own unique work structures using visual boards, columns, and automation.
The platform’s easy-to-use interface and customizable framework make it suitable for a wide variety of projects, from the simple to the complex, enabling teams to align their efforts, minimize miscommunication, and ultimately achieve goals more efficiently.
And customers seem to be taking the platform to heart more and more as MNDY’s recent Q2 report shows numbers at both the top and bottom levels. Revenue was up 42% year-over-year to $175.7 million, beating Street’s call by $6.41 million. On the other side of the scale, adj. Earnings per share of $0.41 were $0.20 higher than expected.
Elsewhere in the publication, the net dollar retention rate was over 110%, while the number of paid customers with an ARR (annual recurring revenue) of more than $50,000 increased 63% year over year to 1,892.
In fact, MNDY came in handy with its outlook as well. The company now expects annual revenue to be in the range of $713 million to $717 million, up from the previous $688 million to $693 million.
The Street welcomed the results and sent shares up in the aftermath, as did Goldman Sachs analyst Kash Rangan.
“Recent results support our contention that Monday.com is a unique work operating system that crosses operational silos built on a low-code no-code platform,” the analyst said. “The platform’s low-code no-code technology, intuitive interface, robust integrations and network effects continue to drive customer growth. Given that enterprise customers are <1% penetrated in the current installed base, we believe the company's continued momentum in enterprise adoption may 1) improve our estimates, 2) improve the unit's economics, and 3) grow at long-term incentive. ”
“We see Monday.com reach over $2 billion in revenue, a scale similar to Atlassian’s Cloud business. As this controls most of TEAM’s ~$50 billion market value, we see benefits for MNDY,” Rangan summarized.
It comes as no surprise, then, that Rangan rates MNDY a buy, backed by a $250 price target. The implication for investors? Potential upside of ~51% over current levels. (Click here to view Rangan’s track record)
Overall, this work management software company gets a lot of support on Wall Street. With 11 Buys and 2 Holds, word is out on the street that MNDY is a Strong Buy. The $209 average price target puts upside potential at ~26%. (To see MNDY stock forecast)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock insights.
Disclaimer: The opinions expressed in this article are solely those of the recommended analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.
