We’re now just days away from the ’24 election, and what a race it’s been. The polls have been all over the place and both parties can make legitimate claims that they retain the advantage as we approach Tuesday’s vote.
Amid the political drama, the stock market has remained robust, with the S&P 500 up 20% this year. Historically, the index tends to perform well in election years, but this year has been exceptional, making it the most bullish election year market in decades. A mix of macroeconomic factors, especially expectations of further Fed rate cuts, have boosted investor confidence.
Morgan Stanley analysts are embracing this momentum and picking stocks they think are poised for gains regardless of the election outcome. They are targeting two specific stocks that are poised for substantial growth in the coming year – including one with a potential upside of as much as 670%.
As if that weren’t convincing enough, both stocks are also rated Strong Buys by analyst consensus, according to the TipRanks database. Let’s see what’s driving this optimism among market experts.
Tenaya Therapeutics (TNYA)
We’ll start with Tenaya Therapeutics, a research-oriented biopharmaceutical company focused on the development and production of novel therapeutic drugs for the treatment of heart disease. Tenaya focuses its approach on the underlying causes of heart disease, including rare genetic disorders. The company’s approach includes gene therapies, cellular regeneration and precision medicine.
Heart disease is the leading cause of death among adults in the world, making its treatment an important niche. Tenaya is currently investigating two primary drug candidates, TN-201 and TN-401, for the treatment of MYBPC3-associated hypertrophic cardiomyopathy and PKP2-associated arrhythmogenic right ventricular cardiomyopathy, respectively.
The lead candidate, TN-201, is currently undergoing a Phase 1b human clinical trial. The study focuses on safety and tolerability and will involve a maximum of 24 adults. Data from the first patient cohort in the study is expected to be released in December, marking a major milestone for the stock. In the meantime, registration for the second cohort continues.
The second candidate, TN-401, started its Phase 1 study with RIDGE-1 earlier this year. This global, open-label dose-escalation study, which will continue patient dosing through the fourth quarter of 2024, aims to evaluate the safety, tolerability and effectiveness of a single intravenous dose of TN-401.
Morgan Stanley analyst Michael Ulz sees TNYA as an attractive investment, with TN-201 the key value driver. Ulz notes: “Interim Ph1b MyPEAK-1 data for TN-201 in nHCM is expected in [December] and are an important catalyst for Tenaya’s main program. We see favorable risk/return based on early data, which could provide early risk reduction, followed by more robust data in 2025.”
“We consider favorable trends in cardiac biomarkers and uninterpretable protein expression data as the most likely scenario,” Ulz added. “We believe investors would view the data as positive and suggestive of upside… In this scenario, we would expect TNYA shares to rise +100%.”
Therefore, Ulz rates TNYA stock Overweight (i.e. Buy), while his $15 price target offers as much as ~670% upside from current levels. (To view Ulz’s track record, click here)
The consensus view here shows that Morgan Stanley’s bullish view is not an outlier. TNYA stock has a unanimous Strong Buy consensus rating, based on seven recent positive analyst reviews. The stock’s trading price of $1.94 and average price of $20.20 together indicate an impressive 941% upside over the twelve-month period. (To see TNYA stock forecast)
The next Morgan Stanley pick we’ll look at is Royalty Pharma, a company that offers investors an interesting way to put money into the biotech sector. Royalty Pharma operates as a royalty company; that is, it buys proprietary rights to biopharmaceutical products and earns royalties on sales and profits. Royalty Pharma has built a pipeline of such opportunities, designed to generate and maintain a steady revenue stream.
This royalty strategy has led the company to build a solid portfolio of assets. Royalty Pharma has rights to more than 35 approved products and is backed by rights to a further 17 drug candidates still in development. Of this total range, 15 products are considered ‘blockbusters’, generating annual sales of more than $1 billion. And for the long term, the company’s portfolio has an average life of 13 years. Over the five-year period from 2018 to 2023, Royalty Pharma deployed an average annual capital of $2 billion, and in calendar year 2023, Royalty Pharma brought in a total of $3 billion in portfolio revenue.
In the last reported quarter (2Q24), Royalty Pharma reported portfolio receipts (revenues) of $608 million, up 12% year-on-year, although this was $18 million below consensus. The company raised its 2024 portfolio revenue expectations to a range of $2.7 billion to $2.775 billion, up from a previous forecast of $2.6 to $2.7 billion. Furthermore, the company posted earnings per share of $0.96, reflecting a 13% increase year-over-year, slightly lower than the consensus estimate of $0.99.
Looking at Morgan Stanley’s view, we see that analyst Terence Flynn has an optimistic view of the company and its long-term prospects.
“RPRX has one of the highest revenue growth rates in our coverage and trades at a discount. In our view, the company’s growth profile and diversified portfolio merit at least an in-line multiple and therefore our Overweight rating. We recognize that RPRX will need to continue deploying capital to new deals given patent/royalty expirations to support HSD’s growth, but management has a strong historical track record in this regard. We see two areas of potential upside for estimates that could meaningfully move the needle – AMGN’s Olpasiran/NOVN’s Pelacarsen for ACVD and JNJ’s Tremfya for psoriasis/IBD,” Flynn opined.
Flynn’s Overweight rating (i.e. Buy rating) is supported by a $51 price target, suggesting a potential one-year upside of 88%. (To view Flynn’s track record, click here)
Morgan Stanley is not alone in this positive view. Royalty Pharma enjoys unanimous support, with 5 buy ratings and a strong buy consensus. Currently priced at $27.10, the $44.40 average price target implies ~64% upside in the coming months. (To see RPRX Stock Prediction)
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.
