During the summer months, the bull market that has defined 2023 so far has taken a break. The question is, can it regain momentum and move forward again? Or as Oppenheimer’s Chief Investment Strategist John Stoltzfus puts it, is it just “the pause that refreshes?”
While Stoltzfus notes that volatility may increase “somewhat” in the coming weeks and months, his overall view of the future will be encouraging for investors.
“We remain positive on the US economy and equity markets,” he said. The Fed’s 11 rate hikes and a ‘skip’ (since March 2022) in its efforts to curb unwanted levels of inflation show significant signs of success, even if it is still some distance from its target of 2% inflation. “
“Jobs, consumer spending, employment vs. unemployment, GDP (Q1 and Q2) and corporate results in the S&P 500 Q2 earnings season continue to show resilience that supports the proposition that the central bank will very well not break this hike cycle ‘something’ that would push the US economy into recession, such as opponents claim,” Stoltzfus added.
Meanwhile, Oppenheimer’s analysts have been looking for names ready to use the bull market’s resumption to their advantage. They’ve drawn investors’ attention to two names that have pulled back significantly in recent months, but which they believe are poised to bounce back – and by bounce, we mean a decent bounce, on the order of triple-digit growth over the next year.
We ran these beat up names through the TipRanks database to get a more complete picture of their prospects. Here are the details.
Aeva Technologies (AEVA)
First, let’s look at Aeva Technologies, an advanced technology company that specializes in developing advanced sensing systems for autonomous vehicles and other industries.
Founded by former Apple engineers, Soroush Salehian and Mina Rezk, Aeva has attracted attention for its unique and innovative approach to sensing and sensing. At the heart of Aeva’s technology is the “4D LiDAR” system, which combines traditional LiDAR (Light Detection and Ranging) with a new frequency modulation technique, or more specifically, Frequency-Modulated Continuous Wave (FMCW) lidar technology. This differentiates Aeva from conventional LiDAR systems, as the approach not only allows for highly accurate distance measurements and object detection, but also provides velocity information, enabling tracking of objects both in space and time.
That said, while it’s still early days and there could be a significant opportunity in the autonomous vehicle market, operating in the current environment hasn’t been easy, as became evident in the recent Q2 printout. Revenue fell 50.3% year-over-year to $0.74 million, just below consensus expectations. The company also regularly runs at a loss, although adj. EPS of -$0.13 beat forecast by $0.01.
Shares fell after the Street digested the report, and it has done so quite regularly this year. Since the peak in February, shares are down 49%.
However, after assessing the Q2 print, Oppenheimer’s 5-star analyst, Colin Rusch, remains confident, highlighting why Aeva is well positioned for better times ahead.
“AEVA continues to make significant progress in commercializing its 4D lidar while managing its cash position well. We are encouraged by commentary on its Tier 1 auto OEM customer moving forward with strategic efforts to develop software around the AEVA’s 4D data, as well as industrial sales expected in 2024 and the announcement of Railergy as a customer (the first track victory for Avea). We see the company continuing to diversify its target markets while leveraging the uniqueness of its hardware offerings,” said Rusch.
“With countless innovators in the perception space struggling to meet commercial timelines, we believe AEVA is methodically shrinking its platform. As we adjust estimates to reflect a slower revenue increase as AEVA gains additional customers, we remain constructive on AEVA stock given technology advancements and potential growth,” the top analyst added.
Constructive, indeed. Together with an Outperform (ie Buy) rating, Rusch gives AEVA a price target of $6. This projection represents a significant 488% increase from the current share price of just $1.02. (Click here to view Rusch’s track record)
Overall, 3 other analysts join Rusch in the bull camp, and with the addition of 2 Holds, the stock claims a moderate buy consensus rating. Shares are expected to rise 137% higher in the coming months as the average target stands at $2.41. (To see AEVA stock forecast)
Arvinas Inc. (ARVN)
We now move into the biotech space where Arvinas, a company dedicated to creating new therapies for a wide variety of diseases by using inventive protein breakdown methods, comes into play. The company leverages its patented PROTAC (PROteolysis TArgeting Chimera) technology, which leverages the body’s inherent protein elimination mechanism to precisely remove harmful proteins associated with disease. This approach aims for superior and longer lasting treatments compared to standard small molecule inhibitors or antibodies.
It’s still in its infancy for Arvinas’ pipeline, but a number of drugs are already undergoing clinical trials.
In the ongoing Phase 1/2 dose escalation and expansion study, ARV-766, Arvinas’ treatment for prostate cancer, showed commendable tolerability and encouraging effectiveness.
In addition, the Company, in collaboration with Pfizer, recently began enrolling patients into the study preparation phase 3 trial of vepdegestrant (ARV-471) in combination with palbociclib as a therapeutic regimen for metastatic breast cancer. The company now has two ongoing Phase 3 trials with vepdegestrant (one with it as monotherapy), with Arvinas targeting an initial Phase 3 data readout in 2H24. In advance, the company plans to present additional data from the Phase 1b combination trial with palbociclib at a medical conference in the second half of the year.
Oppenheimer analyst Matthew Biegler is keeping an eye on this drug’s progress, and while an update to the ARV-471 program earlier this year failed to impress, Biegler thinks the concerns may be overblown.
“There have certainly been hiccups (recent ARV-471 data didn’t look as strong as a year and a half ago + potential concerns about the palbociclib combination), but we think Street may be irrational in its distaste for this stock,” Biegler opined. “Arvinas continues to be an industry leader in protein degradation, a field that, while still gaining ground, we would argue has delivered real clinical validation. Plus, the opportunity for ARV-471 is real – just look at the recent launch of ORSERDU, we hope pipeline updates in 2H23 can change this former darling.
A turnaround would be welcome, as the stock is down 35% since its February highs this year. For Biegler, the current price is way too cheap. His target is set at $95, implying that stocks will grow as much as 278% in the coming months. (Click here to view Biegler’s track record)
What does the rest of the Street think? Most agree with Oppenheimer’s analyst. The stock has a Strong Buy consensus score, based on 10 Buys vs. 2 Holds. Most think the stock is also significantly undervalued. Assuming the $68.36 average target, they will post ~180% gains over the course of the year. (To see ARVN stock forecast)
To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a 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.