Morgan Stanley Bets on These 3 Stocks; Sees Over 40% Upside
Did the stock market’s epic rally just need a little breather? The last few weeks have seen stocks experience their first meaningful correction since the bull market kicked off in March. Now, the question swirling around the Street is, will the rally pick back up again, or is more downside on the way?According to Morgan Stanley’s chief U.S. equity strategist Mike Wilson, uncertainty regarding the presidential election and stalemate on the next stimulus package could lead to declines in September and October. “On the correction, there’s still downside as markets digest the risk of congressional gridlock on the next fiscal deal. While we think something will ultimately get done, it will likely take another few weeks to get it over the goal line,” he noted.However, Wilson argues the recent volatility in no way signals the end of the current bull market. “We think this correction is just that, a correction in a new bull market. It’s normal for markets to pullback after such an incredible run like we’ve experienced since March. Furthermore, when a new bull market coincides with a new economic cycle, the bull market usually runs for years, not months,” the strategist explained.Taking Wilson’s outlook to heart, our focus shifted to three stocks getting a thumbs up from Morgan Stanley. As the firm’s analysts see over 50% upside potential in store for each, we used TipRanks’ database to get the full scoop.Akero Therapeutics (AKRO)With its innovative medicines designed to restore metabolic balance and halt the progression of NASH, a severe form of nonalcoholic fatty liver disease, Akero Therapeutics wants to address the unmet medical needs of patients from all over the world. Based on the strength of its lead candidate, Morgan Stanley is pounding the table.Representing the firm, 5-star analyst Matthew Harrison tells clients that AKRO’s treatment for NASH, efruxifermin (EFX), has a “best-in-class profile.” EFX is the company’s lead asset and was designed to mimic the biological activity of fibroblast growth factor 21 (FGF21), which regulates multiple metabolic pathways and cellular processes, to reduce liver fat and inflammation, reverse fibrosis, increase insulin sensitivity and improve lipoproteins.According to Harrison, NASH is a complex disease, with patients usually having multiple co-morbidities like obesity, type-2 diabetes, increased triglycerides, increased LDL cholesterol and low HDL cholesterol. “A promising therapeutic solution would not only treat the multiple components of NASH but would also have an acceptable side effect profile given the potential co-morbidities,” the analyst explained.That’s where AKRO’s therapy comes in. “In June, Akero presented best-in-class data from its Phase 2a study. This data indicates that EFX improved the two liver histological endpoints recommended by the FDA along with resulting in weight loss, improving cardiovascular health (increasing good HDL cholesterol, decreasing triglycerides, not raising bad LDL cholesterol), and improving factors related to controlling blood glucose levels. This benefit/risk profile beats the competition,” Harrison stated.Looking at the indication as a whole, Harrison views NASH as a very large opportunity given that roughly 20 million people in the U.S. suffer from the condition.The analyst, however, acknowledges there are commercial hurdles. One of these is the fact that “NASH is currently undiagnosed in all but a very small percentage of the prevalent pool since diagnosis currently requires an invasive liver biopsy.” Therefore, along with demonstrating a positive benefit/risk profile, AKRO will need to find patients and secure payer support should the candidate receive FDA approval, in Harrison’s opinion.That said, Harrison believes AKRO is up for the task. “We believe that given EFX’s clean safety profile and broad-based effects, Akero will likely largely overcome these commercial hurdles,” he commented.Harrison added, “Importantly, since Akero’s treatment is injectable, we only assume the drug will penetrate into the population of the most sick patients where there are currently at least 400,000 patients diagnosed and seeking treatment in the U.S.” To this end, he assigns a 60% probability of success, and estimates unadjusted peak sales for the U.S. and the EU will land at $4.5 billion.Based on all of the above, Harrison rates AKRO an Overweight (i.e. Buy) along with a $70 price target. Should his thesis play out, a potential twelve-month gain of 93% could be in the cards. (To watch Harrison’s track record, click here)Are other analysts in agreement? They are. Only Buy ratings, 6, in fact, have been issued in the last three months. Therefore, the message is clear: AKRO is a Strong Buy. Given the $58.50 average price target, shares could rise 61% in the next year. (See AKRO stock analysis on TipRanks)TransDigm Group (TDG)Next up we have TransDigm Group, which is one of the top producers, designers and suppliers of highly engineered aerospace components, systems and subsystems. Its products are used on nearly all commercial and military aircrafts in service today. Given its ability to weather the COVID-19 storm, Morgan Stanley sees a bright future ahead.Morgan Stanley analyst Kristine Liwag stated, “We view TransDigm as the most defensible business model in commercial aerospace.” However, this is not to say the company hasn’t been confronted with serious challenges.Over the past few years, management has had to grapple with how to price its defense business, the sustainability of its pricing strategy in aerospace, the durability of its levered balance sheet and the ability to weather a downturn. That said, Liwag remains optimistic going forward. “TDG has overcome short thesis after short thesis in the past few years and we do not expect these concerns to repeat,” she noted.According to Liwag, TDG’s “ability to hold on to margins during a global pandemic” conveys its operating strength. To this end, her estimate for EBITDA margins is well above the rest of the Street’s. The analyst also points out that the company cut its SG&A expense by $89 million year-over-year in fiscal Q3 2020. “We assume the company will retain at least half of those savings, with the remainder returning in the form of variable selling expenses,” she said.Liwag added, “We are positive on TransDigm, particularly as recovery in global air traffic would be favorable for TransDigm’s core profit maker, the aftermarket. Additionally, we view it positively that TDG has the means to acquire weaker players.”Back in April, management raised $1.5 billion of additional debt to trim liquidity risks and provide an extra cushion. “A large debt load is part of management’s strategy to provide private equity like return for its shareholders. Historically, the company has used debt to acquire businesses with similar attributes to TDG’s portfolio of 90% proprietary products and 75% sole sourced. If passenger air traffic continues to normalize, we would expect TDG to use its incremental capital to acquire struggling businesses that fit its strategy,” Liwag commented.All of this prompted Liwag to leave her bullish call and $772 price target unchanged. This target conveys her confidence in TDG’s ability to climb 48% higher in the next year. (To watch Liwag’s track record, click here)Looking at the consensus breakdown, 7 Buys and 5 Holds have been published in the last three months. Therefore, TDG gets a Moderate Buy consensus rating. Based on the $500.58 average price target, shares are poised to stay range-bound for now. (See TDG stock analysis on TipRanks)Cemex SAB (CX)Cemex counts itself as one of the leading players in the building materials industry, with the company manufacturing and distributing cement, ready-mix concrete and aggregates. As its risk/reward profile has just gotten more positive, now could be the time to snap up shares, so says Morgan Stanley.Covering the stock for Morgan Stanley, analyst Nikolaj Lippmann believes that CX’s bullish guidance for the third quarter and FY20, which was significantly ahead of consensus, was “the catalyst that builds a bridge to a favorable risk-reward shift.” On top of this, the stock is trading at 6.4 2020e EV/EBITDA, which is cheap compared to its historical performance and its peers, according to the analyst.That being said, Lippmann argues “CX is mainly a good, strong deleveraging story with a call option on what could be an exceptional U.S. cement market if the U.S. Congress approves an infrastructure package in 2021… If we get a U.S. infrastructure package beyond 2020, it would add icing to the cake, we think, and take the market from good to possibly great.”Although a large multi-year package is dependent upon the outcomes of the U.S. presidential and congressional elections, even in the base case, Lippmann expects cement to show pricing power in the U.S.It should be noted that Lippmann thinks it’s possible the next year will be relatively uneventful, but in that case, he expects the industry to pause at 90% capacity utilization and grow from there. On top of this, pricing in Mexico has been holding up. This “limits the downside risk materially and helps skew the risk-reward positively,” in Lippmann’s opinion.What else is working in CX’s favor? The cement demand year-to-date has pleasantly surprised Lippmann, with upside seen during the first stage of the pandemic. He points to DIY and Department of Transportation maintenance work during periods of low traffic, and strong residential construction as the drivers of this demand.Everything that CX has going for it convinced Lippmann to rate the stock an Overweight (i.e. Buy). Along with the call, he attached a $6 price target, suggesting 50% upside potential. (To watch Lippmann’s track record, click here)Turning to the rest of the analyst community, opinions are split almost evenly. 6 Buys and 5 Holds add up to a Moderate Buy consensus rating. At $4.16, the average price target implies 4% upside potential. (See Cemex stock analysis on TipRanks)To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched 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 intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Mnuchin says U.S. Treasury cannot act on own to avert airline layoffs
By David Shepardson and Tracy Rucinski
WASHINGTON/CHICAGO (Reuters) – U.S. Treasury Secretary Steven Mnuchin told Congress on Thursday he cannot tap unused coronavirus lending authority to provide cash grants to help U.S. passenger airlines avoid thousands of layoffs.
Airlines have been pushing Congress for months to back a new $25 billion bailout and extend payroll assistance to prevent passenger airline layoffs for another six months. The $25 billion payroll assistance in the “CARES” act approved in March required no layoffs by airlines through Sept. 30.
“Is there anything that you have under existing authorities, either the CARES act authorities, or prior law, that could help the airlines avoid these coming layoffs?” Republican Senator Tom Cotton asked Mnuchin.
“Unfortunately there is not,” Mnuchin said. He added the funding from Congress approved in March “literally saved the entire industry.”
Cotton said he had been asked by numerous airline workers about the status of the talks – and even got a hug from a flight attendant who recognized him on a recent flight.
Mnuchin said the Trump administration supports legislation introduced by Senator Roger Wicker, a Republican, that would provide $25.5 billion in airline payroll support to avoid layoffs for the another six months.
Wicker on Wednesday sought to fast-track the airline support bill but was unsuccessful after some senators raised objections.
American Airlines said it would furlough some 19,000 workers on Oct. 1 without fresh aid and halt service to 15 smaller airports.
There could still a last-minute agreement between Mnuchin and House Speaker Nancy Pelosi, a Democrat, over a broader coronavirus relief package.
Treasury has a separate $25 billion loan fund for passenger airlines. Both American Airlines and United Airlines plan to accept those loans, but many including Delta Air Lines and Southwest Airlines will not. Mnuchin said a “lot of money” in the passenger airline loan fund will not be used and could be reallocated.
(Reporting by David Shepardson and Tracy Rucinski, editing by Timothy Gardner)
Carrie Underwood will make Christmas come a little earlier this year on HBO Max
You’ve heard of Christmas in July. Now, Carrie Underwood is bringing us — Christmas in September?
The seven-time Grammy winner will release her first Christmas album, “My Gift,” tomorrow. HBO Max just announced that she’ll perform songs off the album in a holiday special on the streaming service.
“The journey of writing and recording this album started last year when I finished my tour and we could have never anticipated the circumstances we would be in this year,” Underwood told Deadline. “Creating this album has been good for my heart, and I’m thrilled to get to share it with the world.”
On Thursday morning, the country music star told “The Today Show” that “The Gift” was made possible only by starting work on it at the end of last year, before the ongoing coronavirus pandemic.
“We did everything very much like we’re doing this morning; we did things via Zoom,” Underwood told “Today” hosts. “And found new ways to just make it work. I didn’t wanna let this year stop us.”
The artist also made history earlier this month at the Academy of Country Music Awards, tying Thomas Rhett for the top entertainer of the year prize.
The 55th annual ACMs marked the first time the honor was split between two artists. Underwood also became the first woman to win the prize three times (she had previously been the first woman to win it twice.)
“2020, man?” Underwood asked in surprise. “I am more than happy to share this with Thomas Rhett,” she added.
Underwood also honored trailblazing female country artists in an ACM performance at the Grand Ole Opry in Nashville. She nodded to musical giants Patsy Cline, Loretta Lynn, Martina McBride, Barbara Mandrell, Reba McEntire and Dolly Parton before breaking into a musical tribute to the women.
The virtual awards show was relocated from Las Vegas to Nashville this year (as well as postponed from April) due to the COVID-19 pandemic.
BP Drops to 25-Year Low a Week After Unveiling Climate Strategy
3 “Strong Buy” Stocks That Are Flirting With a Bottom
In the investing game, it’s not only about what you buy; it’s about when you buy it. One of the most common pieces of advice thrown around the Street, “buy low” is touted as a tried-and-true tactic.Sure, the strategy seems simple. Stock prices naturally fluctuate on the basis of several factors like earnings results and the macro environment, amongst others, with investors trying to time the market and determine when stocks have hit a bottom. In practice, however, executing on this strategy is no easy task.On top of this, given the volatility that has ruled the markets over the last few weeks, how are investors supposed to gauge when a name is flirting with a bottom? That’s where the Wall Street pros come in.These expert stock pickers have identified three compelling tickers whose current share prices land close to their 52-week lows. Noting that each is set to take back off on an upward trajectory, the analysts see an attractive entry point. Using TipRanks’ database, we found out that the analyst consensus has rated all three a Strong Buy, with major upside potential also on tap.Progenity (PROG)Offering clear and actionable genetic results, Progenity specializes in providing testing services. The company started trading on Nasdaq in June and saw its shares tumbling 44% since then. With shares changing hands for $8.11, several members of the Street recommend pulling the trigger before it heats up.Piper Sandler analyst Steven Mah points out that even against the backdrop of COVID-19, PROG managed to deliver with its Q2 2020 performance. “We are encouraged by the recovery in late Q2 2020 with 75,000 accessioned tests (~79,000 in Q1 2020), driven by noninvasive prenatal testing (NIPT) and carrier screening,” the analyst noted. Expounding on this, Mah stated, “Progenity did not provide guidance, but June test volumes of ~28,000 were strong (Q1 2020 monthly average was ~26,000) which we believe showcases the durability of its reproductive tests and the success that Progenity has in co-marketing and attaching carrier screening to the more essential NIPT. Of note, despite the pandemic disruptions, Progenity was able to maintain its leading pre-COVID test turnaround times.”Additionally, health insurer Aetna is temporarily extending coverage of average-risk NIPT until year-end as a result of the pandemic, with the American College of Obstetricians and Gynecologists (ACOG) also expected to endorse average-risk in the future given its clinical utility, in Mah’s opinion.Reflecting another positive, the fourth generation NIPT (single-molecule counting assay) test was able to measure fetal fraction, a key milestone according to Mah, and will continue to be developed into 2021. As the technology could potentially be applied to DNA, RNA, epigenetic markers and proteins for additional clinical applications such as oncology, the analyst is looking forward to the completion of the preeclampsia verification in Q4 2020 and a possible 2H21 launch. “We believe preeclampsia (~2.3 billion serviceable market) is a major differentiator for Progenity, allowing them to cross-sell across the full-continuum of reproductive testing,” the analyst added.If that wasn’t enough, PROG signed its first GI Precision Medicine partnership agreement with a top-20 Pharma company in August. The Oral Biotherapeutic Delivery System (OBDS), an ingestible drug and device combination designed to precisely deliver biologics systemically through a needle-free liquid jet injection into the submucosal tissues of the small intestine, is set to be utilized as part of the collaboration. Mah commented, “We believe Progenity can sign additional Pharma deals and look forward to the newsflow coming out on this front.”To sum it all up, Mah said, “We believe Progenity shares are undervalued given the robust recovery in the core testing business and multiple upcoming growth catalysts.”To this end, Mah rates PROG an Overweight (i.e. Buy) along with a $17 price target. Should his thesis play out, a twelve-month gain of 105% could potentially be in the cards. (To watch Mah’s track record, click here)Are other analysts in agreement? They are. Only Buy ratings, 4, in fact, have been issued in the last three months. Therefore, the message is clear: PROG is a Strong Buy. Given the $13.33 average price target, shares could climb 60% higher in the next year. (See PROG stock analysis on TipRanks)Tactile Systems Technology (TCMD)Developing at-home therapy devices, Tactile Systems Technology wants to provide new treatments for lymphedema, which occurs when the lymphatic system is impaired, disrupting normal transport of fluid within the body, and chronic venous insufficiency. Down 52% year-to-date, its $32.67 share price lands close to its $29.47 52-week low. Thus, with business trends improving, the Street is pounding the table.Writing for Canaccord, analyst Cecilia Furlong acknowledges that the pandemic has hampered the company, with COVID-19 weighing on both volumes and sales. In the second half of March, volumes were down 50% compared to the first half of the month, and TCMD’s patient volumes in April and May remained challenged. That being said, trends started to improve at the end of May.“Going forward, given the vast majority of TCMD’s clinician customers practice in outpatient or office-based settings, we remain positive on TCMD’s ability to demonstrate better insulation against COVID impacts and likely experience a greater bounce-back relative to overall med-tech volume trends, with TCMD further benefitting from its expanding using of technology to remotely engage with clinicians and support patients,” Furlong explained.The analyst added, “Furthermore, recent trends among some providers to prescribe Flexitouch (an advanced intermittent pneumatic compression device to self-manage lymphedema and nonhealing venous leg ulcers) earlier along the therapy process, as a means to reduce in-person contact, could provide upside near term, as well as potentially transition to a longer-term tailwind.”On top of this, Furlong is also optimistic about new CEO Dan Reuvers and the reprioritization of the company’s investment and market development efforts. TCMD will shift focus away from its acquired Airwear product line, with it redirecting investments toward its Flexitouch and Entre (a pneumatic compression device used to assist in the home management of chronic swelling and venous ulcers associated with lymphedema and chronic venous insufficiency) products.“Given significant under-penetration in the lymphedema/phlebolymphedema market targeted by Flexitouch alongside the large patient population with limited treatment options today targeted by the firm’s Head & Neck platform, we view the combination of education and clinical data as key to further developing and penetrating these markets… Going forward, we expect management to continue to compile a broad base of clinical data to support reimbursement and drive broad adoption,” Furlong commented.All of this prompted Furlong to keep a Buy rating and $62 price target on the stock. This target conveys her confidence in TCMD’s ability to soar 90% in the next year. (To watch Furlong’s track record, click here)In general, other analysts are on the same page. With 3 Buy ratings and 1 Hold, the word on the Street is that TCMD is a Strong Buy. The $62.33 average price target brings the upside potential to 91%. (See TCMD stock analysis on TipRanks)uniQure N.V. (QURE)Last but not least we have uniQure, which delivers curative gene therapies that could potentially transform the lives of patients. Even though shares have fallen 44% year-to-date to $40, not much higher than its 52-week low of $36.20, multiple analysts still have high hopes.Representing SVB Leerink, 5-star analyst Joseph Schwartz acknowledges that shares struggled after news broke of its collaboration and licensing agreement with CSL Behring for AMT-061, QURE’s gene therapy for Hemophilia B, he argues the “shareholder base turnover is likely now complete as investors and QURE shift focus to next-in-line AMT-130, its AAV5 gene therapy for Huntington’s Disease (HD).”Schwartz further added, “With the M&A premium now out of the stock, we see the QURE’s current level as an attractive buying opportunity for those investors interested in the company’s up and coming CNS gene therapies, internal manufacturing, and robust intellectual property and knowhow.”Looking more closely at the agreement with CSL Behring, QURE will be tasked with the completion of the pivotal Phase 3 HOPE-B trial as well as the manufacturing process validation and manufacturing supply of AMT-061.According to management, 26-week Factor IX (FIX) data from all 54 patients enrolled in the trial remains on track, and topline data from the pivotal trial is still slated to read out by YE20. It should be mentioned that in a Phase 2b dose-confirmation study, QURE reported 41% FIX activity out to one year. Additionally, Schwartz points out that with HOPE-B progressing as planned, QURE has continued its manufacturing process validation work ahead of the anticipated BLA/MAA submissions in the U.S. and EU in 2021.On top of this, as part of the deal, QURE is eligible to receive more than $2 billion including a $450 million upfront cash payment, $1.6 billion in regulatory and commercial milestones and double-digit royalties ranging up to the low-twenties percentage of net product sales.“With a strengthened cash position, QURE is well funded to rapidly advance CNS assets including AMT-130 (AAV5 gene therapy for Huntington’s Disease (HD)) and AMT-150 (AAV gene therapy for Spinocerebellar Ataxia Type 3/SCA3)…We continue to believe that as QURE’s CNS pipeline assets mature, the company could once again be an attractive partner to larger biopharma companies that have recently acquired many publicly traded gene therapy platforms with substantial manufacturing capabilities,” Schwartz noted.Everything that QURE has going for it convinced Schwartz to reiterate an Outperform (i.e. Buy) rating. Along with the call, he attached a $67 price target, suggesting 68% upside potential from current levels. (To watch Schwartz’s track record, click here)What does the rest of the Street have to say? 9 Buys and 3 Holds have been issued in the last three months, so the consensus rating is a Strong Buy. In addition, the $69.89 average price target indicates 75% upside potential. (See QURE stock analysis on TipRanks)To find good ideas for beaten-down stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched 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 intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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