According to an Oppenheimer analyst, you should keep an eye on these 2 stocks. One offers upside potential of up to 170…
There are a lot of pressures on the global economy these days that have pushed stock prices down over the past year. Some people got scared and gave up on investing. I, on the other hand, jumped into action and bought new positions. As the pressures on the economy continue, we are still not out of the woods. Today we look at 2 stocks, one of which, according to Oppenheimer analyst John Stoltzfus, could rise as much as 170% in the next 12 months.
When you add it all up, we have high inflation, rising interest rates, the unresolved conflict in Ukraine, and now we have the debt ceiling issue in the US. Do you not know exactly what the problem is? It is beautifully explained in the video below.
https://www.youtube.com/watch?v=mWsWqZpU-wc
Neither of these issues are still unresolved, and pressures continue to persist According to Oppenheimer analyst and chief investment strategist John Stoltzfus, we can therefore look forward to increased volatility in the markets this year.
Experience tells us that with opportunity comes risk and with risk comes opportunity, whether in everyday life, in business, or in the canyons of Wall Street.
What does John mean by that? Simply put, there is no great investment opportunity that presents no risk to an investor, and the same is true in business and in everyday life. In short, opportunities never exist without risk. And the challenge for us as investors is to say whether the opportunity is worth the risk. So let's take a look at 2 companies that analysts, led by John Stoltzfus, believe hide an investment opportunity.
Icosavax, Inc. $ICVX-0.9%
The first stock where Oppenheimer analysts see a huge opportunity is Icosavax stock $ICVX-0.9%. For me, this is a rather speculative bet, but one that could make a lot of sense in the future. After all, this is a biotech company in Washington, D.C. that focuses on developing safe and effective vaccines against infectious diseases. The company was founded in 2017 in Seattle. It is a developer of computer-designed virus-like particle vaccines that are designed to reduce serious infectious diseases, including respiratory syncytial virus. The vaccine is being developed to protect the elderly from respiratory syncytial virus (RSV) disease.
Why do Oppenheimer analysts see so much potential here? This is a virus that is a very common cause of various respiratory diseases and inflammation, especially of the airways, which can result in hospitalization and intubation in the elderly. At the moment, there is no effective vaccine against this virus, and that is what society is trying to change at the moment. That's why the company has focused on developing vaccines to fill the gap in the market. In short, it is focusing on developing vaccines that should protect people against the most common types of viruses that could have a very bad impact on the human body.
Currently, the company has 2 vaccines that are in the testing phase. One of them is currently aimed at protecting the elderly against RSV. This vaccine may be in the 1b testing phase, but the test results are quite promising, and look good.
But now comes the big problem. The company has virtually no product, no sales, and therefore no profit. So we are going back to what John said at the beginning, which is that we have an opportunity here to invest in a company that can be the first to bring this vaccine to market, which I think will bring huge future profits, but at the same time we are taking the risk that if the company fails to bring this vaccine to market, the shareholders will cry over their earnings. Virtually all the company has at the moment is just over $280 million. USD 280 million on the balance sheet. Those funds should last the company until 2024, according to analysts.
According to a team of analysts led by John Stoltzfus of Oppenheimer, the stock could rise as much as 170% in the next 12 months.
We believe the company has a differentiated vaccine platform that uses viral particles (VLPs) to produce and test vaccines against human respiratory pathogens. This scalable platform can help produce differentiated vaccines with a robust risk-benefit profile and sustained immunogenicity. The company ends 2022 with robust Phase 1 data in RSV and a 6-month shelf life. We expect proof-of-concept (PoC) in bivalent RSV/hMPV and 12-month RSV data in 2023. We are bullish.
For me personally, this is pretty much a speculative investment, plus it's not generating any cash for shareholders or to fund its projects at the moment. For me, it's simply an either/or. Either it works out, and the company takes off, or it simply doesn't work out, but at that point the company has nothing to fund its existence. If I were to think of the company, I would think of it as a highly speculative component of the portfolio to which I would devote possibly a very small portion of the portfolio.
Toll Brothers, Inc. $TOL-0.8%
Okay, let's take a break from speculative stocks for a moment, and let's take a look at Oppenheimer analysts' second choice. Here, it's not as high-risk an investment as the first one, but of course we can't expect as much upside potential here either. This is Toll Brothers $TOL-0.8%.
This is a company that designs, builds, sells, and arranges financing for residential and commercial real estate in the United States. In 2020, the company was the fifth largest homebuilder in the United States based on homebuilding revenue. The company is ranked No. 411 on the Fortune 500 list. The company operates its own architectural, engineering, mortgage, property development, golf course development, smart home and landscape technology companies. The company also operates its own lumber distribution, home component assembly and manufacturing operations.
As is probably already apparent from the line of business, this is a company that has certainly not done well at all in the past year full of high inflation, and high interest rates. But despite all those pressures, the company managed to report results for the last quarter of last year that pleased its shareholders. Here are the preliminary results for the past year.
- Net income was $1.29 billion compared to net income of $833.6 million. USD. in 2021.
- Revenue from home sales was $9.71 billion, up 15% from 2021.
- The gross margin on home sales was 25.5% compared to a gross margin on home sales of 22.5% in 2021.
The company has been plagued by rising interest rates over the past year, which have now started to take effect. There is uncertainty in the mortgage market and people are waiting for the interest rate situation to clear up. This has caused the company to reduce the number of new contracts by around 60% in the last quarter of 2022.
However, the company still expects 2023 to be a very decent year for it as it still has contracts for 8,098 homes totaling $8.9 billion up its sleeve, which will serve as a decent base for the company going into 2023 and also into the weakened real estate market. These contracts may protect the company from a more significant decline in gross margins.
Further, the company has an extremely financially sound balance sheet, with total liabilities of approximately USD 6 billion and current assets of nearly USD 10 billion. This means that in the event of any problems, the company is able to pay all of its liabilities from its current assets. When I looked at the value of the assets net of liabilities, I was looking at about $40 per share here.
Oppenheimer analysts led by John Stoltzfus see growth here of about 24% over the next 12 months.
We see less downside risk to gross margin than other builders given the business model to be built and the backlog. These factors should also allow the company to be patient when it comes to managing pace and pricing in FY23. We also think the company should receive recognition for having the best balance sheet and leverage profile in its history. We think the risk-reward ratio is attractive.
Personally, I think we're talking about a very good, high-quality company that, unfortunately, the economic environment is not conducive right now. And this could be just the opportunity. Just because of the contracts that the company has from 2022, it has a lot of protection against a decline in gross margins. At the same time, if the company were to execute only these contracts in 2023, it could already boast revenues of more than $8 billion in the base year. However, it is already clear that the number of new contracts has dropped significantly, but not to zero.
WARNING: I am not a financial advisor, and this material does not serve as a financial or investment recommendation. The content of this material is purely informational.
Sources:
https://finance.yahoo.com/news/risk-comes-opportunity-oppenheimer-suggests-004543369.html
https://www.marketwatch.com/investing/stock/tol?mod=mw_quote_tab
https://www.marketwatch.com/investing/stock/icvx?mod=search_symbol