As the first quarter of 2021 winds down, analysts are taking a look at the stocks in their coverage universes and evaluating where they stand over the long term.
Against this backdrop are elevated levels of unemployment and a vaccine rollout that is still in its early stages, with over two-thirds of adults in the U.S. not yet receiving a single dose.
In such uncertain times, one approach to finding stocks poised to deliver long-term growth is to follow the recommendations of analysts with a proven track record of success.
Using TipRanks analyst forecasting service, which attempts to pinpoint Wall Street's best-performing analysts based on success rate and average return per rating, we checked out recent stock picks from these top analysts.
Here are the best-performing analysts' five favorite stocks right now.
ALX Oncology is an immuno-oncology company that develops therapies designed to block the CD47 checkpoint pathway for cancer patients.
Despite the recent sell-off, top H.C. Wainwright analyst Swayampakula Ramakanth reiterated a Buy rating and a price target of $100 (59% upside potential) on March 22.
Ramakanth tells clients that the negative investor sentiment is due to an unfavorable top line readout from the Phase 3 study of tilsotolimod, a TLR9 agonist from Idera. It should be noted that on March 4, ALX Oncology agreed to a 50/50 joint collaboration with Tallac Therapeutics to develop a TLR9 agonist antibody conjugate targeting signal-regulatory protein alpha (SIRPα), SIRPα TRAAC, as a cancer treatment, with an IND expected to be filed by the end of 2022.
"In our opinion, the market overreacted, as we believe the two programs utilize completely different mechanisms of action though both programs use TLR9 agonists and due to the early stage of the program, the valuation of SIRPα TRAAC has not yet been baked into ALXO price. Therefore, we believe last Friday's sell-off creates an attractive entry point for long-term investors," Ramakanth commented.
On top of this, the analyst highlights the fact that ALXO will present full results for ALX148, its high-affinity fusion protein binding to CD47, from the Phase 1b studies in patients with gastric and gastroesophageal junction (GEJ) cancers and head and neck squamous cell carcinoma (HNSCC) in mid-2021 and 2H21, respectively. The therapy is being evaluated in combination with Roche's Herceptin and Eli Lilly's Cyramza in HER2+ gastric/GEJ cancers and Merck's Keytruda in HNSCC.
As the available clinical data is promising, "ALX148 data updates in both HNSCC and gastric/GEJ cancers could be near-term catalysts for the stock," in Ramakanth's opinion. What's more, Phase 1 data readouts for ALX148 in high-risk MDS and AML in 4Q21 and 1Q22, respectively, could reflect additional catalysts, the analyst notes.
Ranked #117 on TipRanks' list of best-performing analysts, Ramakanth boasts a 36.3% average return per rating.
In response to Semtech's beat and raise quarter, Oppenheimer's Rick Schafer gave the semiconductor company a thumbs up. To this end, the five-star analyst maintained a Buy rating as well as an $80 price target, which puts the upside potential at 23%.
Looking at the details of the print, sales of $165 million and EPS of $0.51 surpassed the consensus estimates of $158 million and $0.48. Most noteworthy, though, was that LoRa wrapped up 2020 at $88 million, up from $74 million, with the company "notching keynote wins with Amazon Sidewalk and AWS IoT Core network (combined $100 million opportunity)."
"We see these wins further validating LoRa and its ecosystem. SMTC also announced a partnership with Webee in conjunction with earnings. The Webee deal allows customers to easily connect LoRa devices to MSFT Azure. LoRa cloud services begins contributing this year (2H-weighted) and management expects to win more than 20 cloud customers by EOY," Schafer noted.
Schafer also points out that adoption on the rise as LoRa public and private operators increased to 150, tracking to 165 by the end of the year. In addition to LoRa, the analyst argues that 5G and DC will support the "accelerating growth story."
"LoRa cloud services is poised to drive future benchmark wins, in our view. LoRa remains SMTC's top growth/upside driver with potential for a 40%-plus 5-yr CAGR. We remain long-term buyers," Schafer stated.
Currently tracking a 76% success rate and 22.3% average return per rating, Schafer earns the #57 spot on TipRanks' top analyst ranking.
Content creator and streaming company CuriosityStream just reported solid subscriber numbers for 4Q20. As of December 31, 2020, the company had 15 million total subscribers, up 50% year-over-year.
It should be noted that 75% of CURI's DTC subscribers pay $20 for an annual plan, and churn fell 25% year-over-year to 30-month average life. Additionally, the launch of discovery+ on January 4 of this year has had no negative impact on CURI's subscriber growth during the first quarter.
Needham analyst Laura Martin was impressed, with the top analyst leaving her Buy rating and $25 price target as is. This price target suggests 79% upside potential.
"What we like most about CURI is that it is a streaming company, where the bulk of its revenue comes from corporations around the world under 5-year contracts. This gives investors visibility and downside protection. For example, CURI stated that 80% of its 2021 annual revenue guidance is under contract and highly predictable," Martin explained.
When it comes to the total hours in CURI's library, roughly 30% is entirely owned by CURI while 70% is licensed under three-five year contract terms, with it set to maintain this mix. According to management, there hasn't been upward pressure on rights costs for licensed content.
Also working in the company's favor is that it completed two sponsorship deals during the fourth quarter, reflecting a new revenue stream, says Martin, with the analyst estimating these deals will add $5 million to revenue in 2021 and $7 million to $10 million to revenue in 2022.
Landing among the top 65 analysts tracked by TipRanks, Martin has achieved a 64% success rate and 32% average return per rating.
Following a major 4Q20 beat, Bank of America Securities analyst Nat Schindler handed Upstart an upgrade, with the rating being changed from Neutral to Buy. Further demonstrating his optimism, he increased the price target from $57 to $135. This new target puts the upside potential at 13%.
Easily exceeding the Street's expectations, revenue for the quarter came in at $84.4 million, versus the $79 million consensus estimate. EBITDA of $15.5 million beat the $11.1 million estimate. Although Upstart posted EPS of $0.00, analysts had originally called for a loss of $0.07.
This impressive showing was driven by a smaller than expected impact by Credit Karma's November adjustments, high lending volume at 123,396 loans, up 57% year-over-year, and higher conversion rate at 17.4%, up from 14.9% in 4Q19.
"We are encouraged by Upstart's ability to deliver 39% growth on tough comps as continued validation of Upstart's value proposition to both bank partners and consumers. We think Upstart could see longer term growth through recurring borrowers and commentary on the call suggests a robust bank partner pipeline going forward," Schindler said.
Since the company made its public market debut in December, it has signed on three new banks, bringing the total number of bank partners to 15. What's more, the company just revealed that it is set to acquire Prodigy, automotive retail software company.
"Although we don't expect material contribution to revenues in 2021, we see the Prodigy acquisition as a major step forward in Upstart's expansion into the adjacent TAM of Auto loans (estimated $626 billion)," Schindler commented.
Going forward, management estimates that FY21 revenue will come in at $500 million, compared to the $427 million consensus estimate.
According to TipRanks, Schindler is tracking a 59% success rate and 22% average return per rating.
In a recent research note, BTIG analyst Ryan Zimmerman writes that multiple product initiatives, a recovery boost and clarity on long-term goals should help investors "see 20/20 in 2021," when it comes to Alcon.
With this in mind, the five-star analyst upgraded the rating to Buy, with the analyst also assigning a $78 price target (13% upside potential) for the eye care product provider.
Zimmerman acknowledges the fact that since the company was spun out from Novartis in 2019, shares have underperformed the S&P 500 even though it boasts a "healthy valuation premium and beating expectations in three of the last four quarters." Some investors have expressed concern about ALC's ability to expand operating margins, with the pandemic also hampering the ophthalmology space more than other medical technology sectors.
To this, Zimmerman responded, "However, ALC enters FY21 with a litany of top-line drivers and is a beneficiary of recovery dynamics (evident in our surveys and KOL calls), and we expect mgmt.to 'put to bed' questions around long-term targets at the Capital Markets Day."
Although the analyst realizes that operating margins are a cause for concern, Zimmerman argues "it's not a question of if ALC gets to low-20s operating margin, but when; we think the difference of a year or more (due to COVID) isn't prohibitive from owning shares that are likely to see continued above-market growth, which begins to drive operating leverage over the coming years."
When it comes to key growth drivers in 2021, the analyst expects patients to return to ophthalmologist and optometry visits, more people to seek optical solutions to counter the negative effects of increased screen time, a recovery in cataract and refractive surgery volumes, the adoption of AT-IOLs to continue, and hospital budgets to return to the benefit of surgical equipment.
With a 62% success rate and 34.7% average return per rating, Zimmerman is ranked #110 on TipRanks' list.
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