The past 20 months have been good for growth stocks, to say the least. In that time, the S&P 500 just about doubled, while the NASDAQ has done even better, gaining 125%. Corporate earnings strongly rebounded this year, post-COVID, and the government’s stimulus payments have helped put consumers and investors flush with cash.
Most of the factors that have support the markets are still in play. Corporate earnings and consumer cash holdings remain high, interest rates are at rock bottom, and stocks are the highest-return game in town. In this environment, with the consensus view holding out for further growth, investors are going to gravitate toward stocks that have proven records of strong share price appreciation. While this is not a perfect predictor of future gains, there’s sill plenty of investor optimism for the near- to mid-term.
Bearing this in mind, we set out to find stocks flagged as exciting growth plays by Wall Street. Using TipRanks’ database, we locked in on three analyst-backed names that have already notched impressive gains and boast solid growth narratives for the long-term.
Intra-Cellular Therapies (ITCI)
The first stock we’ll look at is a clinical-stage biopharma, Intra-Cellular Therapies. This company is working in novel, innovative treatments for ‘neuropsychiatric and neurologic’ disorders – mental health disorders, in plain language – in adults. These disorders are known for the heavy burden they put on both patients and caregivers, and for their resistance to treatment. ITCI aims to ameliorate both the burden and the treatment resistance.
Intra-Cellular’s most important recent update came on December 20, with the FDA approval of Caplyta (lumateperone) for the treatment of bi-polar depression in adults. This latest approval is a label expansion; the drug was approved two years ago as a treatment for schizophrenia, also in adults. From that earlier indication, the drug has been providing a steadily increasing revenue stream for the company; in the recent Q3 release, Calypta sales provided $21.6 million of the $22.2 million in total revenues. The label expansion promises a strong increase in Calypta revenues, as bipolar I and bipolar II diagnoses account for some 11 million patients in the US.
Furthermore, the company has clinical trials ongoing for two drug candidates. ITI-214 (lenrispodun), a PDE inhibitor, is under investigation in a newly initiated Phase 2 study as a potential treatment for Parkinson’s disease. Patient enrollment is expected to commence in 1H22. And a second candidate, ITI-1284 is the subject of a Phase 1 trial for the treatment of Alzheimer’s related agitation. Clinical conduct of the study is expected early in 2022, and additional studies in the treatment of dementia and depressive disorders in the elderly are expected later in 1H22.
Overall, we’re looking here at a biopharma with plenty of clinical trials underway – and the added bonus of an approved drug on the market. Shares in ITCI are up 63% over the past 12 months, a strong gain that Wall Street’s analysts believe will be followed by additional gains next year.
In coverage for Canaccord Genuity, analyst Sumant Kulkarni sees the multiplicity of paths forward as the key point, writing, “With this clean label, i.e., Caplyta is now approved as mono/adjunct therapy for adults with depressive episodes in Types 1 and 2 bipolar disorder, we believe ITCI is positioned well to drive home the product’s advantages… We continue to believe ITCI remains significantly undervalued on the opportunity in schizophrenia/bipolar depression. We note most investor focus has been around Caplyta’s launch so far and this sNDA action date. But, the company also has a strong pipeline that not only includes further extensions of its Caplyta franchise, but also other new molecules in development…”
Kulkarni’s upbeat outlook leads him to put a Buy rating on ITCI, and his price target, of $88, implies an upside of 76% for the year ahead. (To watch Kulkarni’s track record, click here)
The Canaccord view is no outlier on this stock. ITCI has received 7 recent reviews, and they all concur – this is a stock to buy, making the Strong Buy consensus view unanimous. The shares are priced at $50.8 and the $62.71 average price target suggests ~25% one-year upside potential. (See ITCI stock analysis on TipRanks)
Cytokinetics (CYTK)
We depend on our muscular system for everything we do, from reading this article to cycling the Tour de France, but like every other organ system, our muscles are subject to disease and disability. Cytokinetics is a clinical-stage biopharma company specializing in the discovery and development, commercialization and marketing, of new muscle activators and inhibitors. These first-in-class and next-in-class drug candidates are potential treatments for severe muscular diseases that cause compromise of function.
Cytokinetics is working on small molecule compounds designed to impact muscular contractility and function. The company’s pipeline feature two main tracks, each with several drug candidates – a cardiac muscle track and a skeletal muscle track. Each has at least one program at Phase 2 or 3 clinical trials, and several other programs at earlier stages.
In the cardiac muscle track, Cytokinetics features omecamtiv mecarbil, a novel cardiac muscle activator used in the treatment of heart failure. The company has recently completed the GALACTIC-HF Phase 3 clinical trial, with positive results for patients suffering heart failure, and based on them is preparing a New Drug Application to the FDA. In addition, the company is initiating a second Phase 3 trial, METEORIC-HF with results expected early in 2022.
Until May of this year, Cytokinetics was working on omecamtiv mecarbil in partnership with Amgen, but that partnership has been terminated and Cytokinetics now has full worldwide rights for commercialization of this new drug. As part of those efforts, the company announced this month expansion of its collaboration with Ji Xing, giving it a larger opening to the Chinese markets. The agreement includes an up-front payment of $70 million from Ji Xing, with additional payments to Cytokinetics up to $330 million for milestones and royalties.
The second late-stage cardiac drug is aficamten, an orally dosed, small molecule myosin inhibitor for the treatment of hypertrophic cardiomyopathy. This condition causes abnormal thickening of the heart muscle tissues, and consequent reduction in heart function and blood flow. Aficamten, a cardiac myosin inhibitor, has demonstrated positive results in two cohorts of the REDWOOD-HCM Phase 2 clinical trial. The results included clinically significant reductions in left ventricular outflow tract gradient, as well as an acceptable toleration profile. The company plans to follow up this trial with the SEQUOIA-HCM Phase 3 trial, which is set to start early in 2022 pending drug product availability. This month, aficamten received breakthrough therapy designation from the FDA.
The final late-stage product, reldesemtiv, lies on the skeletal muscle track. This drug candidate is a skeletal muscle troponin activator (FSTA) being tested as a treatment for ALS, or Lou Gehrig’s disease. The COURAGE-ALS trial, a Phase 3 study, started in the third quarter of this year and is ongoing. Data released to date show that the majority of patients enrolled meet the baseline characteristic requirements for the study.
A biopharma so chock-full of clinical trials and upcoming catalysts should be expected to impress investors, and CYTK shares are up 115% this year.
JPMorgan’s Anupam Rama sees plenty of potential in this company. He writes: “We see a synergistic late-stage cardiovascular pipeline emerging with omecamtiv mecarbil (severe heart failure) and aficamten (obstructive hypertrophic cardiomyopathy). Indeed, both indications have outstanding unmet needs in sizable patient populations and the emerging clinical data for both have interesting/compelling data. Of note, we view reldesemtiv (phase 3 ALS) as a high-risk/high-reward shot on goal.”
Turning to the partnership expansion, Rama adds, “The expansion of the Ji Xing partnership to include omecamtiv mecarbil, makes strategic sense and brings in some near-term, non-dilutive cash (though there is common stock issuance as well), as well as potential for long-term milestones…”
Taking the above into consideration, Rama rates CYTK shares an Overweight (i.e. Buy) along with a $58 price target. This target conveys his confidence in CYTK’s ability to climb ~31% higher in the next year. (To watch Rama’s track record, click here)
Wall Street is in clear agreement with the JPM position here; the stock has 12 positive reviews for a unanimous Strong Buy consensus rating. The average price target of $55.75 and current trading price of $44.33 give an upside potential of ~26% for the year ahead. (See CYTK stock analysis on TipRanks)
SMART Global Holdings (SGH)
We’ll wrap up in the tech sector, specifically, the semiconductor chip segment. SMART Global Holdings, through a network of subsidiaries, produces components for the OEM market, particularly specialty memory chipsets for communications, computing, mobile, networking, and storage markets. The company’s chips – Flash storage, DRAM, and solid-state memory – can be found in a wide range of products, including desktop and laptop computers, and tablets and smartphones.
Semiconductor chips are a hot item, essential in our digital age, and the supply chain disruptions affecting both manufacture and distribution cannot change that. SMART has a ready market for its products, and has seen its shares increase in value through the year. The gains have been somewhat choppy, the stock has been volatile – but the upward trend is clear and SGH is up 76% year-to-date.
Over the course of the past year, the company has moved to diversify its business. SMART is moving rapidly away from its origins as a Brazilian hi-tech, and now boasts three divisions with global reach. The legacy divisions, Intelligent Platform and LED Solutions, now account for less than 60% of the total business, with Memory Solutions expanding rapidly.
These changes, and the share gains, have been supported by rising revenues and earnings. The company recently reported results for fiscal 4Q21, and the full fiscal year 2021, and showed strong year-over-year gains. For the quarter, the top line revenue of $467.7 million was up 57%, while EPS gained an impressive 163% to reach $2.16. The full year figures were $1.5 billion at the top line, up 34% compared to fiscal 2020, and $5.22 in EPS, a 102% yoy gain.
Needham’s 5-star analyst Rajvindra Gill is bullish on this one, saying, “We believe there is more upside from here as we still see SGH as cheap relative to virtually all comparables across its segments, even while the company’s gross margin expansion initiatives bear fruit. Importantly, we believe the Street consensus under-appreciates the earnings growth that this brings.” On the subject of the company’s shift in business structure, Gill continues, “We expect the diversification to mediate both top and bottom line volatility, reducing risk and warranting a higher multiple for SGH shares.”
Gill’s bullish stance holds up his Buy rating, and his $85 price target suggests an upside of 28% in the coming calendar year. (To watch Gill’s track record, click here)
The Needham view is in-line with the general attitude on the Street, as shown by the unanimous 5 positive ratings and the Strong Buy consensus. Shares are trading for $66.48 and their $74.40 average price target is indicative of 12% further growth for the year ahead. (See SGH stock analysis on TipRanks)
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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.
Source: finance.yahoo.com