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J.P. Morgan: These 2 Stocks Could Yield Big Returns in the Coming Year
The stock market pulled back from all-time highs in recent days, as investors paused to consider just what’s been goosing stocks – and what the future may hold. But according to JPMorgan’s technical strategist Jason Hunter investors shouldn’t get too worked up. “While we still see a large dichotomy within the S&P 500 Index, one where Value and Growth have decidedly different chart patterns and outlooks, the broader index outlook remains positive. Given that view and the broader technical/cross-market setups, we continue to view pullbacks as buying opportunities,” Hunter noted. So let’s talk about buying opportunities. Hunter’s colleagues among the JPM stock analysts have been looking for the big returns in the current market environment, and they’ve made some interesting picks. We’ve used the TipRanks platform to look up the details on two of those; turns out, they are Strong Buy stocks with upsides starting at 100%. Here are the details. Alkami Technology (ALKT) Alkami Technology, which went public just last month, is a leader in digital banking, and has been providing cloud-based digital banking solutions for US-based banks and credit unions since 2009. Alkami boasts over 150 institutional banking clients, representing over 9.7 million accounts. As mentioned, Alkami went public in April of this year. The IPO, which opened on April 14, saw 6 million shares hit the public market (the company is traded on the NASDAQ) at an initial price of $30 per share. This was higher than the $26 to $28 range the company had originally planned on. At the end of the first day’s trading, the stock closed at $43. The gross proceeds from the first day’s trading were over $250 million before expenses. The good news from the IPO was bookended by a solid year-over-year revenue gain in the Alkami’s first quarterly report as a public entity. The company reported annual recurring revenue of $133.8 million, up 39% from the year-ago quarter, along with six new client wins with an aggregate total of 215,000 new digital banking users. Alkami runs a loss, however, and that net loss widened in the quarter yoy, to $10.9 million. JPMorgan analyst Sterling Auty, who holds a 5-star rating from TipRanks, notes the potential of the digital banking segment – and Alkami’s strengths as it expands in that market. “The modernization of digital banking has been a slow and steady process that we see continuing for at least the next decade. This is a large addressable market with very attractive customer economics that we see supporting a revenue CAGR of 25% with significant margin expansion…. We believe the financial institution vertical is one of the most attractive in software with long customer lifetimes and a $7B, underpenetrated TAM,” Auty noted. The analyst added, “Alkami, as relatively new entrant, is taking advantage of the attractiveness of the market by offering a true SaaS solution against legacy and single-tenant providers. We see strong growth and margin expansion in the coming years.” Everything that ALKT has going for it convinced Auty to initiate an Overweight (i.e. Buy) rating. Along with the call, he attached a $62 price target, suggesting ~127% upside potential from current levels. (To watch Auty’s track record, click here) JPM’s view here is no outlier; the stock has 8 reviews since going public and they break down 6 to 2 for Buys over Holds, for a Strong Buy consensus rating. The shares are priced at $27.26, and the $50.14 average price target suggests ~84% one-year upside. (See ALKT stock analysis on TipRanks) Atara Biotherapeutics (ATRA) With the next stock on our list, we’ll shift gears to the biotech industry. Atara is a biopharmaceutical company with a focus on allogenic T-cell immunotherapy, a promising pathway to treatments for patients with serious diagnoses, including autoimmune diseases, hematologic cancers, and solid tumor cancers. Atara has an active research pipeline, with three drug candidates in clinical testing phases, and five more in preclinical studies. The leading candidate, Tab-cel, or tabelecleucel, is currently in a Phase 3 clinical trial as treatment for Epstein-Barr virus-associate post-transplant lymphoproliferative disease (EBV+ PTLD). The trial is proceeding simultaneously with earlier-phase trials of the same drug as a treatment for other Epstein-Barr related diseases. The Phase 3 study, ALLELE, is proceeding well, according to the company’s recent program updates. Atara has several regulatory benchmarks coming up, including a Biologics License Application (BLA) submission in 3Q21, and a letter of intent to the European Medicines Agency which will start the submission process for the EU’s Marketing Authorization Application in 4Q21. Data from the ALLELE study is scheduled to be presented in 4Q21. In addition to Tab-cel, Atara’s other main program is ATA188, a potential treatment for progressive multiple sclerosis. The two-year Phase 1 open-label extension study is complete, and Atara plans to present data from it during the second half of 2022. The Phase 2 study is currently enrolling patients, a process expected to be completed in 1H22. During this past quarter, 1Q21, the company received a green light for a clinical trial application in Canada for a Phase 2 study of ATA188 in that country. The company’s ATA188 program has caught the eye of JPMorgan analyst Anupam Rama, who writes: “Based on our survey results, there was clear enthusiasm for ATA188 despite the early stage of the phase 1 results in progressive MS. Looking to the phase 2 ATA188 randomized controlled trial (RCT) results, while the company has not disclosed statistical assumptions for the study, based on survey results, the bar for clinical meaningfulness appears low (which also underscores the unmet need in progressive MS) and achievable given known phase 1 data for ATA188/competitive data.” Currently going for $14.50 apiece, Rama believes that ATRA’s share price presents investors with an “attractive entry point.” The analyst rates the stock an Overweight (i.e. Buy), and his $29 price target implies an upside of 99% for the year ahead. (To watch Rama’s track record, click here) Rama rates ATRA shares as Overweight (i.e., Buy), and he increased his price target to $29, implying an upside of 100% for the year ahead. (To watch Rama’s track record, click here) The Wall Street consensus on ATRA is unanimous; of the 7 reviews on record, all are positive, for a net Strong Buy rating. The $39.50 average price target suggests the stock has a robust upside potential of ~173% from the current trading price of $14.50. (See ATRA 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.
