The global economy’s emergence from the Covid-19 pandemic has coincided with altogether different challenges, amongst them the global supply chain issues. The lingering effect has impacted production, distribution and transportation and has led to shortages, longer waiting times for consumers and rising prices across the board.
However, according to JPMorgan’s chief global markets strategist Marko Kolanovic there is a light at the end of the (congested) tunnel.
“Global supply chain pressures are easing – if this persists S&P 500 should continue to deliver strong revenue growth and record margins,” Kolanovic noted. “US companies delivered much stronger than expected Q3 results and some key names gave an encouraging outlook on supply chains. Our view all along has been that supply and labor shortages would be temporary and normalize with a decline in COVID-19.”
Taking this outlook into consideration, we used TipRanks’ database to take a closer look at two names identified by JPM as strong value stocks. The banking giant has noted that each could gain more than 60% in the year ahead. It’s clear the rest of the Street is in agreement, with each earning a “Strong Buy” consensus rating.
Privia Health Group (PRVA)
We’ll start with Privia Health Group, a national physician organization that uses technology to deliver the talent and tools that physicians need to deliver top-tier healthcare to patients. The company works with providers, allowing them to keep their independence while reaping the benefits of a larger group. In short, Privia brings the advantages of large scale health networks to small scale physician groups.
It’s no secret that patients want more personalized care, delivered with shorter wait times. That’s the experience that Privia’s services make possible, and the results are clear from the company’s recent 3Q21 report. Privia reported total revenue in the quarter of $251.5 million, up 21% year-over-year, and 11% from Q2. While the company has been seeing revenue increase, it still operates a net loss, reporting negative EPS of 9 cents for the quarter.
Privia is new to the public markets. The company held its IPO in May of this year, when it put 22.425 million shares on the market. That was upsized from the initial announcement of 19.5 million shares. The PRVA ticker started trading on the NASDAQ on April 29, at a share price of $23, in line with expectations. The company raised $131.7 million from the IPO, and even after 6 months of volatile trading and an 11% drop in share price, Privia still boasts a market cap of $3.3 billion.
During the third quarter, the company made affiliation agreements that took it into the California and Texas health care markets. These are the two largest states in the Union, and Privia management raised its full year 2021 guidance in response to these market entries. The new revenue guidance, at $3.3 billion to 3.33 billion, is up 14% at the high end.
Lisa Gill covers this stock for JPM, and in her notes she takes cognizance of the guidance raise and the new markets, writing, “PRVA reported strong 3Q21 results with collections, revenue, care margin, platform contribution, and adj. EBITDA all ahead of expectations. PRVA raised 2021 guidance reflecting the recently announced entries into California and West Texas coupled with YTD outperformance. PRVA’s guidance raise is larger than we anticipated, although we suspect it is mostly driven by 3Q outperformance given our prior estimates that the new partnerships would have a relatively modest impact on 4Q21.”
Gill rates the stock as Overweight (Buy), and her $51 price target indicates confidence in a 65% one-year upside potential. (To watch Gill’s track record, click here.)
The Strong Buy consensus rating here is unanimous, based on 7 positive stock reviews. The average price target is $42.43, which suggests a 37% upside from the current trading price. (See Privia’s stock analysis at TipRanks.)
agilon health (AGL)
The second stock we’ll look at is agilon, a health care company founded in 2016 with the aim of correcting structural problems in the way that health care is delivered. The company focuses on empowering primary care physicians to take a holistic view of the patients, in the niche of senior citizens’ care. The company’s goal is to turn around the current system’s mode of rewarding volume over value, and creating a value-oriented care system.
To do this, agilon provides physician groups with capital, data, executive experience, contract support, and payor relationships – so that physicians can devote more of their time to patient care and less to back office paperwork. In a mark of the company’s success, agilon went public in April of this year. The IPO saw the AGL ticker start trading on April 15, at a price of $23 per share. The company put 53.59 million shares on the market, and raised $1.233 billion in gross proceeds. The stock closed at $31 on its first day of trading, and while it has slipped since then, by almost 18%, it remains above its initial pricing. agilon has a market cap now of $9.96 billion.
In its most recent quarterly report, for 3Q21, agilon reported strong revenue growth driven by increased system membership. The company’s top-line hit $458.6 million, up 47% yoy, although down 8% sequentially from Q2. The YoY gain was powered by Medicare Advantage membership, which was up 43% from the year-ago quarter. The company raised its guidance for Q4 membership numbers, and expects 2022 total membership numbers to grow 45%.
agilon expects its direct contracting business to experience rapid growth early next year, with seven new physician groups joining in January. These groups will bring in between 30,000 and 35,000 attributed beneficiaries, bumping the company’s total of such attributed beneficiaries to nearly 85,000.
Solid revenue and growth prospects attracted JPM’s Lisa Gill to this stock. Checking in with her again, we find she wrote of agilon, “We are incrementally positive on AGL following better than expected 3Q21 results, including continued outperformance on direct contracting, in addition to a solid preliminary 2022 membership outlook and favorable new market growth commentary. The company also pointed to a strong 2023 pipeline, noting it has signed definitive agreements and letters of intent for provider groups in new and existing states…”
Gill’s outlook on the stock extends to an Overweight (Buy) rating and a price target of $42, that implies an upside of 66% in the next 12 months. (To watch Gill’s track record, click here.)
This is another stock with a unanimous Strong Buy consensus rating; the 7 reviews on file here all agree that this is a Buying proposition. Shares are priced at $25.29 and their $36.14 average price target suggests an upside of 43% for the coming year. (See agilon’s stock analysis at 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.
