The markets started 2022 with heavy losses – but the last two weeks have seen sharp gains that have lifted stocks back out of correction territory. The S&P 500 is up 11% from its March 14 trough, while the NASDAQ, which had fallen farther, had gained 16% in the last couple of weeks.
Goldman Sachs’ David Kostin sees an interesting pattern, as we go forward. According to the chief US equity strategist, institutional investors will pull back, while households will be the major source of purchase activity in equities this year.
“Leveraged investors have participated in the current sell-off by aggressively reducing their equity exposure… In contrast, households have bought $93 bn in US equity funds YTD. Households will continue to deploy some of their $15 trillion in cash holdings into the equity market… We forecast pension and mutual funds will be net sellers of $900 billion of equities.”
Kostin goes on to point out that stocks remain the strongest vehicle for returns in current market conditions, writing, “While yields have risen substantially YTD, cash and fixed income products continue to offer low yields in absolute terms and limited return potential compared with equities. If, as our economists forecast, ten-year US Treasury yields rise to 2.7% by year-end 2022, bonds will continue to experience negative price returns.”
In an environment as Kostin describes, the stock market is the logical place for investors to shift their resources. And that means that there will be winners. The stock analysts at Goldman have been perusing the market, and tagging the shares they see primed for gains this year – and substantial gains, too, on the order of 80% or better. Using TipRanks’ database, we found out that the rest of the Street is also on board as both have earned a “Strong Buy” consensus rating.
Xometry (XMTR)
The first Goldman pick we’ll look at is Xometry. The company is a leader in on-demand parts supply, using AI to enable a network of suppliers to meet the demands of the manufacturing industry. Put more plainly, Xometry focuses on lean supply, creating a network of suppliers and giving manufacturers access to their know-how – on demand. Manufacturers can source parts through a range of processes, from 3D printing to water cutting to injection molding to metal stamping, to name just a few, and can place the orders when they are needed. The result: less downtime, less dormant capacity, and more efficient production.
In the context of today’s manufacturing and production environments, Xometry’s approach to parts supply offers one path potentially toward untangling the supply chain snarls. The company’s approach to on-demand parts sources also offers advantages for inventory and warehousing processes.
Xometry entered the public markets in the middle of last year, with an IPO on June 30. The company put 6.9 million shares on the market, at $44 each. This was higher than the $38 to $42 range originally anticipated, and the stock soared on its first day of trading, closing at more than $87. Xometry had planed to raise $252 million through the IPO; in the event, it brought in $303.6 million in gross proceeds. Since the IPO, however, XMTR shares have fallen by more than half, losing ~60% of their early value.
Back in December, Xometry has announced an important acquisition move. The company bought the product sourcing, supplier selection and digital marketing solutions company Thomas, in a cash and stock transaction valued at $300 million. The acquisition is expected to expand Xometry’s buyer and seller base, and to enhance its ability to provide end-to-end service.
While the shares are down since going public, Xometry’s revenues are up. As a public entity, Xometry has reported three sets of quarterly financial results; the second and third have both shown sequential revenue gains. In the last report, for 4Q21, the company showed $67.1 million at the top line. This was up 18% from Q3, and an even more impressive 77% year-over-year. Xometry finished 2021 with $116.7 in cash and liquid assets, and in February of this year the company raised over $278 million through an offering of convertible senior notes.
Eric Sheridan, 5-star analyst with Goldman, sees Xometry in a strong position to leverage its unique business model into further gains going forward. The supply-chain difficulties are not going away, giving Xometry an opening to gain customers.
“Over the short term, we expect investor focus to remain on variable components of revenue growth in 1H ‘22 with a focus on the execution on both the Thomas acquisition and international expansion. Looking long term, we view Xometry as a leader in the online B2B marketplace space connecting businesses with manufacturers of industrial parts, addressing a $260bn global TAM for custom manufacturing… In terms of its industry positioning and level of innovation, we find the company to be a strong player with runway for growth and margin expansion in the coming years. Growth in the Xometry marketplace should benefit from high levels of fragmentation among both buyers and sellers, as well as an industry-wide shift toward reinforcing supply chains,” Sheridan opined.
These upbeat comments support Sheridan’s Buy rating on XMTR, while his $67 price target implies an upside of 87% for the stock. (To watch Sheridan’s track record, click here)
While bullish, Sheridan’s stance is in-line with the Wall Street consensus on Xometry. The stock has 5 recent analyst reviews, that include 4 Buys and 1 Hold, giving it a Strong Buy rating. The average price target, at $61.60, suggests an upside of ~73% from the current trading price of $35.65. (See XMTR stock forecast on TipRanks)
Repare Therapeutics (RPTX)
Next up on Goldman’s radar is Repare Therapeutics, a clinical-stage biopharmaceutical maker in the precision oncology niche. Repare is working on the development of novel treatments for a variety of cancers, based on synthetic lethality. The company has a proprietary SNIPRx platform, based on genome-wide CRISPR-enabled technology, which it is using for the discovery of targeted cancer therapies that take advantage of genomic instability and focus on DNA damage repair.
Repare has two leading drug candidates with no fewer than six clinical trial programs between them. The leading candidate, RP-3500, is an ATR inhibitor undergoing four Phase 1/2 clinical studies. Earlier this month, Repare released data from the TRESR trial, showing an acceptable tolerability profile at the recommended Phase 2 dose. RP-3500 is under development for the treatment of solid tumors with specific synthetic-lethal genomic alterations.
The company has several concurrent trials of RP-3500 ongoing, along with some upcoming catalysts. Phase 2 of TRESR was initiated in February, testing RP-3500 against solid tumors. The drug was also initiated in a Phase 1 pediatric module, with the first patient to be dosed in this quarter. And additional clinical data on RP-3500, from a Phase 1 monotherapy trial with 120 patients, is expected in 2Q22. Finally, in 2H22, the company expects to announced data on dose determination of Phase 2 trial for RP-3500 in combination with gemcitabine.
In Repare’s second drug candidate program, RP-6306, the company is running two clinical trials. The first, a Phase 1 trial studying the drug candidate in combination with gemcitabine as a treatment for solid tumors, began dosing patients in December of last year. For the second, a combination therapy with FOLFIRI in the Phase 1 MINOTAUR trial, began recruiting patients in February of this year. The company expects to release data from an earlier Phase 1 monotherapy study in the later part of this year.
In addition to these multiple ‘shots on goal,’ Repare reported its first significant revenues in 4Q21, of $6.88 million, derived from collaboration agreements with Bristol-Myers Squibb. In addition, Repare listed cash and other liquid assets totaling $341.9 million against 2021 combined administrative and R&D expenses of $116.2 million. This gives the company a cash runway for nearly 3 years of operations.
Noting the volume of upcoming catalysts for this company, along with the quality of its platform and potential of its two leading drug candidates, Goldman’s 5-star analyst Chris Shibutani writes, “We view Repare Therapeutics as one of the premier synthetic lethality-focused precision oncology companies…. Lead asset RP-3500 targets ATR with a best-in-class safety profile and differentiated development strategy based on STEP2 populations. Data to be presented at AACR in April will benchmark expectations for ongoing expansion cohorts designed to inform regulatory pathways, for which we view visibility to an estimated $1.9bn peak sales opportunity as providing a potential inflection point.”
To this end, the analyst rates RPTX a Buy, with a $43 price target indicating potential for a robust 208% upside ahead. (To watch Shibutani’s track record, click here)
All in all, this stock boasts a unanimous Strong Buy consensus rating, based on 5 recent positive analyst reviews. The shares are trading for $13.87 and have an average price target of $47, suggesting ~239% one-year upside. (See RPTX stock forecast 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.
