The markets were already on shaky ground in 2022’s opening period, as the prospect of inflation and higher interest rates loomed large. But the volume has been turned up significantly now there is a full-scale war to contend with following Putin’s invasion of Ukraine.
What does all this mean for the global markets? Asks Oppenheimer’s Chief Investment Strategist John Stoltzfus, before providing the answer: “Near-term volatility likely will persist on the landscape as global market participants weigh developments as they cross the proverbial transom.”
There are severe sanctions in place on Russia now and they look likely to be ramped up further. While these will no doubt hurt the country’s economy, it remains to be seen how they impact the course of the war or how they affect global markets over the coming period.
In the meantime, in the current “transitional environment,” Stoltzfus is sticking with equities. “We remain overweight US equities while maintaining meaningful exposure to international developed and emerging equity markets,” the strategist said.
Given this background, the analysts at Oppenheimer have been filtering the wheat from the chaff to find the stocks primed to surge ahead. They have zeroed in two names which they see as yielding strong returns this year – more than doubling in value actually. We ran the tickers through the TipRanks database to get a fuller picture of their prospects.
Digital Turbine (APPS)
This first Oppenheimer pick is Digital Turbine, a digital advertising specialist that provides end-to-end products and solutions to facilitate the monetization of mobile content for mobile operators, original equipment manufacturers (OEMs), and third parties. In short, the company brings together publishers, mobile operators and OEMs with app developers and advertisers.
In the past, the company mostly concentrated on preinstalled apps on Android handsets. Now, though, it is a force to be reckoned with in the digital advertising space following several acquisitions which have meaningfully grown its total addressable market (TAM).
The growth was on evidence in the company’s latest quarterly report, for F3Q22. Revenue increased by 323.7% year-over-year to reach $375.4 million, in turn beating the Street’s call of 353.21 million. There was a beat on the bottom-line too, as adj. EPS of $0.49 came in ahead of the $0.43 consensus estimate. And in contrast to many recently, the company’s outlook was sound as well. The FY22 guidance called for revenue in the $1.225 billion and $1.240 billion range, above the Street’s forecast of $1.22 billion.
While the shares got a post-earnings boost, as has befallen the fate of many growth stocks over the past year, shares have taken a real hammering and are down 27% year-to-date.
What this means, according to Oppenheimer’s Timothy Horan is that investors have the opportunity to pick up shares on the cheap.
“Despite current challenging investor sentiment for growth stocks and undeniably dynamic environment for adtech, APPS remains one of our top 2022 picks at 3.0x FY23E FV/revenue and 16.5x EBITDA vs. 30-40% CAGR,” the 5-star analyst said. “Potential growth should be underpinned by highly differentiated, independent, end-to-end ad/media tech ecosystem, directly embedded into more than 1.5B devices by handset OEM and carrier partners.”
Accordingly, Horan rates APPS an Outperform (i.e. Buy), while his $117 price target indicates room for 162% growth over the coming year. (To watch Horan’s track record, click here)
Three other analysts have weighed in on APPS’s prospects over the past 3 months and like Horan they all get behind this name; with 3 additional Buys, the stock boasts a Strong Buy consensus rating. There are plenty of gains projected here too; going by the $94.5 average target, shares will rise by 101% over the one-year timeframe. (See APPS stock forecast on TipRanks)
Ventyx Biosciences (VTYX)
Let’s move on now to the biotech sector. Ventyx is a clinical stage biopharma company focused on the treatment of autoimmune and inflammatory diseases. Three of the company’s research programs are in clinical trials, for conditions ranging from ulcerative colitis, psoriasis, Crohn’s disease, and a range of cardiovascular, hepatic, and renal diseases.
The company’s most advanced drug candidate is VTX002, a selective sphingosine 1 phosphate 1 receptor modulator (S1P1), discovered and developed internally by Ventyx’s team. The drug candidate is under testing as a treatment for moderate to severe ulcerative colitis (UC). In an important update, Ventyx announced in December that VTX002 had begun a Phase 2 clinical trial and had dosed the first patient. The trial will include a 13-week induction treatment phase followed by a 39-week open label extension. The earlier Phase 1 trial showed that the drug candidate was well tolerated at all doses tested.
The company’s second clinical stage drug candidate, VTX958, is an allosteric, orally bioavailable TYK2 inhibitor with potential to treat a wide range of autoimmune disorders, including psoriasis, Crohn’s, and lupus, among others. Each of these conditions represents a substantial addressable market. Ventyx completed a Phase 1 trial of VTX958 in 4Q21, and at the same time began dosing patients in a MAD (multiple-ascending dose) trial.
The third candidate, VTX2735, is part of a portfolio of NLRP3 inhibitors under development for the treatment of multiple indications. VTX2735 is designed to treat systemic inflammatory diseases of the cardiovascular, hepatic, and renal systems. Ventyx began dosing patients in a Phase 1 clinical trial.
In addition to these clinical programs, Ventyx has a solid cash position. The company raised $158.8 million this past October in its IPO, an event that was upsized to 10.89 million shares of common stock that were sold at an initial price of $16 each. Ventyx also has cash holdings – separate from the new capital generated by the initial offering – of $142 million. Taken together, these cash holdings are sufficient to see the company through nearly two years of operations.
Oppenheimer analyst Jeff Jones likes what he sees in Ventyx, and writes of this newly public company: “We are enthusiastic about the potential for these programs, given the differentiated profile of lead molecules, validated targets and endpoints, and clear development path… Significant financial runway provides the company with the resources to meet a list of key milestones over the next 12-to-18 months providing multiple potential catalysts to the story.”
Based on the above, Jones rates VTYX shares an Outperform (i.e. Buy), while setting a $30 price target. Investors stand to score ~131% gain, should Jones’ thesis go according to plan in the year ahead. (To watch Jones’ track record, click here)
Wall Street generally is bullish on Ventyx, even more so than Jones. The Strong Buy consensus rating on the stock is unanimous, based on 3 positive reviews, and the $40 average price target implies an upside of ~209% from the current share price of $12.96. (See VTYX 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.
