For the stock market, is it onwards and upwards? As the dog days of summer come to a close, stocks have ripped higher in a remarkable fashion, with the market sitting at record highs. That said, when we make our way into September, a historically rough month for equities, should investors put their hunts for compelling plays on hold?
Not necessarily. The pros on Wall Street have set their sights on a select few names with growth prospects that can only be described as monstruous. We aren’t exaggerating here. These stocks have already posted some serious gains in 2020, with analysts arguing there’s more than enough fuel in the tank to keep the rally alive.
Bearing this in mind, we used TipRanks’ database to pinpoint three stocks deemed as exciting growth plays by the analyst community. According to the platform, each ticker has received Buy ratings and boasts substantial upside potential.
Operating as a wafer fab equipment (WFE) supplier, ACM Research specializes in wet processes including wet clean and electroplating. With shares notching a 398% year-to-date gain, it’s no wonder Wall Street focus has locked in on this name.
Writing for Needham, five-star analyst Quinn Bolton believes ACMR does in fact have more “room to run.” He notes this name has had “a monstrous run this year,” and was able to deliver solid Q2 2020 results.
Digging deeper into the details of the print, revenue, non-GAAP gross margin and non-GAAP EPS all exceeded Bolton’s expectations. ACMR also reported shipments of $45 million in the quarter, which sets “the stage for sequential revenue growth in Q3 2020,” in the analyst’s opinion.
“The company provided several product and business highlights, but the most noteworthy in our view are the announcement of ~ $36 million orders from two China-based analog and power devices companies and the announcement of a repeat order for its Tahoe platform. According to management, most of the $36 million tools will ship in 2H20 and 2021,” Bolton added.
Going forward, management raised its outlook for 2020 from $130-$150 million, which had a potential C2H20 DRAM recovery built in as the swing factor, to $140-$155 million, factoring in only modest DRAM investment. “The stronger revenue outlook is driven by an improving China WFE outlook that has risen from $8-9 billion to $10-plus billion, which may still have upside as SMIC just raised CapEx again. ACMR management expects domestic China WFE will grow in 2021 setting the stage for further revenue growth next year,” Bolton explained. To this end, he sees the business fundamentals as being robust.
That said, Bolton points out that the share price is “less fundamental driven but more trading driven today as ACMR's China subsidiary is expected to list on China's STAR Market that typically values semiconductor and semicap stocks at 31-35x EV/sales (vs. less than 10x in international markets),” with it hard for him to value the stock.
However, this doesn’t change Bolton’s bullish thesis. “By comparing SMIC's relative valuations on the STAR Market and Hong Kong Exchange, we believe ACMR on NASDAQ could be valued at ~40% of the expected multiple on the STAR Market. This translates to a potential valuation of ~14x EV/CY21 sales leading up to the China IPO expected near year end,” the analyst said.
Everything ACMR has going for it keeps Bolton with the bulls. Along with a Buy rating, the analyst leaves a $125 price target on the stock. This target suggests shares could surge 36% in the next year. (To watch Bolton’s track record, click here)
Looking at the consensus breakdown, 5 Buys and 2 Holds have been published in the last three months. Therefore, ACMR gets a Moderate Buy consensus rating. Based on the $120.83 average price target, shares could rise 31% in the next twelve months. (See ACM Research stock analysis on TipRanks)
Primarily focused on the development of cutting-edge treatments, TG Therapeutics wants to improve the lives of patients with B-cell malignancies and autoimmune diseases. Even though this healthcare name has already soared 121% in 2020, several members of the Street believe shares can climb even higher.
Ladenburg Thalmann analyst Matthew Kaplan sees big things in store following the FDA’s acceptance of umbralisib’s NDA filing with a Priority Review for relapsed/refractory (r/r) Marginal Zone Lymphoma (MZL) (February 15, 2021 PDUFA) and a Standard Review for Follicular Lymphoma (FL) (June 15, 2021 PDUFA). The Priority Review was based on the Breakthrough Therapy Designation (BTD) umbralisib had previously been granted for MZL.
“We expect a commercial launch for the MZL indication could come in Q1 2021. Additionally, the FDA awarded the FL indication a Standard Review (10-month) with a PDUFA date of June 15, 2021. We expect the commercial launch for the FL indication could come in Q3 2021,” Kaplan commented.
It should be noted that the FDA doesn’t plan to hold an advisory committee meeting for either indication. To this end, Kaplan stated, “We are encouraged by the acceptance of the umbralisib NDA for review by the FDA and look forward to the potential approval for both the MZL and FL indications in 1H21.”
On top of this, additional upside could be driven by regulatory milestones and results from late-stage clinical trials slated for 2H20 and early 2021, in Kaplan’s opinion. In Q4 2020, topline data from the Phase 3 ULTIMATE I and II studies with ublituximab in Multiple Sclerosis (MS) will be read out, with an approval potentially coming in late 2021.
The analyst added, “Detailed data from the positive UNITY-CLL trial and detailed data from the UNITY-NHL MZL and FL cohorts, including full efficacy and safety data is expected to be presented at a medical conference in 2020 and we expect the UNITY-CLL NDA/BLA submission in late 2020/early 2021.” Data already released from this trial indicates the therapy showed superior efficacy as it successfully hit the primary progression-free survival (PFS) endpoint.
Summing it all up, Kaplan said, “We continue to be impressed with the progress TGTX has made and recommend investors purchase the stock ahead of the significant potential catalysts expected during 2H20.”
Therefore, Kaplan kept his bullish call and $44 price target as is. Should this target be met, a twelve-month gain of 80% could be in store. (To watch Kaplan’s track record, click here)
What does the rest of the Street think? Only Buy ratings, 5 to be exact, have been received in the last three months, so the consensus rating is a Strong Buy. The $41.80 average price target suggests 71% upside potential. (See TG Therapeutics stock analysis on TipRanks)
Making homes smarter, Vivint Smart Home offers products that allow its clients to secure, automate and control their homes. So far in 2020, shares have jumped 67%, but this is only the beginning, according to one analyst.
J.P. Morgan’s Paul Coster tells clients he is even more optimistic about VVNT’s long-term growth prospects after speaking with its CEO, noting a “positive re-rating of this somewhat undiscovered growth-stock” could be in the cards. Choosing the company as a top pick in Applied Tech and a Focus List Pick, the analyst is “looking for a homerun here.”
Expounding on this, Coster stated, “We believe growth momentum, revenue visibility, expanding margins, improved cash flow, and optionality warrant a close look at this leader in smart home solutions by tech investors, by GARP investors, and a re-rating could be spurred on by branding events and improved stock liquidity.”
To back this up, Coster cites VVNT’s Q2 earnings release, which he believes was “pivotal.” During the quarter, the company reported 9% year-over-year growth despite COVID-19's impact on door-to-door sales and the planned temporary withdrawal from the Canadian market. Additionally, all operational metrics got a major boost, with churn, customer acquisition cost and subscriber service cost dropping.
If that wasn’t enough, adjusted EBITDA margins reached approximately 50% and cash flow from operations turned positive, one year earlier than expected, and almost all upfront equipment sales are now either paid-in-full or third-party financed through FlexPay. Coster added, “The company raised guidance for the year. Various thresholds were crossed, and we think the bearish concerns that accompanied that SPAC are largely put to rest.”
Reflecting additional positives, 90% of 2020 revenue was contracted in previous years, and 95% of revenue is recurring. With its subscriber base, which currently lands at 1.6 million, expanding at about a 15% CAGR, Coster thinks “VVNT has a meaningful leadership position in the professionally-installed, smart home/home security space at a time when homeowners are making significant investments in their homes.”
The analyst also mentioned, “Though the solution is largely focused on security today, the firm has a path to grow into near adjacencies, the most exciting of which is likely to be home insurance (they have an enormous amount of data regarding the home, its occupants and their behaviors), but could include home automation, age-in-place services, telehealth and so on. We think Google’s investment in ADT is a validation of the space and its potential.”
With VVNT placing a significant focus on increasing brand awareness, which could benefit sales, and launching an insurance product, the deal is sealed for Coster. As a result, he reiterated his Overweight rating. Given the $30 price target, shares could gain 74% in the next twelve months. (To watch Coster’s track record, click here)
Turning now to the rest of the Street, opinions are split evenly down the middle. 2 Buys and 2 Holds assigned in the last three months add up to a Moderate Buy analyst consensus. In addition, the $21.75 average price target implies upside potential of 26%. (See Vivint Smart Home stock analysis on TipRanks)
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.
