Raymond James Sees ‘Multiple Expansion’ To Drive Stock Market Returns – Here Are 2 Stocks To Play That Bullish Sentiment

It is time to get your crystal ball out and check out to determine what awaits the inventory market this yr. Thus far, it is clear that shares are rebounding considerably from their 2022 lows, and one Wall Road professional says there may be extra runway for positive factors.

Writing concerning the market state of affairs for 2023, Larry Adam, chief funding officer of Raymond James, notes that final yr was the second yr in a row for a number of leverage — however that state of affairs is never repeated for the third time. He expects a number of expansions to “drive inventory market returns” sooner or later. To wit: “Historical past means that our view of a gentle recession ending on the finish of the yr, easing of inflationary pressures, decrease rates of interest, and a much less aggressive Fed all counsel that ‘unhealthy information’ has been priced into multiples and units up a number of prospects within the yr. 2023.”

Adam acknowledges that earnings are prone to decline this yr, however he is nonetheless concentrating on the tip of the yr Normal & Poor’s 500 at 4,400, or about 10% above present ranges. Supporting this place – with a number of expansionary elements – Adam particularly cites the prospect of decrease inflation, with value will increase petering out to round 3%; a subsequent slowdown in rates of interest, as larger charges wouldn’t be wanted to fight rising charges; And the Fed switched to simply two extra fee hikes, halting in March.

So, in Raymond James’s view, we ought to be on the lookout for a greater funding setting that comes into play within the second half of this yr – and the corporate’s inventory analyst Andrew Cooper has picked two shares that he sees as poised for positive factors, and he recommends shopping for in now. Let’s take a better look.

Natera, Inc (The Nationwide Telecommunications Regulatory Authority)

We’ll begin with Natera, a biotechnology firm that is within the pipeline for cell-free DNA, or cfDNA, testing. CFDNA checks are minimally invasive, primarily based on a easy blood draw, and concentrate on naturally occurring DNA fragments that float freely within the bloodstream. Natera’s expertise captures these elements and makes use of them in genetic testing.

The corporate’s check platforms are primarily based on novel molecular biology strategies and AI-driven bioinformatics software program, and may detect single DNA molecules in a tube of blood pattern. Natera makes use of this expertise for correct, non-invasive prenatal testing (Panorama platform), tumour-specific screening check for particular person most cancers therapies (Signatera platform), and best-in-class rejection analysis check earlier than kidney transplantation (Prospira platform).

Diagnostic DNA testing is huge enterprise, and Natera is capitalizing on sufferers’ want for a much less invasive medical expertise. The corporate’s income has proven constant progress over the previous a number of years, and in its most lately reported quarter, Q3 ’22, Natera noticed a high line of $210.6 million, up 33% year-over-year. The income achieve got here on high of a 27% enhance in checks processed throughout the third quarter of ’22, from 407,300 to 517,500. Of this complete, the oncology section skilled the strongest progress. The corporate processed 53,000 oncology checks within the quarter, up 153% year-over-year.

Natera revised its ahead steering upward in its third-quarter report, projecting full-year 2022 revenues of $810 million to $830 million. This was $40 million larger on the midway level than beforehand printed steering. The corporate is anticipated to report This fall ’22 leads to late February, and we’ll discover out after that how the steering holds up.

Becoming a member of the bulls, Raymond James’ Andrew Cooper is taking a bullish stance on this firm and its inventory.

“With each section rising properly within the close to and medium time period and a catalyst-rich setup in 2023, significantly in oncology, we’re upgrading the inventory to Outperform. Management within the burgeoning MRD area, the place we consider it will probably win further protection and potential directive itemizing on The least for CRC generates pleasure, whereas the more and more profitable ladies’s well being firm has its personal catalysts within the dialog about 22q. All of it comes right down to an evaluation that appears, at the very least on a relative foundation, to be fairly acceptable all issues thought of.” mentioned the analyst.

The Cooper Outperform (i.e. Purchase) ranking on NTRA comes with a value goal of $58, indicating a one-year upside potential of 35%. (To observe Cooper’s log, click on right here)

Total, this fascinating biotech has obtained 9 analyst opinions lately, together with 8 Buys for 1 contract – for a Sturdy Purchase consensus ranking. Shares are buying and selling for $42.94 and a median value goal of $63 suggests an upside of round 47% for the following 12 months. (We see Nationwide Telecommunications Regulatory Authority inventory forecast)

Fulgent Genetics, Inc. (FLGT)

Fulgent, Raymond James’ second decide we’re taking a look at, is a full-service genomic testing firm, with a concentrate on bettering affected person care within the areas of oncology, infectious and uncommon ailments, and reproductive well being. The corporate operates proprietary expertise behind its testing platform, and has created a catalog of checks that’s broad, versatile, and capable of develop with choices optimized because the genetic reference library grows.

This firm was based in 2011, and within the years since then it has constructed up a popularity for high-quality genomic testing. The corporate offers best-in-class help companies for its testing platform, making certain the most effective outcomes for the most effective affected person care and outcomes.

In Q3 of ’22, the newest reported quarter, the corporate’s high line was $105.7 million, lower than half of the $227.9 million reported in Q3 of ’21. The income drop should not be shocking, contemplating Billable checks decreased year-on-year from 2.2 million to 952,000. On the optimistic facet, core income — which doesn’t embody COVID-19 testing services — grew 110% year-over-year to $56 million, greater than half of complete income. The corporate’s non-GAAP revenue got here in at 32 cents a share, in comparison with $4.05 within the prior yr quarter.

In brief, Fulgent has thrived throughout the pandemic, when COVID testing necessities boosted demand, and has seen demand drop sharply because the pandemic subsided. Though this has diminished income, the corporate has two vivid spots to attract on: increasing its core income and money holdings, a legacy of the COVID growth instances. Fulgent had $918 million in money and liquid property on the finish of Q3 ’22.

Checking in once more with analyst Cooper, we discover that he sees the corporate within the midst of a change, from worthwhile COVID testing in a pandemic period to an oncology testing base that can energy future operations.

“With a robust core expertise spine throughout each the Moist Lab and Dry Lab and broader operations, we consider the corporate can efficiently promote these capabilities in addition to add new prospects for every. It should display the power to scale with out compromising service (as the corporate prides itself on aggressive turnaround instances if Pioneer) was not central to the corporate’s success, however with targets that the corporate sees as a complete baseline check of $105 billion, the runway is important,” Cooper wrote.

“From an funding perspective, $26 in web money per share not solely helps create a ground for the inventory, however creates a further choice for capital deployment,” the analyst summarized.

Total, Cooper thinks it is a inventory price holding. The analyst charges FLGT inventory as an outperformer (i.e. Purchase), and its $45 value goal suggests a robust upside potential of 34%.

Solely 3 analysts have weighed in on FLGT inventory, and their opinions embody 2 Buys to 1 Maintain for a Reasonable Purchase consensus ranking. The typical inventory value goal of $45 matches Cooper’s. (We see FLGT inventory forecast)

To seek out good concepts for shares buying and selling at enticing valuations, go to TipRanks’ Greatest shares to purchasea software that unites all of TipRanks’ fairness insights.

Not giving an opinion: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is extremely vital to do your personal evaluation earlier than making any funding.

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