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3 stocks JP Morgan says are poised to tear higher
Take a deep breath, get ready, the new year is just around the corner, and while we are all ready to celebrate – just on principle, because leaving 2020 is reason enough for joy – let’s take stock too, where we are and where we are going. There is growing optimism caused by the availability of COVID vaccines and the potential for a return to normal on the country’s main roads. Finally a chance that the lockdown and social distancing regimes will really end in the near future. There is a real chance that John Q. Public will get back on his feet by the end of 2021. Combine that with the current exuberance of Wall Street, when stock markets trade at or near their all-time highs and we look to the prospect of a banner year. A return to grassroots normalcy will be great – but we also have the prospect of an overall rising market. Dubravko Lakos-Bujas, chief US equity strategist at JPMorgan, writes: “Equities are in one of the best scenes in years. The risks related to global trade tensions, political uncertainty and the pandemic will disappear. At the same time, the liquidity conditions remain extremely positive and the interest rate environment is extremely favorable. This is a goldilocks environment for risky assets. “Lakos-Bujas is not afraid to quantify his optimism. He predicts the S&P 500 will grow up to 19% and says the index will hit 4,000 in early 2021 and hit up to 4,400 later in the year. JPM’s roster of equity analysts is turning Lakos-Bujas’ outlook into concrete recommendations and proposing three stocks that look particularly compelling. We took the trio through the TipRanks database to see what other Wall Street analysts had to say. Sotera Health (SHC) Sotera Health occupies a unique niche in the healthcare industry and, through its subsidiaries, offers a range of security-oriented support companies for healthcare providers. These services include sterilization procedures, laboratory testing and advisory services – and their importance is immediately clear. Sotera has over 5,800 healthcare provider customers in more than 50 countries around the world. While it’s not a new venture – two of its offices have been in business since the 1930s and 1940s – Sotera is new to the stock markets having carried out that exact initial public offering after November. The initial offering was considered successful, raising $ 1.2 billion on a sale of 53.6 million shares. Earlier this month, Sotera announced that it had used much of its IPO capital to pay off $ 1.1 billion in existing debt. This included $ 341 million for a first-term loan and $ 770 million for senior debt issuance. This move allowed Sotera to increase its revolving credit facility to $ 347.5 million. This facility is currently undrawn. Among the bulls is JPM analyst Tycho Peterson, who rates SHC overweight (i.e. buy) with a one-year price target of $ 35. This number suggests an upward movement of 31% from current levels. (To see Peterson’s track record, click here.) “SHC is uniquely positioned to benefit from healthy end-market growth and favorable pricing momentum,” noted Peterson. “With a diversified operating platform, sticky multi-year contracts, efficient pricing strategy, significant barriers to entry, and high levels of regulatory oversight, we expect revenue to grow ~ 9%, with higher utilization driving further expansion [and] The resilient FCF supports the ongoing de-leveraging and allows us to be positive about both the short- and longer-term outlook. “The Wall Street analyst corps is firm behind Peterson on this – in fact, the 7 most recent valuations are unanimous buys, making analyst consensus a strong buy. SHC is currently trading at $ 26.75, and its average price target of $ 32.50 implies an upward movement of 21.5% by the end of 2021. (See SHC stock analysis on TipRanks) Myovant Sciences (MYOV) Let’s stick with the healthcare industry and look at myovant sciences. The biopharmaceutical clinical research company focuses on key issues related to diseases of the reproductive system in men and women. In particular, Myovant is working on developing therapies for uterine fibroids, endometriosis, and prostate cancer. Relugolix is currently in the Myovant pipeline for the treatment of fibroids and endometriosis. The drug is in Phase 3 study for the latter and has submitted its NDA for the former. Also in preparation and in connection with reproductive health is MVT-602, a new drug to improve egg maturation and support in vitro fertilization. In addition, this month Myovant announced that Relugolix has been approved by the FDA – under the brand name Orgovyx – for the treatment of advanced prostate cancer. The drug is the first and currently the only oral gonadotropin releasing hormone (GnRH) receptor antagonist for the disease. Orgovyx is expected to be launched in January 2021. In his comment on this stock for JPM, analyst Eric Joseph describes how impressed he is with Relugolix, “based on the clinical and commercial potential of lead asset Relugolix for the treatment of endometriosis and uterine fibroids, and for the treatment of advanced prostate cancer in men. “The analyst added,” With regard to women’s health, we believe that all of the Phase 3 data to date increases the likelihood of Relugolix approval in the US for uterine fibroids and diseases at risk for endometriosis – commercial opportunities on the move current level are not reflected. In addition, we see an attractive commercial setup for Relugolix in the treatment of advanced prostate cancer as an oral LHRH alternative with a differentiated CV risk profile. “These comments support Joseph’s overweight (ie buy) rating on MYOV and his target price of $ 30 implies a 31% upside for the next 12 months. (To see Joseph’s track record, click here.) Overall, Strong Buy analysts’ consensus rating for Myovant is 5 ratings, and the breakdown is clear for the bulls: 4 to 1 in favor of buy versus hold. The share price of $ 22.80 and the average target price of $ 36.40 give a robust upside of ~ 59%. (See MYOV stock analysis on TipRanks) Metropolitan Bank Holding (MCB) For the third stock, we’re switching the lane from healthcare to finance, where Metropolitan Bank Holding – through its subsidiary Metropolitan Commercial Bank – does business as a full-service bank -, business and private customers in the middle market segment. The bank’s services include business loans, cash management, deposits, e-banking, personal checks and prepaid cards. In a year that has been difficult for most of us, MCB has seen steadily growing sales and solid profits. The bank’s revenue rose from $ 33 million in the first quarter to $ 36 million in the third quarter. Earnings per share were $ 1.27 per share, 30% higher than last year. The gains come from the bank’s total revenue forecast of $ 153.9 million for the next year, which – if met – will reflect a gain of 22% over 2020. While MCB’s financial performance has steadily increased, its stock’s appreciation has not followed. The stock has only partially made up for losses suffered at the height of the corona crisis last winter, and is currently down 26% this year. Analyst Steven Alexopoulos observes JPM’s New York banking scene and notes general troubles in the commercial real estate lending sector – an important part of MCB’s portfolio – due to the ongoing pandemic problems. In this environment, he sees the Metropolitan Bank as the right choice: “We do not see the prospects for New York real estate as bearish as most others. After many cycles in NYC, the time to buy was when the herd ran the other way. Over the past few cycles, MCB has outperformed our cover group in terms of its credit portfolio, ”noted Alexopoulos. Alexopoulos explains another key strength of MCB’s loan portfolio: “In a low interest rate environment, MCB is better positioned than peers to withstand the headwinds from NIM as 59% of MCB loans are fixed rate and 67% of the remaining floating rate loans have minimum floors to protect against lower short-term interest rates… ”To this end, Alexopoulos rates MCB as overweight (ie buy) along with a price target of $ 50. If the target is met, investors could see profits of 43% over the next year. (To see Alexopoulos’ track record, click here.) Some stocks are flying under the radar, and MCB is one of them. Alexopoulos’ is the only recent analyst rating of this company and it is extremely positive. (See MCB stock analysis on TipRanks.) To find great ideas for trading stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that brings together all of TipRanks’ stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analyst. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.