There is an old Chinese curse that says “May he live in interesting times.” Like it or not, we live in interesting times. COVID is receding but not gone, and while markets have rebounded well from the crisis (the S&P 500 is up 19% so far this year), the general economy is showing some worrisome signs. Jobs creation slowed in August, and employers reported over 11 million unfilled positions – but unemployment, while ticking down, remains above 5%. More ominously, in an indication that supply chains and distribution networks have not recovered from the pandemic disruptions, a record 65+ container ships are stuck off the Port of Long Beach waiting to unload.
So what to make of these conflicting signals? Should investors steer clear of the market, or dive in headfirst? Watching the scene from Oppenheimer, chief investment strategist John Stoltzfus believes that the current environment resembles past crises that have come and gone, leaving in their wake winners among the bulls.
“Whenever the luxury of hindsight for present times (i.e. the Pandemic Crisis) finally arrives investors may come to realize that indeed historical precedence shows that times of crisis, if successfully managed and navigated by monetary policy makers, businesses, and consumers, can be indeed good times for investors of many stripes including traders, intermediate term and longer-term investors,” Stoltzfus wrote.
Taking Stoltzfus’ outlook into consideration, we wanted to take a closer look at three stocks getting a round of applause from Oppenheimer. As the firm’s analysts think each could surge over 50%, we used TipRanks’ database to find out even more about the trio.
Metabolic diseases and hormonal disorders form a serious class of illnesses and are notoriously difficult to treat. Clarus is working on meeting the needs of patients with these disorders, through the development of metabolic therapies and androgen replacement. The company has one product, Jatenzo, which has been approved as a treatment for hypogonadism, and four additional drug candidates in pre-clinical testing for a variety of metabolic applications.
Jatenzo is the first – and for now, the only – oral softgel capsule for testosterone replacement therapy. It received FDA approval for the treatment of male hypogonadism back in 2019, but introduction to the US market was held up by patent litigation with Lipocine. The litigation, involving intellectual property and patent interference, has been settled by agreement between the parties as of this past June. The terms are sealed, but do not involve financial payments by Clarus – and the way is now clear for commercialization of the drug.
This company had one other major piece of news this summer, when in early September it announced the closing of its business combination with Blue Water Acquisition, a SPAC entity. The combination merged the companies and saw the CRXT ticker start trading on the NASDAQ on September 10. Clarus gained $25.3 million in gross proceeds from the SPAC transaction.
Among the healthcare name’s fans is Oppenheimer’s Leland Gershell. The analyst rates CRXT an Outperform (i.e. Buy), and his $12 price target implies an upside of ~112% for the year ahead. (To watch Gershell’s track record, click here)
“With twice-daily capsule Jatenzo, Clarus brings a first-in-class oral option to ~2.2M US men who receive testosterone replacement products. We expect Jatenzo will take growing share from topical and injectable mainstays as well as increase overall treatment rates among the ~6M US men diagnosed w/low testosterone. Alongside commercial execution, CRXT is actively pursuing once-daily development, indication expansion, and ex-US markets. In women’s health, recently in-licensed candidate CLAR-121 has potential to address breast disease (inflammation, cancer). Trading at a $[125M] enterprise value and with ~one year of cash on the balance sheet, we expect shares to Outperform as Jatenzo’s launch builds steam,” Gershell opined.
The Oppenheimer view is one of two positive reviews on record for Clarus, giving the stock its Moderate Buy consensus rating. Share are trading for $5.67 and their average target of $16 is even more bullish than Gershell allowed, suggesting a robust upside of 182% in the next 12 months. (See CRXT stock analysis on TipRanks)
Next up is Denali Therapeutics, a clinical stage biopharma company with a special focus on neurodegenerative diseases. The company is working on a score or more of drug candidates, with most in early preclinical development – but 5 candidates have begun human clinical trials. The drug candidates are engineered small molecules designed to cross the blood-brain barrier, and the targeted diseases include Alzheimer’s, ALS, Parkinson’s, and lupus, among others.
In the last few months, Denali has reported several milestones in its clinical trial programs. A Phase 1/1b study of DNL151, a potential treatment for Parkinson’s, met its safety goals and is on track for mid-stage clinical trials by the end of this year. Also this past summer, DNL310, being investigated in patients with Hunter syndrome, showed positive data in its Phase 1/2 study. The data demonstrated a durable CNS effect of the drug candidate, along with an acceptable safety profile. The company is planning a further clinical trials of DNL310 in the first half of next year.
In a somewhat more advanced trial stage, DNL758 entered Phase 2 dosing. This trial is being conducted in partnership with Sanofi, and is looking at the drug candidate as a treatment for lupus. Earlier this year, Denali received a $15 million payment from Sanofi, in relation to the start of the Phase 2 study. Denali has rights to further milestone payments on this drug for development, regulatory, and sales progress, and will receive royalties upon commercialization.
Finally, in early September, Denali announced that it had begun a Phase 1b study of DNL343, a proposed treatment for ALS, or Lou Gehrig’s disease. This is a severe, progressive neurodegenerative disease, with a patient base of 20,000 and up to 5,000 new diagnoses each year in the US alone. The company plans to present healthy volunteer data on the DNL343 Phase 1 study in October of this year.
All of this gives Denali multiple pathways for future advancement – and brought notice from Oppenheimer analyst Jay Olson.
“We view DNLI as an underappreciated emerging leader in neurodegeneration and CNS disorders with several late-stage development candidates based on novel and differentiated mechanisms of action (MOA) with strong preclinical and clinical data. DNLI applies scientific insights into the genetic and biological processes underlying disease pathology to pursue biomarker strategies that optimize development and potential commercial uptake,” Olson wrote.
The analyst added, “We view DNLI’s biomarker-driven approach as de-risking development and commercialization based on scientific rationale, and we believe that partnerships with industry leaders provide external validation.”
Unsurprisingly, Olson rates this stock an Outperform (i.e. Buy) along with an $85 price target. Investors stand to pocket ~67% gain should the analyst’s thesis play out. (To watch Olson’s track record, click here)
Overall, DNLI has 10 analyst ratings, split among 7 Buys and 3 Holds. This gives the stock a Moderate Buy from the analyst consensus. Shares are selling for $51, and the $91.38 average price target suggests it has a 79% one-year upside potential. (See DNLI stock analysis at TipRanks.)
The last Oppenheimer pick we’re looking at is EZCORP, a Texas-based company that operates pawn shops across the US and Mexico, and into Central America. The company has a total of 1,143 pawn store locations, with 627 of that total in Latin America.
On September 6, the company announced that it had acquired 128 new stores in Mexico – these numbers are included in the totals above – for a purchase price of $33.8 million. That price includes $17.3 million in cash, 212,870 shares of EZPW common stock, and repayment of $14.9 million worth of the seller’s debt. The seller, Cash Apoyo Efectivo, is entitled to additional payments up to $4.6 million in the next two years based on store performance. The newly acquired stores are located in the Mexico City area and have solid brand recognition in their home market.
The pawn business thrives when people are facing rough times, and EZCORP’s shares reflect that. The stock has gained 60% this year, easily outpacing the S&P 500’s 19% gain in the same period. Turning to financial results, EZCORP reported $174 million in total revenue for its third fiscal quarter of 2021 (ending June 30), along with $157.2 million in outstanding pawn loans. The pawn loan outstanding number – a key metric for the company – was up 39% year-over-year. The company reported an improvement in inventory turnover from 2.9x to 3.1x.
Brian Nagel, one of Oppenheimer’s 5-star analysts, describes this company as ‘overlooked opportunity,’ and writes: “Upon our initial study, we conclude that the company and its shares embody many key characteristics of ultimately successful small-cap consumer investment stories, including: 1) meaningful market share opportunity within a large and fragmented sector; 2) new senior leadership working to develop an improved strategy and to strengthen corporate controls; 3) solid cash position and balance sheet; 4) building external tailwinds enabling the company to better leverage recent internal efforts; and 5) depressed equity valuation.”
Taking all of the above into consideration, Nagel rates EZPW an Outperform (i.e. Buy) along with a $12 price target. This target conveys his confidence in EZPW’s ability to climb 57% higher in the next year. (To watch Nagel’s track record, click here)
Some stocks slip under the radar, picking up few analyst reviews despite sound performance, and this is one. Nagel’s is the only recent analyst review on record here. (See EZPW stock analysis 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.
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