As we head into the final stretch of 2022, with less than three weeks until we turn the page to 2023, the markets and the economy are sending a series of mixed signals. Stocks have leveled out somewhat over the past month, with reduced volatility compared to the previous six months. At the same time, investors must consider the economic signals – especially persistently high inflation and uncertainty over the Federal Reserve’s interest rate decision this week. It’s a difficult environment for making stock decisions.
What’s needed here is a simple tool that can cut through the noise and give an easy-to-read, data-driven sign on any particular stock. That’s where the TipRanks Smart Score comes in, an analytic tool that takes the flood of raw market data and breaks it down by a series of 8 readily identifiable factors, each of which is known to match up to future outperformance. Taken together, and distilled into a single-digit score, these factors give a useful pointer for each stock. The Smart Score rating comes on a scale of 1 through 10, with a Perfect 10 being the highest, and the clearest signpost for investors.
A select few stocks will pick up the ‘Perfect 10’ score, the highest rating from the Smart Score. Are these the right ones for your portfolio? According to the algorithms, they check all the boxes for gains in the year ahead; we’ve pulled up details on three of them to find out what makes them tick. Here they are, along with commentary from the Street’s analysts.
We’ll start in the tech world where HubSpot is a well-known name in online inbound marketing, and has a reputation as an innovator in the field. HubSpot offers its customers – social media experts, CRM experts, content managers, and SEO optimizers – a strong line-up of web analytic products, using the freemium model. Under this model, basic services are available to users free of charge, with higher-level options and upgrades available as paid subscriptions.
HubSpot’s software is in 6 languages, and is in use in more than 120 countries by more than 158,000 paying customers. That metric comes from the 3Q22 financial results, and represents a 24% increase year-over-year. The company’s subscription model is profitable, and HubSpot brought in over $11,000 on average, in subscription revenue per customer in Q3, up 7% for the year-ago period. Total revenue in 3Q22 was reported at $444 million, for a 31% y/y gain. Subscription revenue made up $435 million of that total, and was up 32% from 3Q21.
On earnings, the company reported both positives and negatives. In GAAP terms, HubSpot posted a quarterly net loss of $31.4 million, or 65 per share. This was significantly deeper that the GAAP net loss posted in 3Q21. On the other hand, in non-GAAP figures, net income was positive, at $35.1 million, or 69 cents per diluted share, representing a 37% increase in the net and a 38% increase in the diluted EPS.
However, the stock, like so many others, has taken a sound beating this year, and shares now trade at a 56% discount to the price at the beginning of 2022.
That could be an opportunity, according to the thesis laid out by Credit Suisse analyst Rich Hilliker.
"We believe HubSpot is positioning itself as the next front and middle office software leader and that its value-led growth strategy is strongly resonating with customers at all stages of their lifecycles, leading to greater standardization and eventual expansion... We believe the combination of thoughtful, diligent, and continued product development, coupled with a well-trodden, natural freemium to paid conversion motion, has resulted in a deeply compelling product and value-led growth algorithm that is getting customers 'Hooked on Hubs,'" Hilliker opined.
To this end, Hilliker rates HUBS an Outperform (i.e. Buy), with a $400 price target that implies a one-year gain of 37%. (To watch Hilliker’s track record, click here)
Overall, tech firms like HubSpot never lack for analyst attention, and HUBS shares have 21 recent analyst reviews on record. These break down 19 to 2 in favor of Buys over Holds, for a Strong Buy consensus rating. With a trading price of $291.38 and an average price target of $380.38, the stock boasts a potential upside of ~31%. (See HUBS stock analysis on TipRanks)
The next 'perfect 10' stock we're looking at is Vaxcyte, a biotech firm involved in vaccine research, working on prophylactic vaccines against a range of serious bacterial infections, including pneumococcal disease, Group A strep, and periodontitis. The company’s research tracks are based on Vaxcyte’s proprietary cell-free protein synthesis platform, XpressCF, and the aim is to create vaccines that feature distinct antigens and protein carriers – critical building blocks essential to vax efficacy.
The company’s research pipeline currently features four tracks, with three of them currently at pre-clinical stages. The fourth, VAX-24, is under development as a preventative for invasive pneumococcal disease and pneumonia. VAX-24 is a 24-valent pneumococcal conjugate vaccine (PCV) candidate, and data released at the end of October was highly positive, meeting multiple milestones. The topline data from the Phase 1/2 proof-of-concept study showed positive results on safety, tolerability and immunogenicity at all doses, and provided support for the company to move forward with a Phase 3 trial based on the 2.2mcg dose. The study was conducted with healthy adults aged 18 to 64. Looking ahead, Vaxcyte is planning to conduct regulatory discussions re: Phase 3 trial during 2H23, and expects to have Phase 3 data available in 2025.
The market reaction to the data release shows why biotech stocks can be popular with investors – the shares jumped 60% in one day, and are now trading at approximately double their October 20 valuation.
Vaxcyte took advantage of the jump in share price to make a public offering of stock. The company put 17,812,500 shares of common stock on the market, at $32 each, and with the underwriters options fully subscribed, realized $690 million in gross proceeds from the sale.
Looking ahead, BTIG analyst Thomas Shrader sees plenty of strength in the company’s pipeline and its potential addressable market. He writes, “The company’s vaccines look poised to become best-in-class in the nearly $40 billion infectious disease vaccine market... Most of the current value of the stock is based on the lead program VAX-24 and the recent P1/2 readout leaves the vaccine poised to be BIC in this $7 billion market that could double in the next decade..."
"It’s hard to imagine a stronger readout than the recent P1/2 data for VAX-24 with all three doses demonstrating a profile likely to support approval and all three doses showing an AE profile essentially identical to less effective but already approved vaccines,” Shrader added.
Shrader adds a Buy rating to his commentary on Vaxcyte, and completes his bullish stance with a $69 price target, indicating his confidence in an upside of ~63% for the next 12 months. (To watch Shrader’s track record, click here)
Overall, Vaxcyte has picked up 4 recent analyst reviews, and they are all positive – making the Strong Buy consensus rating unanimous. The shares last closed at $42.39 and have an average price target of 61.75, implying a ~46% upside by the end of next year. (See PCVX stock analysis on TipRanks)
Many individuals are born with disorders for which there is no cure, or for which only meager treatments exist to improve their quality of life. However, with gene therapy, it is said that entire ailments can be eliminated after just one treatment that targets their source.
The next stock, Rocket Pharma, is a gene therapy company involved in the development of new treatments for severe diseases with ‘high unmet medical needs.’ The company uses gene therapy methods to adapt viruses as delivery systems, capable of inserting new genetic information directly into the disease-affected cells, replacing the incorrect or damaged genes and altering the cell at the genetic and molecular levels to reduce the disease presentation. Potentially, these therapies offer potential for cures of the targeted diseases, rather than palliative care.
The company’s pipeline features active programs working on gene therapies for several terminal cancers and severe pediatric conditions. Targeted diseases include Danon Disease, Fanconi Anemia (FA), Leukocyte Adhesion Deficiency (LAD-I), and Pyruvate Kinase Deficiency (PKD), and the company is working through associated viral vector (AAV) and lentiviral vector (LVV) tracks to create delivery systems for the genetic therapeutic agents.
Based on recent strong clinical results, Rocket expects to make regulatory filings on both the LAD-I and FA tracks during 2023. The LAD-I filing is planned for 1H23, and the FA filing for 2H23. Clinical data on both tracks should be presented before the end of this year.
In other clinical updates, Rocket has reported positive results from its Phase 1 clinical trial of RP-A501 against Danon Disease. The study showed that the drug candidate gave a durable treatment effect and pediatric and adult patients showed 9 to 36 months of disease improvement. The drug candidate was also well-tolerated. The company has designed a Phase 2 pivotal study, and is working with the FDA to get regulatory feedback.
While all of that has been going on, Rocket has also moved to expand its AAV-based gene therapy program in cardiovascular disease through the acquisition of Renovacor. The move gives Rocket ownership of Renovacor’s pipeline of AAV-based gene therapy products. The merger terms were conducted in all stock, and Renovacor shares stopped trading on December 1.
Rocket’s shares troughed in May of this year, but since then are up 139%. Yet, Canaccord analyst Whitney Ijem sees the company in a strong position to continue its gains.
“We continue to think RCKT shares represent a unique opportunity within the gene therapy space. We like the company's differentiated gene therapy pipeline... The late-stage pipeline provides line of sight to commercialization for both RP-L201 and RP-L102, with BLA+MAA filings anticipated in 1H23 and 2H23, respectively. In the meantime, RCKT's earlier-stage pipeline should continue to provide clinical catalysts in the near to medium term. Plus, we expect adds to the pipeline – so called 'Wave 2' in 2023 – will further add to valuation and the catalyst-driven side of the story," Ijem opined.
These comments back up Ijem’s Buy rating, and her price target, of $49, implies a 157% upside potential for the year ahead. (To watch Ijem’s track record, click here)
The bulls are definitely running for RCKT; the stock has 11 recent analyst reviews, and they are all positive – for a unanimous Strong Buy consensus rating. The stock is priced at $19, and its $54.90 average price target is even more bullish than the Canaccord view, suggesting ~187% gain in the next 12 months. (See RCKT 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.
