It’s change into mainstream to foretell a recession this 12 months. The Federal Reserve is on a gradual path of rate of interest will increase – the most recent was a 25-basis level hike introduced in the present day – to struggle inflation, and the central financial institution has already indicated it can keep this course till inflation is effectively and actually down. By definition, that may contain rising the price of capital to choke off the cash provide, and sure spark a recession within the cut price.
However not everyone seems to be leaping onto that practice. Watching the state of affairs from funding banking large Credit score Suisse, chief US fairness strategist Jonathan Golub takes the contrarian stance. Predicting a lackluster 12 months for shares, quite than an outright collapse, Golub stated, “If I’m right in the way in which that we do keep away from this recession within the near-term, the market will proceed to offer you just a little little bit of reduction. So the decision is for multiples stand up just a little bit, earnings to fall just a little bit, after which you find yourself with a completely uninspiring 3-4% return for equities between now and the top of the 12 months.”
What traders want to recollect right here is that Golub’s ‘uninspiring return’ represents a mean – and there shall be loads of shares beating that common and bringing critical development to the desk. His colleagues among the many Credit score Suisse inventory analysts are highlighting this reality, by publishing suggestions for shares that, of their view, will deliver positive aspects of 30% and go up from there. In any market situation, development like that may earn a re-assessment from traders.
For our half, we may give these Credit score Suisse picks that re-assessment. Utilizing the info instruments at TipRanks, we’ve pulled up the small print on two of them; right here they’re, together with the analyst commentary.
Exelixis, Inc. (EXEL)
The primary firm we’re taking a look at is Exelixis, a biotech agency that has reached the brass ring – it has a line of accepted drugs available on the market, producing regular revenues, and has a latest historical past of constructive quarterly earnings. Exelixis’ lineup of medicines is targeted on most cancers therapy, and the corporate payments itself as a ‘resilient chief’ within the oncology area.
The flagship product is cabozantinib, a medicine used within the therapy of thyroid and renal cancers. Exelixis markets the drug below two model names, Cabometyx and Cometriq, and these, together with the cobimetinib formulation Cotellic – marketed in partnership with Genentech – type the present core of the corporate’s enterprise.
It’s a profitable core, too. In accordance with the latest launch of its preliminary 4Q22 and full 12 months 2022 monetary outcomes, Exelixis noticed complete revenues of $1.6 billion final 12 months, in comparison with a complete high line of $1.4 billion in 2021. Trying forward, the corporate is guiding towards a high line between $1.575 billion and $1.675 billion for 2023. The newest backside line numbers come from 3Q22, when Exelixis reported a GAAP internet earnings determine of 23 cents per share, beating the consensus estimate of 20 cents a share. Exelixis will report its full information for 4Q22 on February 7.
Going ahead in 2023, Exelixis’ fundamental precedence shall be conducting the medical trial program to broaden the product line. Arising this 12 months, the corporate could have a knowledge readout for a Part 3 medical trial of cabozantinib within the therapy of metastatic non-small cell lung most cancers. This examine is being run as a mix remedy with atezolizumab and has enrolled 366 sufferers. Additionally in a Part 3 trial is zanzalintinib, a brand new drug candidate (earlier known as XL092) for the therapy of superior non-clear-cell renal carcinoma. The examine has 291 sufferers and is due for enlargement.
The pipeline doesn’t come low-cost, however along with its income stream, Exelixis has deep pockets. The corporate completed 3Q22 with $2.1 billion in money and liquid belongings readily available, a rise from the $1.9 billion accessible on the finish of 2021.
Becoming a member of the bulls, Credit score Suisse analyst Geoffrey Weiner takes an upbeat stance on this firm and its inventory.
“Based mostly on our conversations with key opinion leaders (KOLs) and evaluation of the renal cell carcinoma (RCC) panorama, we mission product gross sales may develop to ~$2B in 2025, even with out potential label expansions,” Weiner famous.
“EXEL has ample money movement to bridge the hole between cabo and worth creation from its pipeline, which incorporates a number of clinical-stage candidates and an underappreciated/rising antibody drug conjugate (ADC) pipeline… We predict the prospects for the home-grown asset zanzalintinib/XL092 (next-generation cabo-like TKI) and XB002 (TF-ADC) are missed, as is EXEL’s transfer to construct out an ADC pipeline. We consider there are a number of medical catalysts to drive pipeline curiosity over the following one to 2 years,” the analyst added
Gazing into the close to future, Weiner sees match to price EXEL shares an Outperform (i.e. Purchase), with a worth goal of $29 indicating potential for a strong 65% share appreciation over the approaching 12 months.
General, EXEL shares keep a Robust Purchase analyst consensus score, based mostly on 13 latest opinions. These opinions break down 11 to 2 in favor of Buys over Holds, and the corporate’s $25.33 common worth goal implies a 44% upside potential from the present share worth of $17.55. (See EXEL inventory forecast)
Boyd Gaming Company (BYD)
The following Credit score Suisse decide we’re taking a look at is Boyd Gaming, one of many main on line casino operators within the gaming trade. Spreading out of its Las Vegas house, Boyd now has 28 gaming services and properties throughout 10 states, and as well as, the corporate has a 5% fairness stake in FanDuel Group, a number one sports activities betting operator. Boyd’s experience has additionally introduced the corporate a administration settlement with a tribal on line casino in northern California.
This array of properties has supplied Boyd a powerful income stream and earnings. The corporate will report its full-year 2022 outcomes tomorrow after market shut, however wanting again to 3Q22, we see that Boyd had $877.3 million on the high line. This was up 4% year-over-year, and with a 9-month complete income of $2.63 billion, the corporate is effectively on observe to beat final 12 months’s full-year determine. On the backside line, Boyd’s Q3 adjusted earnings of $1.48 per share have been up greater than 13% y/y.
Boyd has gotten a lift from sturdy client spending popping out of the pandemic interval. It stays to be seen if it will maintain up going ahead; a discount within the price of inflation shall be supportive of the patron discretionary spending phase usually.
Of curiosity to traders, Boyd this 12 months reinstated its quarterly dividend cost. The corporate had suspended dividends beginning in 2020, however restarted the funds in 1Q22. The present dividend is 15 cents per frequent share, greater than double the final 2019 cost. At this price, the cost annualizes to 60 cents and offers a small yield of 1%.
5-star analyst Benjamin Chaiken, in his write-up of Boyd for Credit score Suisse, lays out a number of the explanation why this inventory ought to do effectively going ahead: “(1) Progress within the Downtown Las Vegas market and BYD’s funding within the Freemont property. We predict the Downtown market may inflect larger as company demand on the Strip returns… (2) BYD is spending $100m to maneuver its Treasure Chest on line casino from a riverboat to a newly developed land-based asset adjoining to the present property. We predict new facilities, higher entry, and a extra cohesive on line casino flooring may drive a 20-30% ROI. (3) BYD bought Pala Interactive in November ’22, so annualizing the acquisition must be a small tailwind in ’23… (4) BYD has a Tribal administration contract for the Sky River On line casino, which we estimate will drive $36m of mgmt. charges in ’23…”
Based mostly on these 4 causes, Chaiken charges BYD shares an Outperform (i.e. Purchase) score, together with an $82 worth goal that implies a 12-month potential upside of 31.5%. (To look at Chaiken’s observe file, click on right here)
General, this inventory will get a Reasonable Purchase from the Road’s analyst consensus, based mostly on 7 analyst opinions that embody 4 Buys, 2 Holds and a single Promote. The inventory is promoting for $62.35 and its $71.33 common worth goal suggests an upside potential of ~14% on the one-year horizon. (See BYD inventory forecast on TipRanks)
To search out good concepts for shares buying and selling at enticing valuations, go to TipRanks’ Finest Shares to Purchase, a instrument that unites all of TipRanks’ fairness insights.
Disclaimer: 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.
