Morgan Stanley is betting on these 3 stocks; Looks over 40% upside down
Does the stock market’s epic rally just need a little breath? The last few weeks, stocks have experienced their first meaningful correction since the bull market started in March. Now the question that swirls around the street is whether the rally will pick up again, or is there more inconvenience along the way? According to Morgan Stanley̵
7;s chief executive of US equity capital Mike Wilson, uncertainty over the presidential election and the stalemate over the next stimulus package could lead to declines in September and October. “With regard to the correction, there is still a disadvantage, as the markets digest the risk of congressional network locks at the next fiscal agreement. While we believe something will eventually be done, it will probably take a few more weeks to get it over the finish line, ”he noted. Wilson, however, argues that the recent volatility in no way signals the end of the current bull market. “We believe that this correction is just that, a correction in a new bull market. It is normal for the markets to retire after such an incredible race as we have experienced since March. Moreover, when a new bull market coincides with a new economic cycle, the bull market usually runs for years, not months, ”the strategist explained. Taking Wilson’s prospects to heart, our focus shifted to three stocks that got thumbs up from Morgan Stanley. As the company’s analysts see over 50% upward potential waiting for each, we used TipRanks’ database to get the full scoop. Akero Therapeutics (AKRO) With its innovative drugs designed to restore metabolic balance and halt the development of NASH, a severe form of non-alcoholic fatty liver disease, Akero Therapeutics wants to meet the unmet medical needs of patients from all over the world. Based on the strength of its leading candidate, Morgan Stanley knocks the table. Introducing the company, 5-star analyst Matthew Harrison tells clients that AKRO’s treatment of NASH, efruxifermin (EFX), has a “best-class profile”. EFX is the company’s leading asset and was designed to mimic the biological activity of fibroblast growth factor 21 (FGF21), which regulates multiple metabolic pathways and cellular processes to reduce liver fat and inflammation, reverse fibrosis, increase insulin sensitivity and improve lipoproteins. to Harrison, NASH is a complex disease in which patients usually have multiple comorbidities such as obesity, type 2 diabetes, increased triglycerides, elevated LDL cholesterol, and low HDL cholesterol. “A promising therapeutic solution would not only treat the many components of NASH, but would also have an acceptable side effect profile given the possible comorbidities,” the analyst explained. This is where AKRO’s therapy comes in. In June, Akero presented the best – class data from its phase 2a survey. These data indicate that EFX improved the two liver histological endpoints recommended by the FDA along with resulting in weight loss, improvement in cardiovascular health (increased good HDL cholesterol, decreased triglycerides, no elevation of bad LDL cholesterol) and improvement of factors related to control blood sugar levels. This benefit / risk profile beats the competition, ”said Harrison. Looking at the indication as a whole, Harrison sees NASH as a very large option given that about 20 million people in the United States suffer from the condition. However, the analyst acknowledges there are commercial barriers. One of these is the fact that “NASH is currently undiagnosed in total except a very small percentage of the prevalent pool, as the diagnosis currently requires an invasive liver biopsy.” Together with demonstrating a positive benefit / risk profile, AKRO must therefore find patients and ensure payer support if the candidate receives FDA approval, in Harrison’s opinion. That said, Harrison believes AKRO is ready for the task. “We believe that, given EFX’s pure safety profile and broad effects, Akero is likely to largely overcome these commercial barriers,” he commented. Harris added: “It is important that since Akero’s treatment is injectable, we only assume that the drug will penetrate the population. of the sickest patients, with at least 400,000 patients currently diagnosed and seeking treatment in the US ”For this purpose, he assigns a 60% probability of success and estimates that unadjusted maximum sales for the US and the EU will land at $ 4.5 billion Based on all of the above, Harrison rates AKRO as an overweight (ie buy) along with a price target of $ 70. Should his dissertation play out, a potential twelve-month gain of 93% could be in the cards. (Click here to see Harrison’s track record) Do other analysts agree? They are. Only Buy ratings, 6, have actually been issued in the last three months. Therefore, the message is clear: AKRO is a strong buy. Given the average price target of $ 58.50, stocks may rise 61% in the next year. (See AKRO stock analysis on TipRanks) TransDigm Group (TDG) Next, we have TransDigm Group, which is one of the largest manufacturers, designers and suppliers of highly engineered aviation components, systems and subsystems. Its products are used on almost all commercial and military aircraft in operation today. Given its ability to withstand the COVID-19 storm, Morgan Stanley sees a bright future ahead. Morgan Stanley analyst Kristine Liwag said: “We see TransDigm as the most viable business model in commercial space.” However, this does not mean that the company has not been faced with serious challenges. Over the last few years, management has had to contend with how to price its defense business, the sustainability of its aerospace pricing strategy, the sustainability of its delivered balance, and the ability to avert a downturn. That said, Liwag remains optimistic going forward. “TDG has overcome short dissertation after short dissertation in the last few years and we do not expect these concerns to be repeated,” she noted. According to Liwag, TDG’s “ability to hold on to margins during a global pandemic” conveys its operational strength. To this end, her estimate for EBITDA margins is well above the rest of Street’s. The analyst also points out that the company reduced its SG & A expenses by $ 89 million over the year in fiscal 3rd quarter 2020. “We assume that the company will keep at least half of these savings, while the rest is returned in the form of variable selling expenses “, She said. Livag added, “We are positive about TransDigm, especially as the recovery in global air traffic would be beneficial for TransDigm’s core professionals, the aftermarket. In addition, we view it positively that TDG has the funds to acquire weaker players. “Back in April, the management created DKK 1.5 billion. Dollars in additional debt to reduce liquidity risks and provide an extra cushion. “A large debt burden is part of management’s strategy of providing private equity as a return to its shareholders. Historically, the company has used debt to acquire companies with similar attributes to TDG’s portfolio of 90% real estate products and 75% solar cells. If passenger air traffic continues to normalize, we would expect TDG to use its incremental capital to acquire struggling companies that fit its strategy, ”commented Liwag. All of this caused Liwag to leave its bullish call and $ 772 price target unchanged. This goal conveys her confidence in TDG’s ability to rise 48% higher next year. (To see Liwag’s track record, click here) Looking at the consensus distribution, 7 Buys and 5 Holds have been released in the last three months. Therefore, TDG receives a consensus assessment with moderate purchases. Based on the average price target of $ 500.58, stocks are ready to stay within range for now. (See TDG stock analysis on TipRanks) Cemex SAB (CX) Cemex considers itself one of the leading players in the building materials industry, where the company manufactures and distributes cement, ready-mixed concrete and aggregates. As its risk / reward profile has just become more positive, it may be time to take up stocks, says Morgan Stanley. Turnover for Morgan Stanley, analyst Nikolaj Lippmann believes that CX’s bullish guidance for the third quarter and FY20, which was significantly ahead of consensus, was “the catalyst that builds a bridge to a favorable shift of risk-reward.” On top of that, the stock is trading at 6.4 2020e EV / EBITDA, which is cheap compared to its historical performance and its peers, according to the analyst. That said, Lippmann claims “CX is essentially a good, strong write-down story with a choice of what could be an unusual U.S. cement market if the U.S. Congress approves an infrastructure package in 2021 … If we get an U.S. infrastructure package beyond 2020, it would add the finishing touch, we think, and take the market from good to possibly good. “Although a large multi-year package depends on the results of the US presidential and congressional elections, even in the basic case, Lippmann expects cement to show price strength in the United States. It should be noted that Lippmann believes that it is possible the next year will be relatively uneventful, but in that case he expects the industry to stop with 90% capacity utilization and grow from there. On top of this, pricing in Mexico has stopped. This “significantly reduces downward risks and helps to skew the risk reward positively,” in Lippmann’s view. What else works in CX’s favor? Cement demand year to date has pleasantly surprised Lippmann with upward looking during the first phase of the pandemic. He points to DIY work and Department of Transportation maintenance work in periods of low traffic and strong housing construction as the driving forces for this requirement. Everything CX intends, convinced Lippmann to rate the stock an overweight (i.e. Buy). Along with the call, he attached a price target of $ 6, indicating 50% upward potential. (To see Lippmann’s track record, click here) When we turn to the rest of the analyst community, opinions are distributed almost evenly. 6 purchases and 5 teams provide a consensus assessment of moderate purchases. At $ 4.16, the average price target implies 4% upward potential. (See Cemex stock analysis on TipRanks) To find great ideas for stocks that trade at attractive valuations, visit TipRanks ‘Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ stock insights. Disclaimer: The statements in this article are solely those of the featured analysts. The content is intended for informational purposes only. It is very important to do your own analysis before making an investment.