Earnings season is in full swing, and so far the Q3 numbers are looking solid. As of Monday’s close, 84% of the 117 S&P-listed companies reporting so far have beaten expectations. These results have calmed some fears that the third quarter would disappoint.
Meanwhile, Oppenheimer strategist John Stoltzfus believes interesting times lie ahead, with the most likely goose to the markets coming from the political scene.
“Ongoing negotiations in Congress to trim the cost of the next round of policy related stimulus along with the Federal Reserve likely on the verge of starting tapering of its monthly bond buying program (as soon as next month with prospects for an upward tweak to its benchmark rate next year) could set the stage for stocks to move higher through the end of this year,” Stoltzfus noted.
Taking Stoltzfus’ outlook and turning it into concrete recommendations, the pros at Oppenheimer are giving two stocks a thumbs up. Specifically, the firm’s analysts see at least 50% upside potential in store for each. We’ve looked up these stock calls in the TipRanks database, and found out that both tickers also sport a “Strong Buy” consensus rating from the rest of the Street. Let’s take a closer look.
We’ll start with Valens, a small-cap player in the semiconductor industry. This company lives in the ‘fabless’ segment of the chip industry, designing chips and producing prototypes which are then manufactured in a chip foundry. Valens was founded 15 years ago, and has become the industry leader in HDBaseT technology, now the industry standard for audio-video chips. The company also supplies chips to the automotive industry, where its products are in demand for in-vehicle connectivity solutions.
Valens has been around for a while, but it is new to the public markets. The VLN ticker entered the NYSE on September 30, after completing a SPAC merger with PTK Acquisition Corporation. The merger brought $240 million in gross proceeds to Valens, which was valued at$1.16 billion.
Shortly before entering the public markets, Valens released its 2Q21 results, showing $17.5 million in top-line revenue, with $2 million of that coming from automotive orders. The total was up 9.2% year-over-year, while automotive revenues were up 400%. EPS came in at a 3 cent loss, but the company’s prospects going forward look solid. Valens had record bookings in Q2, totaling $35.3 million, up 200% yoy, and an orders backlog of $56.5 million as of the end of Q2.
Oppenheimer’s 5-star analyst Rick Schafer, rated #13 overall by TipRanks, sees the company in a strong position to expand market share.
“VLN’s proprietary HDBaseT all-in-one connectivity solution contributes 90% of sales today. We see growth in this high GM segment accelerating in the years ahead as HDBaseT further penetrates industrial, medical, and transportation markets. Auto, 10% of sales today, is growing rapidly following MIPI’s adoption of the A-PHY standard for in-vehicle connectivity. We estimate VLN automotive revenues’ CAGR at 105% through 2024, contributing >40% of sales exiting 2024,” Schafer opined.
All of this prompted Schafer to initiate coverage with a Buy rating and $12 price target. This target conveys his confidence in VLN’s ability to climb 50% higher in the next year. (To watch Schafer’s track record, click here)
The Oppenheimer view may turn out to be the conservative look at Valens – the stock’s Strong Buy consensus rating is based on a unanimous 3 reviews, and the average price target of $15 suggests ~87% upside from the current share price of $8. (See VLN stock analysis on TipRanks)
Portage Biotech (PRTG)
For the second Oppenheimer pick, we’ll turn to the biotech industry. Portage is a clinical-stage biopharmaceutical company engaged in immune-oncological research. The company aims to leverage its proprietary drug platform to create cancer therapies that will improve results and quality of life for patients – especially patients for whom existing therapies have not been successful.
Portage has five platform technologies, using different approaches to creating new cancer-fighting drugs. The two platforms farthest along the clinical trial progress are designated PORT-2 and PORT-3; both are iNKT agonist, but with different delivery systems, targeting different cancers. PORT-2 is packaged in a liposome, while PORT-3 can be ‘co-delivered with antigen-specific vaccines.’
The company has clinical trials underway for both of these platforms, at Phase I/II. The study underway for PORT-2 is a safety trial for the drug as a monotherapy and in combination with PD-1 checkpoint inhibitors. The target conditions are non-small cell lung cancer (NSCLC) and melanoma. The company has already dosed its first patient in the study, and expects to enroll up to 100 patients.
On the PORT-3 track, Portage last year initiated its Phase I/II trials, and the first patient in the European section of the trial was dosed in April of this year. The study has both Phase I and Phase II portions, with 15 patients expected in the Phase I study and up to 42 patients in the Phase II randomized study.
Kevin DeGeeter, another of Oppenheimer’s 5-star analysts, sees PORT-2 as the key here. Of the general prospects, he writes, “We see opportunity for PORT-2 to demonstrate clinical proofof-concept for invariant natural killer T cell (iNKT cell) agonists in stimulating DC and T-cells’ responses to broaden activity of checkpoint inhibitors including PD-1. View response from PD-1 refractory patients as evidence of PORT-2 anti-tumor efficacy.”
Getting into the financial side of PORT-2’s potential, DeGeeter adds, “Our model calls for PORT-2 to launch in the US and Europe in 2026 for metastatic melanoma and NSCLC and to achieve 7% US market share and 3% European share by 2031. We assume PRTG partners ex-US commercialization and recognizes $787.6 million revenue in 2031E.”
To this end, DeGeeter rates PRTG shares an Outperform (i.e. Buy), and sets a $30 price target suggesting room for 56% upside growth for the stock. (To watch DeGeeter’s track record, click here)
Once again, Oppenheimer, while bullish, is a bit conservative compared to the general Wall Street view. Portage has 3 recent reviews, and they are all positive, making for a Strong Buy consensus view. The shares are priced at $18.89 and the $35 average target implies an 82% upside from that level in the next 12 months. (See PRTG 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.