The year 2022 has begun with a significant increase in market volatility, as well as a rapid reversal of last year’s favourable trend. A range of enhanced risk factors are often attributed to the abrupt decline and move to a more pessimistic investor mindset. Geopolitical tensions on the Russia-Ukraine border, as well as concerns about China’s belligerence, are among the worldwide tensions. Domestically, the markets are being influenced by high and growing inflation, as well as the possibility of higher interest rates from the Federal Reserve.
This last component has recently received a lot of attention. The Federal Reserve is largely expected to raise interest rates by a half-percentage point next month, followed by at least two more hikes before the end of the year. These anticipated rate hikes, according to JPMorgan’s Chief Global Markets Strategist Marko Kolanovic, are not cause for concern.
Kolanovic writes, “We believe risky asset markets have mostly reacted to monetary policy moves by now,” and adds, “We expect risky asset markets to rise as they digest these risks and sentiment improves, helped by inflows from systematic investors and corporate buybacks.” In our model portfolio, we maintain a pro-risk stance with a strong cyclical tilt…”
So, which stocks has JPMorgan given its seal of approval? The firm’s analysts have identified two equities with a low price – however the analysts consider the low price as a gateway in these circumstances. We searched TipRanks’ database for both names to see what other Wall Street analysts had to say about them. Let’s look at it more closely.
Ultragenyx Pharmaceutical (RARE)
The first is Ultragenyx, a biopharmaceutical business focused on rare diseases that is in the commercial and clinical stages. The FDA defines these disorders as affecting fewer than 1 in 50,000 individuals; as a result, they have a small patient pool and minimal opportunities for drug sales to cover development costs. Ultragenyx spreads those costs out by collaborating with other pharmaceutical researchers on numerous development lines and focusing on the commercialization of its approved drugs.
On this front, the business has enjoyed some success. Ultragenyx reported total revenue of $83.4 million in 4Q21, which was in line with analyst forecasts. Burosumab (marketed as Crysvita) generated $55.5 million in revenue, with lower amounts coming from two other commercial-stage drugs. Product sales of triheptanoin (Dojovi) were $11.8 million, while vestronidase alfa (brand name Mepsevii) was $3.1 million.
Because Dojovi is still in the early stages of commercialization, its revenue figure is deemed positive. By the end of 2021, the medicine had 270 reimbursed commercial patients in the United States.
Ultragenyx reported total revenues of $351.4 million for the year. This was an increase of 29% over the $271 million forecasted for 2020. The full-year rise is due to higher Crysvita sales as well as the introduction of new medications. The company ended the year with $1 billion in cash on hand, which it may use to fuel its development pipeline.
Ultragenyx has a number of advanced programs in the works. GTX-102, for example, is being studied in conjunction with GeneTx. This medication is now in Phase 1/2 clinical trials as a potential therapy for Angelman Syndrome. The first four patients, all from Canada and the United Kingdom, were given several doses with no side effects. Patient dosing has been implemented in the United States. The business intends to deliver safety and efficacy data in the middle of this year as the next major driver on the calendar.
DTX401, for the treatment of glycogen storage disease type Ia (GSDIa), and DTX301, for the treatment of ornithine transcarbamylase (OTC) deficiency, are two of the company’s most advanced research tracks. Both have completed early-stage clinical trials and are now moving forward to Phase 3 tests. The first patients in DTX401’s Phase 3 GlucoGene trial have already been dosed, while DTX301’s Phase 3 eNH3ance study is set to begin later in 1H22. Both studies will run for 48 weeks and 64 weeks, respectively.
Despite the encouraging progress in the pipeline, Ultragenyx’s stock has dropped 50% in the last year. This, according to JPMorgan 5-star analyst Cory Kasimov, is a good time to buy.
“We can no longer overlook this opportunity as a diverse orphan disease company with tangible assets, 2022 catalysts, and a competent management team.” The mid-year GTX-102 Angelman update is undoubtedly the most important event, and management continues to sound upbeat. We recognise there’s a lot riding on this update…. we’re not attempting to call a market bottom, but we’re more bullish on stories with genuine assets, pipeline flexibility, and impending levers that offer a positive risk/reward… and we feel RARE satisfies that standard,” Kasimov stated.
Based on the foregoing, Kasimov rates Ultragenyx shares as Overweight (i.e. Buy), with a $132 price target implying an 85 percent upside potential for the year ahead. (Click here to see Kasimov’s track record.)
The Strong Buy consensus view on Wall Street reflects the positive mood in this market. This viewpoint is supported by ten recent assessments, nine of which are Buys and one is a Hold. Shares are currently trading for $71.17, with an average price objective of $139.10, representing a 95 percent one-year gain.
Goodyear Tire (GT)
Now let’s change gears and look at one of the more well-known names in the US stock market. In fact, you may already be utilising some of their products. Goodyear is one of the top four tyre producers in the world, and the largest in the United States. The Cooper Tire & Rubber Company was the company’s most recent expansionary step, which was completed last year. Goodyear paid $2.5 billion for the acquisition.
However, the acquisition paid off for Goodyear, as the tyre manufacturer announced strong fourth-quarter and full-year earnings. Revenue for the fourth quarter was $5.05 billion, the highest in more than two years and up 38 percent year over year, while EPS of 57 cents per share easily above the projection of 33 cents. Total revenues for the year totaled $17.5 billion, narrowly edging over the predicted $17.3 billion. Annual EPS of $2.09 was announced, exceeding the $1.82 expectation.
Despite these strong results, Goodyear’s stock dropped dramatically after the announcement, and the stock is now down 33% from its January high. The stock price drop has been ascribed to management’s admission that inflationary and economic pressures are increasing against the company and would most likely increase in 2022. Goodyear is facing increased labour, raw material, and shipping costs across its supply, manufacturing, and distribution chains. Raw materials alone will cost $700 million to $800 million more in the first half of 2022 than in the first half of 2021, according to the firm.
Investors should not panic, according to JPMorgan analyst Ryan Brinkman, nor should they ignore this stock.
“We believe the sell-off is overdone, given what we expect to be much more modest needed reductions in consensus SOI and FCF, and because pricing has been quite strong so far this cycle, with Goodyear posting its 6th consecutive positive quarterly Price/Mix-to-Raw Materials spread in 4Q, implying the possibility of better than currently envisaged ability to price for non-commodity costs, although these costs are likely recoverable via pricing over time, suggesting lit.”
In line with these remarks, Brinkman rates GT as Overweight (Buy) and sets a $23 price objective, implying a 40% upside potential through 2022. (Click here to see Brinkman’s track record.)
Overall, Wall Street analysts are divided down the middle on this one, with the bulls having the upper hand; the stock qualifies for a Moderate Buy consensus recommendation based on three Buys and Holds, each. The outlook for the stock price is more certain; given the average objective of $22.40, the prediction calls for a 36 percent gain over the next 12 months.