Following the instability of the last two years, it’s time to assess the health of the markets, national economies, the corona pandemic, and what it all means for investors. It’s a lot to chew on, but banking major JPMorgan addresses these concerns in a new report. It’s far more than we can cover in-depth here, but we can look at a summary of key themes.
For starters, the corona crisis has shown to be incredibly unexpected, but investors have grown accustomed to it. According to current signs, we’re dealing with a virus that is transitioning from a pandemic agent to an endemic sickness, part of humanity’s natural ‘viral load,’ which we’ll all have to get used to. This means it will likely become more contagious as well as less virulent, with a decreasing impact over the next few years.
On the plus side, the global crisis of the last two years has caused households and corporations to strengthen their balance sheets. Households and companies were able to escape the worst of the pandemic with cash on hand thanks to a mix of government assistance and lower spending. This, combined with new technological advancements and shifts in how we view distant labor, bodes well for economies in the future. According to JPM, it will be the “basis for a significantly more lively economic climate,” with the promise of higher development following the slow 2010s.
JPM sees many megatrends, such as digital transformation, healthcare innovation, and environmental sustainability, as future drivers of investment, value, and R&D at the heart of this growth story. In short, these are the areas where investors should concentrate their efforts.
This is the setup to remember as we use the TipRanks platform to pull up information on three recent JPM choices — companies that the firm believes are well-positioned to prosper in today’s climate. According to the banking behemoth, these stocks are set to surge higher in the coming year, beginning at 45 percent and rising from there. Let’s take a look and talk to the analysts.
Solo Brands, Inc. (DTC)
Let’s begin with consumer pleasure. Solo Brands is a direct-to-consumer (DTC) retail platform that sells four premium outdoor lifestyle brands, including the company’s original Solo Stove as well as the newly acquired Our Kayak, ISLE Paddle Boards, and Chubbies clothes. The company primarily markets and sells through e-commerce and digital channels. Solo touts its aim as “bringing families together in the outdoors,” and the company grew at a compound annual growth rate of 132 % from mid-2016 to the end of 1H21.
Solo, like many other firms, went public this year. On October 28, the firm held its first public offering (IPO), selling 12.9 million shares for $17 apiece. This was the upper end of the initial range ($14 to $17), and the sale generated more than $219 million.
Solo’s September reorganization was followed by the October IPO. The company, formerly known as Solo Stove, changed its name to Solo Brands to represent its growth – the expanded product line and sales prospects enabled by the new brands in its constellation. Taken together, the reorganization and the IPO indicate forward-thinking management.
JPMorgan’s 5-star analyst Christopher Horvers notes several reasons to be bullish on the stock, including “(1) strong Solo brand momentum and near-term upside drivers; (2) structural advantages from being 84 percent direct to consumer; and (3) long-term optionality on platform synergies, product innovation, marketing and supply chain efficiencies, international expansion, acquisitions, and margin forecasts.”
Horvers’ comments support his Overweight (i.e., Buy) rating, and his $27 price target suggests a 65 percent one-year upside for the company.
With 7 assessments on record, including 6 Buys and 1 Holds, Wall Street analysts retain a Strong Buy consensus recommendation for Solo Brands. The shares are currently priced at $16.33, with a $26 average price target implying a 59 percent increase from that level.
Offerpad Solutions (OPAD)
Everything in retail has altered as a result of the digital revolution. You name it, whatever can be sold online — even real estate. Offerpad is an online real estate network that connects buyers and sellers directly, making it simple to put a house on the market or locate the perfect home to buy. Sellers can submit images, including a virtual walkthrough tour of the home, buyers can make offers, and transactions can conclude all online.
Offerpad, like Solo before it, has only lately entered the public trading markets. The OPAD ticker began trading in September of this year, following the completion of a SPAC merger with Supernova Partners Acquisition Company. When the transaction was finalised, Offerpad received $284 million in cash, and the firm now has a market valuation of $1.76 billion.
While the stock has since fallen, the company announced strong performance for its first quarterly report as a public company. In Q3, Offerpad reported a 190 percent year-on-year growth in revenue to $540.3 million, a 169 percent increase in gross profit to $53.1 million, and an increase in ‘homes sold’ from 749 in 3Q20 to 1,673 in the current quarter. The company boasts a quick turnover, with more than 99 percent of its inventory selling in fewer than 180 days.
This stock piqued the interest of JPMorgan’s Dae Lee, who stated, “…we continue to believe that consumers will value the ease, transparency, and control that OPAD’s solutions give.”
Following investor meetings, Lee elaborated: “Mgmt stressed that opportunity is vast, the market is very fragmented, and 99 percent of real estate transactions are done offline.” Currently, sellers who do not accept OPAD’s offer are more likely to go to traditional brokers rather than a competitor iBuyer. As a result, management feels that growing awareness and improving consumer adoption of buying are more crucial for growth than acquiring market share from rival buyers. OPAD’s distinctive features, such as 24hr shutting, prolonged stays, bundling, and auxiliary services, among others, should help OPAD gain share from the traditional model.”
In line with these remarks, Lee recommends the stock Overweight (Buy) and assigns an $11 price target, implying a 49 percent upside for the year ahead.
In its brief time as a public company, Offerpad has received three analyst ratings, with a two-to-one buy-to-hold ratio for a Moderate Buy consensus outlook. The average price objective is $11.33, representing a 53% increase over the current trading price of $7.38.
Bioventus, a healthcare developer, will round up our discussion. JPM is generally optimistic about emerging healthcare companies, so it’s not unexpected to see BVS here. The organization offers a variety of pain management, restorative therapies, and surgical options, all with the goal of deferring and simplifying complicated orthopedic surgeries. Exogen ultrasonic bone healing system, Durolane for osteoarthritis pain management, and many orthobiologic items to make orthopedic procedures easier and less intrusive are among the products available.
Bioventus stated this month that it is expanding its manufacturing facilities, shifting them to a larger venue in suburban Memphis, Tennessee, demonstrating the company’s underlying strength. The company will relocate 116 employees to the new site in 2H22, ending a 10-year tenure at its existing location, and aims to hire 40 additional employees over the next half-decade. A light manufacturing area of 55,000 square feet will be included in the building.
In other good news for the company, Bioventus completed its acquisition of Misonix in October. Misonix is a premier developer of minimally invasive therapeutic ultrasonic technology, and the combined firm will have access to a $15 billion total addressable market in regenerative medicine and wound healing.
With the presentation of the 3Q21 financial results in early November, the company’s bullish outlook was maintained. Bioventus’ net revenues increased by $23 million to $108.9 million. This was a year-on-year increase of 26%. The increase in revenue prompted management to raise its full-year sales target for 2021 from $405 million to $415 million to $425 million to $430 million. At the midpoint, the new forecast reflects a 4.2 percent gain.
JPM analyst Robbie Marcus sees Bioventus as having a strong position, based on its product range and future growth possibilities. “Exogen is the clear leader in the US long-bone stimulation industry, and the company should grow above market as the indication for fresh fractures expands,” he adds. Finally, Bioventus’ expanding line of hardware-agnostic products enables the firm’s orthobiologics solutions to appeal to a diverse range of clinicians, allowing the company to maintain market dominance. Overall, we expect this to drive a +10 percent CAGR through 2025, with additional upside potential from new product releases, indication extension, and continued tuck-in M&A.”
Marcus’ $25 price objective, implying an 89 percent one-year upside, corresponds to this Overweight (Buy) rating.
Despite the fact that there are only two evaluations, they both believe that Bioventus is a company for investors to buy, giving the shares a Moderate Buy consensus rating. The current trade price is $13.2, and the average price objective is $22.50, meaning a 70% increase in the next year.