RBC Sees 40%-Plus Upside in These 3 Stocks
Are interest rates going to head back up? Real worries about rising rates are starting to seep into the stock markets, as inflation indicators are going up and Fed chair Jerome Powell is said to be considering a change in the Fed’s current rate policy. The central bank has kept rates at rock-bottom for over a year now, but if inflation starts to set in, the bank may have no choice but to rethink that policy, as interest rates are its chief device in controlling inflation. So what are investors to do? Investment firm RBC notes that some companies have what it takes to outperform in the long run. Bearing this in mind, we used TipRanks database to get all the details on three of the firm’s stock picks. These are buy-rated stocks that boast over 40% upside potential. Let’s take a closer look. Splunk, Inc. (SPLK) We’ll start in the tech sector, where so much of the stock market news seems to start these days. Splunk is a software company based in San Francisco, offering a range of cloud-based business services. Splunk described itself as a ‘data-to-everything’ platform capable of capturing, indexing, and correlating reams of data in real time, and generating usable alerts, graphs, reports, and visualizations from it. The company’s products allow customers to find data patterns, make use of data metrics, and develop business intelligence. The company showed $745 million in revenue for Q4 fiscal 2021, up 33% from Q3 but down 6% year-over-year. Full-year revenue for fiscal 2021 was down 5%, to $2.23 billion. However, the company showed strong gains in annual recurring revenue (ARR), a key metric in predicting future income. ARR for the fiscal fourth quarter was $2.36 billion, up 41% yoy and topping previously published management guidance. The outlook for Q1 of fiscal 2022 is for ARR of $2.44 billion, which would represent 37% growth. Splunk shares are down 20% so far this year, but that decline may just give investors a chance to buy in at a discount, according to RBC’s 5-star analyst Matthew Hedberg. “We believe one of the keys for the stock is accelerated new customer adds, as green shoots appear to be emerging. Guidance for Q1/22 reflects a continued conservative posture, which will likely remain until more clear signs are seen around market stabilization and the SaaS mix so we think there could be upside to estimates…. We are bullish on Splunk’s ability to grow and take share in a market called operational intelligence, which is more than just analyzing big data—it’s about gaining actionable insight to make better business decisions across an entire organization by harnessing the full power of data,” Hedberg opined. Hedberg rates Splunk an Outperform (i.e. Buy), and his $235 price target implies a one-year upside of ~74%. (To watch Hedberg’s track record, click here) The majority of the Street concurs, as among the 17 analysts to have published a call on SPLK over the last 3 months, 10 say Buy and 7 suggest Hold. SPLK’s Moderate Buy consensus rating is accompanied with a $199.19 price target, suggesting 47% upside. (See SPLK stock analysis on TipRanks) GoodRx Holdings (GDRX) For obvious reasons, the healthcare sector has been getting more than its share of headlines in recent months. GoodRx is an interesting company that has built a useful niche in the pharmacy segment, offering price comparison tools and free coupons for pharmacies and prescriptions. Founded in 2011, the company gives customers a smartphone app that allows them to shop competitively for their prescription meds – and to download coupons for point-of-purchase discounts. The company reported Q4 results earlier this month, and showed gains in several key metrics. Revenues from prescription transactions were up 26% year-over-year to $131.3 million, and customer membership increased 32% yoy to 5.6 million. Total revenues for Q4, the company’s first full quarter as a publicly traded entity, were $153.5 million, a gain of 36% from 4Q19. At the same time, the company’s net loss per share deepened, from 12 cents in Q3 to 76 cents in Q4. Turning to the analysts, RBC’s Sean Dodge likes this stock, despite its Q4 earnings loss. “Revenue of $153.5M compares favorably to its previous guidance and Street estimate of $148M. The outperformance was driven primarily by an increase in Monthly Active Consumers (also ahead of mgmt’s previous expectations) as well as demand for telehealth and other ancillary services…. Beyond its core Prescriptions segment, we believe GoodRx is well positioned to capture Option Values by penetrating the $30B Medical Marketing and $250B Telehealth markets,” Dodge noted. Dodge sets a $56 price target on GDRX, to go along with his Outperform (i.e. Buy) rating. His target indicates a 47% upside for the coming 12 months. (To watch Dodge’s track record, click here) RBC is on the bullish end of the Wall Street reviews – this stock has received coverage from 9 analysts, and they are split 5 to 4 in favor of Buy versus Hold. This gives the stock a Moderate Buy consensus rating. The current share price is $38.05, and the stock’s average price target, at $50.63, suggests it has a 33% upside ahead of it. (See GDRX stock analysis on TipRanks) Gamida Cell (GMDA) We’ll stick with the healthcare sector, and take a look at Gamida, a biotech company focused on using cell therapy to create cures for blood cancers and other serious blood disorders. The company has a proprietary platform that can expand on multiple types of cells. The goal is to create a cell therapy that provides a therapeutic-level dose to the patient. Gamida’s pipeline includes two agents, under investigation for the treatment of four conditions. At the early stages of the clinical phase process, GDA-201 is being studied as treatment for non-Hodgkin Lymphoma as well as Multiple Myeloma, two dangerous blood cancers. Omidubicel, the second agent, is also in early stages of trials for its efficacy against severe aplastic anemia, but is much farther along in testing as a treatment for high-risk hematologic malignancies. Earlier this month, Gamida released results of Phase 3 clinical study of omidubicel against those malignancies at the European Society for Blood and Marrow Transplantation (EBMT 2021). The release, recapping data previously made public in December, was based on clinical data from 125 patients aged 13 to 65. Gamida stated that the study’s secondary endpoints “demonstrated a statistically significant improvement” among patients treated with omidubicel. In addition, patients given the drug were significantly less likely to require hospitalization in the first 100 days after treatment. Gamida states that it will use this clinical data to support its submission of a Biologics License Application (BLA) to the US FDA in 4Q21. Among the bulls is RBC’s Gregory Renza who wrote: “We believe that, if successful, omidubicel (NiCord) has a role in the HSCT treatment paradigm across several patient segments including those with no existing donor options. Should the data continue to demonstrate a favorable profile and the program ultimately convert, we see potential for more than $1.4B in peak sales, with GMDA capturing ~$800M revenues from assumed standalone U.S. efforts…” To this end, Renza rates GMDA shares an Outperform (i.e. Buy) along with a $14 price target. Investors stand to pocket a 95% gain should the analyst’s thesis play out. (To watch Renza’s track record, click here) Wall Street was clearly impressed by Gamida’s results, as the stock has a unanimous Strong Buy consensus rating, based on 6 recent Buy-side reviews. The stock is selling for $8.95, and its $19 average price target suggests a one-year upside of 112%. (See GMDA stock analysis on TipRanks) To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. 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.