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Bank of America Predicts Up to ~200% Raise for These Two ‘Strong Buy’ Stocks
New indicators of a cooling economy eased concerns about inflation, boosting the S&P 500 to record highs last week. The index, which fell around 4% in April, is now up 11% for the year.
Will this momentum continue? Savita Subramanian, head of US quantitative and equity strategy at Bank of America, believes so. She is taking an optimistic stance on the current market outlook and backs it up with an analysis of long-term results over the past 300+ quarters. “20 were recessive, 13 were stagflationary, and 90% of the time things were fine,” noted Subramanian.
In practice, Subramanian’s perspective leads her to beat the drum for long-term equity ownership, and she advises investors to avoid market timing. In her words, “’Time in the market is better than timing the market’ is an old but prescient saying. The risk of losing money in stocks decreases as time horizons lengthen, a phenomenon unique to stocks compared to other asset classes. The best days often follow the worst days, and missing those best days is costly: Since the 1930s, missing the S&P 500’s 10 best days per decade would have yielded a paltry 66% gain versus about 23,000% for the remainder invested. ”
Subramanian’s colleagues among equity analysts at Bank of America follow this positive outlook and advise investors to buy two stocks in particular. Both have solid appreciation potential – up to 200% in one case. According to TipRanks Databases, both stocks also receive a ‘Strong Buy’ rating from the broader analyst consensus; Let’s take a closer look and find out why they are poised for gains.
Sutro Biopharmaceutical (ESTRUS)
The first Bank of America pick we’ll look at, Sutro Biopharma, is a clinical-stage medical research company with a strong oncology focus. The company is committed to developing new medicines to address unmet needs common in many types of cancer; Sutro is pursuing this goal by developing a research suite comprised of drug candidates with improved therapeutic profiles.
To achieve this goal, Sutro first developed a proprietary technology platform called XpressCF. The company recognized an inherent limitation in creating most drug candidates – that compounds, especially proteins, are created from existing lines of living cells. Because these cells must be intact and functioning, there are some molecules that they cannot produce and the production methods can be complicated.
Sutro’s XpressCF platform utilizes cell-free technology, utilizing an extract of the cellular components that produce proteins. This new platform technology allows Sutro to produce “unique proteins in g/L yield in 8 to 10 hours at any scale” and transform them into new drug candidates. Using its platform, Sutro can develop compounds as varied as small peptides and monoclonal antibodies.
The story continues
The lead drug candidate in Sutro’s pipeline is STRO-002, also called luveltamab tazevibulin, or luvelta for short. This new therapeutic agent has shown promise in early trials against ovarian cancer, and is currently undergoing a Phase 2/3 study, called REFRαME-O1, in the treatment of platinum-resistant ovarian cancer (PROC). The trial has two parts, a dose optimization portion that is fully enrolled with 50 patients, and an enrollment-driven randomized trial, Part 2, that opened for enrollment in April. Part 2 of this trial, phase 3, is expected to enroll up to 500 patients.
For Bank of America analyst Tazeen Ahmad, this company’s potent combination of a high-potential drug candidate and an equally high-potential development platform is too attractive for investors to pass up. She writes of the drug candidate: “We believe luvelta has the potential to treat up to 80% of PROC patients, a significant improvement over the ~30% eligible for AbbVie’s Elahere (FolRα ADC approved). While we do not model all eligible patients receiving the drug, we believe luvelta represents a compelling commercial opportunity in PROC, with potential for expansion into other high unmet need oncology indications… We currently model risk-adjusted peak sales for luvelta in the PROC of US$597 million.”
Continuing, Ahmad explains how Sutra’s development platform is another solid asset: “To date, STRO’s differentiated approach has generated strategic partnerships with prominent names including Astellas, Merck, Ipsen and Bristol Myers Squibb. We note that these partnerships will be essential as the company continues to maximize the reach of its XpressCF platform and innovative product candidates in areas of high unmet need.”
Together, these assets support Ahmad’s Buy rating on STRO, and his $12 price target points to robust one-year upside potential of approximately 199%. (To see Ahmad’s history, Click here)
Overall, the Strong Buy consensus rating on STRO is based on 10 recent analyst reviews, including 9 Buys and 1 Hold. Shares are selling for $4.01 and its $11.44 average price target suggests shares will gain 185% over the next 12 months. (To see STRO Stock Forecast)
Avidity Biosciences (RNA)
The second stock on today’s list is another biotech, Avity Biosciences. This company is focused on developing targeted RNA therapeutics and has created its own proprietary development platform to achieve this. The platform, called Antibody Oligonucleotide Conjugates, or AOC, is described as having “broad and disruptive potential, and the company has already placed a portfolio of muscle disease programs into the research pipeline.”
Genetic diseases are particularly difficult to treat and, at the same time, have a profound impact on patients’ lives – making the development of new therapeutics an urgent need. Avity’s AOC platform enables the company to design and develop drug candidates that offer both the tissue selectivity of monoclonal antibody treatments and the precision of oligonucleotide-based medicines, in a move that promises to redefine RNA therapeutics. The resulting drug candidates have the potential to more effectively target the underlying genetic causes of many diseases.
So far, Avity has used its platform to place three RNA therapies into the clinical trial pipeline. These candidates are intended to target the specific genetic cause of three rare muscle diseases, each of which has proven to be untreatable with previously available RNA therapies. The company has already achieved some success in its research program and has made the first successful targeted delivery of RNA into muscle tissue. This early success underlies its three clinical programs for myotonic dystrophy type 1 (DM1), Duchenne muscular dystrophy (DMD) and facioscapulohumeral muscular dystrophy (FSHD).
The DM1 track, featuring drug candidate AOC-1001, is the most advanced. The drug, dubbed delpacibart etedesiran and abbreviated as del-desiran, showed reversal of disease progression across multiple functional measures in early trials – an important achievement for a drug that targets an often fatal neuromuscular disease that has no currently approved treatment. Avity will begin a global Phase 3 trial of AOC-1001, HARBOR, during the current quarter.
A second drug candidate, AOC-1044, in February received Rare Pediatric Disease Designation from the FDA for the treatment of DMD44. The company will release 5 mg/kg cohort data from the EXPLORE 44 Phase 1/2 study of AOC-1044 in people living with DMD44 during the second half of 2024.
The company’s third clinical-stage drug candidate, AOC-1020, is a treatment for FSHD. Avity is on track to present preliminary data from approximately half of the patients participating in the FORTITUDE Phase 1/2 clinical trial of the drug candidate. This data release is expected during this quarter.
These are some significant ‘goal shots’ and they caught the attention of analyst Geoff Meacham. In his coverage of this company for Bank of America, Meacham presents an optimistic position: “We believe RNA will benefit from robust demand for its innovative COC therapies and estimate peak adjusted sales of $2.3 billion by 2033 from the company’s portfolio of rare muscle diseases. (AOC 1001 in DM1, AOC 1044 in DMD capable of skipping exon 44 and AOC 1020 in FSHD). With an innovative platform and a path to commercialization as early as 2026, we see RNA as a compelling risk-reward opportunity.”
Looking ahead, the analyst rates RNA shares a buy, and his $40 price target indicates room for 35.5% upside potential over the one-year horizon. (To watch Meacham’s track record, Click here)
A high shot is no exception here; RNA stock has 7 unanimously positive analyst reviews behind its Strong Buy consensus rating. The stock is currently trading for $29.50 and has an average price target of $42.67, with 45% upside potential over the next year. (To see RNA Stock Forecast)
To find good ideas for stock trading at attractive valuations, visit TipRanks’ Best stocks to buya tool that brings together 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.