Stocks that Analysts Love: Here are 7 that are Blooming in May

Stock screeners can help investors identify stocks to buy based on a variety of criteria. In fact, one helpful predictor of stock price growth can be found with analyst ratings. Though not perfect, an analyst rating can indicate where institutional investor sentiment lies. In this article, I used a screener to help find stocks that analysts love. Because of their access to company insiders, analysts have access to information not normally available to retail investors. This forms the basis of their research that includes looking at a company’s financials. Investors will frequently look at analyst ratings to see if news affecting the stock results in an upgrade or downgrade.  

When an analyst upgrades a stock, it could be a sign that the stock is undervalued. The analyst may believe the company’s fundamentals have improved. Or they may believe that an outperforming stock has more room to run higher. Either way, investors can take it as a bullish sign, and if the rating is supported by an attractive price target, it could represent a buying opportunity. Here are seven stocks that analysts have been upgrading in the 90 days ending May 17, 2023.  

Darling Ingredients (DAR) 

Darling Ingredients (NYSE:DAR) has been rated by 15 analysts in the last three months. Twelve analysts rate the stock as a Strong Buy and another analyst gives DAR stock a Buy rating. Bullish analyst sentiment was supported by the company’s earnings report on May 9. Darling beat on the top and bottom line by double digit percentages. Analysts project about 5% earnings growth in the next 12 months and have a price target that suggests a 39% upside for the stock.  

What’s driving the stock is a conglomerate that develops and produces natural ingredients from edible and inedible bio-nutrients. The company has feed, food, and fuel segments. A key driver of the recent stock price growth is its fuel segment. Specifically, the company’s Diamond Green Diesel joint venture with Valero (NYSE:VLO) opened its third renewable diesel plant earlier this year. In the company’s earnings report it noted that this makes Diamond Green Diesel “North America’s largest renewable diesel producer.” 

Darling is also expecting to have a catalyst as California mandates that airlines that fly in the state use renewable airline fuel. That leans into the company’s plans to have one of its existing Diamond Green Diesel plants producing Sustainable Aviation Fuel (SAF) by 2025.  

Viking Therapeutics (VKTX) 

Next on this list of stocks that analysts love is Viking Therapeutics (NASDAQ:VKTX). The stock has been rated by 11 analysts in the last three months with 10 of them giving VKTX stock a Strong Buy rating. In the last 30 days ending May 17, 2023, four analysts have boosted their price targets for the stock. All of the new targets are above the consensus estimate.  

Investing in pre-revenue biotech companies can be tricky. There’s no guarantee that a company will be able to get candidates in their pipeline across the finish line. But some recent events provide reason for optimism as it relates to Viking Therapeutics.  

One such event was the initiation of a Phase 1 clinical trial for its VX2735 candidate. VK2735 is I development as a weight loss drug that specifically focuses on individuals with Type 2 diabetes or obesity. Viking also has a candidate, VX2809 in Phase 2 trials. This is a treatment for nonalcoholic steatohepatitis (NASH) that may draw the attention of big pharmaceutical companies.  

Tenet Healthcare (THC) 

If you believe that healthcare is a recession-proof business, you’ll understand why Tenet Healthcare (NYSE:THC) is one of the stocks that analysts love. THC stock is up 49% in 2023, and analysts believe it has more room to grow. Of the 21 analysts that have offered a rating in the last three months, 18 gave the stock a Strong Buy or Buy rating. 

The Dallas-based company delivers diversified healthcare services through a network that includes United Surgical Partners International. This is the largest ambulatory platform in the country. The company also operates 61 acute care and specialty hospitals and over 100 additional outpatient facilities. – 

And the catalyst for Tenet at the moment is a return to growth. The company’s revenue is soaring as pandemic restrictions ease. As evidence of that the company increased its earnings guidance for the year to a range of $3.21 billion to $3.41 billion at the midpoint. The company also hinted at a dividend to come in the future. THC stock is at the high-end of its 52-week range, but recent price targets suggest there is still room for the stock to rise.  

Lantheus (LNTH) 

Another stock that analysts love is Lantheus (NASDAQ:LNTH). The company is a leader in developing products to treat “Find, Fight and Follow” cancers with a high unmet need. In addition to having several drugs and therapeutics in the market, Lantheus has a deep pipeline with several candidates in late-stage trials. 

The company is not heavily covered by analysts. But of the eight analysts that have issued a rating for Lantheus in the last 90 days, all eight give the stock a strong buy. For its part, the company continues to stack quarter after quarter of record-breaking revenue. LNTH stock is up over 45% in 2023. That being said the price targets give the stock an upside of over 25%. As of May 18, 2023 short interest is a little high at around 5%. However, if the company hits analysts’ forecasts for 10% earnings growth for the year, the shorts could get burned.  

Merus (MRUS) 

Merus (NASDAQ:MRUS) is the last of the biotech stocks on this list and it may carry the biggest risk/reward dynamic for investors. The company focuses on immuno-oncology drugs and therapeutics. The Biden administration is calling for a cancer “moonshot” that could provide some revenue for the company. This will be important as the company has five candidates in late-stage clinical trials.  

MRUS stock is up 41% in 2023 which has pulled the stock up 6% for the last 12 months. But this is a still a small-cap company with a market cap that is just over $1 billion. That could lead some investors to be rightfully cautious. But analysts love the stock. Eleven analysts have issued a rating for Merus in the last 12 months and each one gives it a strong buy rating. The stock currently has a 12-month price target of $42.78. That would be a 95% increase from its current level.   

Chemed (CHE) 

There are over 6,000 stocks that investors can buy. And I’ll admit, prior to preparing for this article, I was unfamiliar with Chemed (NYSE:CHE). It’s not heavily covered by analysts, but three analysts gave the stock a strong buy in the last 90 days.  

The company has a unique business model to say the least. One side of the business is VITAS Healthcare which takes care of palliative care (e.g., hospice). Specifically, the company matches professionals with patients and their families. This will continue to be a growing sector as the aging of America continues. But on the other side of the business is Roto-Rooter (yes, THAT Roto-Rooter) the plumbing and drain cleaning services.   

It’s a disparate pair of businesses, but it’s obviously working. The company continues to deliver strong revenue and earnings. And unlike many stocks on this list, Chemed pays a dividend. With a yield of just 0.28%, it’s a modest dividend. But the company has been raising it for the last 14 years. And since the price of CHE stock has increased 64% in the last five years, the dividend is a cherry on top in terms of total return.  

Carrols Restaurant Group (TAST) 

Last on this list of stocks that analysts love is Carrols Restaurant Group (NASDAQ:TAST). The company is the largest Burger King franchisee in the United States with over 1,000 restaurants in 23 states. The company also operates 65 Popeyes restaurants in seven states. 

But that number is coming down. In early May 2023, the company announced it was temporarily closing over 40 of its Burger King franchises due to being built too close to other restaurants. However, when the company reported earnings it posted a sharp increase in sales that gives the company confidence that it may begin to generate positive cash flow. Investors seem to be buying this addition by subtraction narrative. TAST stock is up 267% in 2023. And analysts still believe the stock has 17% upside.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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Pump the Brakes, XPEV Stock Fans. Xpeng Is a No-Go for Now

Xpeng (NYSE:XPEV) shares drifted significantly lower during 2022. So far in 2023, however, XPEV stock has held steady, especially over the past month.

Admittedly, this makes sense. Back in April, the China-based electric vehicle maker made a big announcement. This announcement could pave the way for a turnaround.

But while the story with Xpeng might change for the better, don’t assume that means you need to rush into a position today. For one, the first signs that a turnaround is on the verge of taking shape have not appeared just yet.

Much like with one of its main Chinese EV peers, recent results continue to be disappointing. There’s little to suggest that improvements to operating performance are imminent.

With this, let’s take a closer look, and see why “wait and see” is the best course of action for now.

Why Bullishness is Slowly Returning

Although Xpeng stock hasn’t exactly bounced back, investor sentiment for shares has lately been slowing returning to bullish. A big reason for this has been because of the “big announcement” I hinted at above.

So, what is this “big announcement” for XPEV stock? That would be the company’s announced plans to use a new technology platform for future production models.

Dubbing it Smart Electric Platform Architecture 2.0, per management, this “scalable smart EV architecture” is a major positive for the company.

For starters, SEPA 2.0 will help to improve research and development (or R&D) efficiency. This could reduce Xpeng’s R&D cycle by 20%. Management is confident that this platform will allow other cost savings. Lower production costs would of course go a long way in helping to turn this money-losing firm into a much larger, consistent profitable enterprise.

This platform may also help to improve the appeal of/demand for Xpeng’s vehicle models, making it a more formidable competitor. Still, while this announcement is a step in the right direction, keep in mind that it’s unclear whether this new platform will help to spur a turnaround.

Disappointment Persists

The uncertainty surrounding the bull case for XPEV stock is very much like the uncertainty surrounding another high-profile Chinese EV stock, Nio (NYSE:NIO).

I have been critical of the Nio bull case. Nio’s management (and the stock’s biggest supporters) argue that a growth resurgence is just around the corner.

Namely, due to a big production ramp-up, and the launch of new vehicle models. To skeptics such as myself, however, Nio’s underwhelming delivery numbers call into question the prospect of massive growth re-acceleration by year’s end. Perhaps it is a similar situation with Xpeng.

That is, with the launch of SEPA 2.0, plus its own series of recent and upcoming vehicle launches (the P7i and the G6), Xpeng could end up reporting materially stronger results a few quarters from now.

At the same time, though, Xpeng is also (like Nio) continuing to report disappointing delivery numbers.

For instance, in April 2023, Xpeng delivered 7,079 vehicles. This represented only a slight increase in deliveries compared to March 2023 (7,002 vehicles). Xpeng’s monthly delivery also remains down massively compared to the prior year’s month (when 9,002 vehicles were delivered).

Bottom Line

Sure, just because Xpeng has hit a rough patch performance-wise, the EV maker is doomed to continue reporting underwhelming operating results.

The aforementioned technological innovations may just well be a stronger way to take competition from competitors like Tesla, compared to Nio’s much-touted “battery swap” feature.

Still, if you want to go contrarian, and buy ahead of Xpeng ahead of a turnaround, chances are you’ll have plenty of time to do so. In fact, XPEV could soon fall to a more opportune entry point.

Later this month, Xpeng releases its latest quarterly results. Given the delivery number, it is doubtful that the company’s latest financial will elicit a positive reaction from investors.

There’s no need to rush into a position, so sit on the sidelines with XPEV stock.

XPEV stock earns a D rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.

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Regional banks slump after report Yellen told bank leaders more mergers may be needed

The KBW Regional Bank index
KRX,
-2.16%
slumped over 3%, after a report from CNN that Treasury Secretary Janet Yellen told bank chief executives than more mergers may be necessary. The CNN report, citing two people familiar with the matter, raises the prospect that more regional banks would have to be bought by larger too-big-to-fail firms. The Treasury Department confirmed the meeting on Thursday but its readout did not include the point about the possible need for further mergers.

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TipRanks names the top 10 health care analysts of the past decade

A customer used an automated teller machine (ATM) at a Truist Bank branch in Dallas, Texas, US, on Friday, April 14, 2023.

Shelby Tauber | Bloomberg | Getty Images

The health care sector experienced rapid change over the past decade with the rise of digital services, bringing a range of opportunities to invest. 

TipRanks recognized Wall Street’s 10-best analysts in the space for identifying the best investment opportunities. These analysts outdid their peers with their stock picking and generated noteworthy returns through their recommendations.

TipRanks leveraged its Experts Center tool to recognize the ones with a high success rate. We also analyzed each stock recommendation made by health care sector analysts in the past decade. 

The ranking shows the analysts’ ability to deliver returns from their recommendations. TipRanks’ algorithms calculated the statistical significance of each rating, average return and the analysts’ overall success rate. In addition, every rating was measured over one year.

Top 10 analysts from the healthcare sector

The image shows the most successful Wall Street analysts from the healthcare sector, in descending order.

1. Thomas Smith – SVB Securities 

Thomas Smith tops the list. Smith has an overall success rate of 51%. His best rating has been on Viking Therapeutics (NASDAQ:VKTX), a clinical-stage biopharma company focusing on therapies for metabolic and endocrine disorders. His buy call on VKTX stock from April 27, 2022 to April 27, 2023 generated a stellar return of 791.30%.

2. Brandon Couillard – Jefferies 

Brandon Couillard is second on this list and has a success rate of 68%. Couillard’s top recommendation is Exact Sciences (NASDAQ:EXAS), a provider of cancer screening and diagnostic tests. The analyst generated a profit of 450% through his buy recommendation on Exact Sciences stock from May 4, 2016 to May 4, 2017. 

3. David Windley – Jefferies 

Jefferies analyst David Windley ranks No. 3 on the list. Windley has a success rate of 68%. His best recommendation has been on Medidata Solutions, a tech-based company with clinical expertise. Dassault Systemes later acquired Medidata. The analyst generated a turn of 175.70% through a buy recommendation on MDSO from Aug. 01, 2012 to Aug. 01, 2013.

4. John Eade – Argus Research 

John Eade bags the fourth spot on the list. The five-star analyst has a 69% overall success rate. Eade’s best recommendation has been on Moderna (NASDAQ:MRNA), a pharmaceutical and biotechnology company. His buy call on MRNA stock generated a 265.90% return from June 30, 2020 to June 30, 2021.

5. Michael Wiederhorn – Oppenheimer

Fifth-place analyst Michael Wiederhorn has a success rate of 66%. His best recommendation is Community Health Systems (NYSE:CYH), a company engaged in the management and operations of hospitals. The analyst delivered a profit on this stock of 298.2% from May 1, 2020 to May 1, 2021.

6. Charles Duncan – Cantor Fitzgerald

Taking the sixth position is Charles Duncan. The analyst has a success rate of 52%. His top recommendation was Novavax (NASDAQ:NVAX), a biotech company that develops vaccines. Through his buy call on NVAX stock, Duncan generated a solid return of 800% from March 17, 2020 to March 17, 2021.

7. Yaron Werber – TD Cowen

TD Cowen analyst Yaron Werber is seventh on this list, with a success rate of 65%. Werber’s best call has been a buy on the shares of Ultragenyx Pharmaceutical (NASDAQ:RARE), a biopharma company focusing on developing innovative medicines for rare and ultrarare diseases. The recommendation generated a return of 267.50% from Dec. 18, 2019 to Dec. 18, 2020.

8. Geulah Livshits – Chardan Capital

In the eighth position is Geulah Livshits of Chardan Capital. Livshits has an overall success rate of 42%. The analyst’s top recommendation is Cabaletta Bio (NASDAQ:CABA), a clinical-stage biotech company focused on developing therapies for autoimmune diseases. Based on her buy call on CABA, the analyst generated a profit of 800% from Oct. 11, 2022 through now. 

9. Richard Newitter – Truist Financial

Richard Newitter ranks ninth on the list. The five-star analyst sports a 62% success rate. His top recommendation has been on Organogenesis (NASDAQ:ORGO), a regenerative medicine company providing products for advanced wound care and surgical biologics. The buy recommendation generated a return of 397.9% from May 12, 2020 to May 12, 2021.

10. Boris Peaker – TD Cowen

Boris Peaker has the 10th spot on the list, with a success rate of 47%. Peaker’s best call has been a buy on shares of Trillium Therapeutics, a clinical-stage company developing therapies for cancer treatment. Pfizer (NYSE:PFE) later acquired Trillium. The recommendation generated a return of 800% from Jan. 7, 2020 to Jan. 7, 2021.

Bottom Line

Investors could follow the recommendations of top analysts to form a well-informed investment decision. You can also look at all the analysts who made it to the top 100 list. We will soon return with the top 10 analysts of the past 10 years from the Consumer Goods sector.

 

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3 Stocks With 1,000% Upside Potential

If you’re a risk taker on the lookout for stocks with 1000% upside potential, you’d have to venture into speculative territory. It is difficult to find analyst ratings with such a high upside potential unless catalysts could propel the stock that high. Such catalysts include promising drug candidates that are awaiting approval or going through a clinical trial. These catalysts may or may not materialize for years. If the said business disappoints by losing the drug or not getting approval, shareholders will incur substantial losses almost overnight.

Furthermore, I will not be touching too much on their finances. The only companies with such high upside potential are early-stage biotech startups that generate negligible revenue. Instead, focusing on the drugs and their viability will give us a much better idea of the company’s future.

With that in mind, let’s look into three stocks with 1,000% upside potential.

Aptose Biosciences (APTO)

Aptose Biosciences (NASDAQ:APTO) is a clinical-stage biotechnology company focused on developing personalized therapies for “hematologic malignancies, such as acute myeloid leukemia (AML), chronic lymphocytic leukemia (CLL), and non-Hodgkin lymphoma (NHL).” The company has two lead drugs: tuspetinib, a myeloid kinase inhibitor, and luxeptinib, a dual lymphoid and myeloid kinase inhibitor.

According to analysts, Aptose Biosciences has a price target of $7, representing a whopping 1,409% upside from its current price of $0.46. The company recently reported positive results from its phase 1/2 trial of tuspetinib in relapsed or refractory AML patients, showing clinical responses across four dose levels. The company also initiated enrollment of a combination treatment arm with venetoclax, a standard-of-care therapy for AML.

The primary catalyst for Aptose Biosciences is the advancement of its clinical trials. It also has the potential to obtain regulatory approvals and partnerships for its drug candidates. The company has a strong intellectual property portfolio and a robust pipeline of preclinical compounds. The company also has a cash runway of about a year. But again, I believe the promising drug candidates here mean that fundraising shouldn’t be much of a hassle.

I believe that Aptose Biosciences is an undervalued gem in the biotech sector. It has a unique approach to targeting multiple kinases that are involved in cancer cell survival and proliferation. I believe it could end up being one of the stocks with 1000% upside. The company has demonstrated proof-of-concept for its lead drug candidates and has the potential to address large and unmet medical needs in hematologic malignancies. But of course, early-stage biotech companies have a lot of risks involved. I would not rely on the upside potential alone to make the decision whether or not to buy these stocks.

Checkpoint Therapeutics (CKPT)

Checkpoint Therapeutics (NASDAQ:CKPT) is a clinical-stage biotech company that develops drugs for various types of cancer. The company’s lead product candidate is cosibelimab, an antibody that targets “programmed death ligand-1 (PD-L1),” a key immune system regulator.

The company recently announced that the FDA accepted the filing of its “Biologics License Application (BLA) for cosibelimab in patients with metastatic or locally advanced cutaneous squamous cell carcinoma (CSCC),” a common and aggressive type of skin cancer. The FDA granted cosibelimab priority review and set a PDUFA goal date of January 3, 2024.

The main catalyst for Checkpoint Therapeutics is the potential approval and launch of cosibelimab in the CSCC market. It is estimated to be worth over $10 billion globally in 2020. Naturally, analysts have a price target of $35 for Checkpoint Therapeutics. This implies a staggering 1,175% upside, making it an easy choice for an article about stocks with 1000% upside.

Achilles Therapeutics (ACHL)

Achilles Therapeutics (NASDAQ:ACHL) is a clinical-stage biotechnology company that develops “personalized T-cell therapies targeting clonal neoantigens, which are protein markers unique to each individual and expressed on the surface of every cancer cell.”

The company uses its AI platform, PELEUS, to identify these neoantigens from DNA sequencing data. It uses the VELOS manufacturing process to create “patient-specific clonal neoantigen-reactive T cell products” or cNeTs.

Analysts have a price target of $11 for Achilles Therapeutics, which implies a 1,059% upside. There hasn’t been much recent news, but the company reported positive data from its phase 1/2a trial last year. The trials showed that in patients with advanced non-small cell lung cancer (NSCLC) and melanoma, cNeTs showed tumor regression and durable responses.

I believe regulatory approval is likely for cNeTs in the future. The company has a pragmatic approach to targeting clonal neoantigens, which are present in all cancer cells and are absent from normal cells. There isn’t a single treatment that works for all cancers, but cNeTs certainly look promising because of this fact. They can likely treat a range of cancers, which could make ACHL be one of the stocks with 1000% upside.

On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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3 Dividend Stocks to Sell as the Tech Sector Slumps in 2023

The technology industry has been marred by large-scale layoffs, an erosion of earnings, and cost-cutting measures, prompting investors to contemplate the worst tech dividend stocks.

Though the sector has enjoyed an out performance driven by a few big players, the performances are few.

Investors must be wary of tech dividend trap stocks in the current scenario, which may seem attractive but could prove detrimental over the long run.

Over the past few quarters, earnings reports have taken a hit from a slowing economy. Analysts estimate that tech earnings in the U.S. dropped 15% in the first three months through March due to higher costs and slowing demand.

Such a scenario will almost certainly lead to many tech dividend cutters, who’d be looking to navigate the macro environment without significantly impacting its financial flexibility.

Let’s look at three tech dividend stocks to avoid that are likely to burn their shareholders in the not-so-distant future.

INTC Intel $30.73
IRM Iron Mountain $55.70
AMKR Amkor Technology  $21.39

Intel (INTC)

Intel (NASDAQ:INTC) shareholders may have felt left in the lurch as the tech behemoth slashed its dividend payout by a jaw-dropping 66%. It continues to cede market share to its competitors in the chip sphere, with AMD at the top of the list.

In a recent article, I mentioned how Intel dropped 82% in 2018 to 62% in 2022.

Disappointingly, Intel reported its first-quarter earnings recently, which showed a nearly 36% year-over-year decline in sales, totaling $11.7 billion.

The firm suffered a staggering net loss of $2.8 billion, marking the most significant quarterly loss in the company’s history. Additionally, in the past 11 consecutive quarters, INTC stock has plummeted over 33% in the past 12 months.

Although Intel strives for a turnaround, its ambitious plan to transform its factories into foundries for other companies’ chips will take time. The company is looking to set its sights on 2026 to compete for high-profile work, but until then, the road ahead is incredibly bumpy ahead.

Iron Mountain (IRM)

Iron Mountain (NYSE:IRM) has established its position as a frontrunner in safeguarding valuable physical and digital assets catering to various clientele across various businesses.

It provides versatile storage solutions for diverse needs, ensuring the secure preservation of essential assets for its burgeoning customer base.

To be fair, there’s much to like about the company’s operations, fundamentals, and stockholder-centric strategies. There’s a lot to detest regarding its valuation and dividend profile with the firm.

IRM stock trades at a lofty 17.5 times its trailing twelve-month cash flows, more than 40% higher than its sector median.

Its dividend profile is unattractive, with a 5-year dividend growth rate of just 1.7%. What’s more concerning is its dividend safety, with its net long-term debt-to-assets ratio at a whopping 65%, roughly 54% higher than the sector median.

Its levered free cash flow margin is at just 1.4%, more than 90% lower than its peers. Hence, it’s safe to say, and it’s one of the dividend trap stocks you’d want to avoid.

Amkor Technology (AMKR)

Amkor Technology (NASDAQ:AMKR) is a global provider of outsourced semiconductor packaging and test service. It offers robust and comprehensive turnkey solutions catering to a wide range of clientele internationally.

Though it’s coming off a relatively solid year in 2022, the same can’t be said for its position in 2023.  Its management is projecting a 7.9% decline in fiscal 2023 sales to $6.53 billion compared to last year.

The downbeat forecast is linked to multiple headwinds, particularly in the low-end smartphone market, where demand is expected to shrink. Additionally, the drop in sales and income raises concerns, especially as the consumer wearable and computing sectors are also under immense duress.

There’s not much to like about its dividend profile. It offers a 0.4% 4-year average dividend yield, which lags the sector by more than 70%. It’s only been paying dividends in the past couple of years, compared to the 9 year sector median.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.

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3 Undervalued Pharma Stocks to Buy for High Total Returns

undervalued pharma stocks to buy - 3 Undervalued Pharma Stocks to Buy for High Total Returns

Source: Iryna Imago / Shutterstock.com

Throughout financial history, equity markets have navigated bull and bear cycles. The same holds true for various sectors. After an extended bull market, there tends to be a price and time correction phase in various sectors.

One secret to successful investing is to identify sectors that have been depressed for an extended period. Stocks in this sector tend to be undervalued, and once sentiments reverse, the rally can be massive. My focus in this column is on undervalued pharma stocks to buy.

To put things into perspective, the S&P Pharmaceuticals Select Industry Index has delivered total annualized returns of 3.83% in the last 10 years. For the same period, the S&P 500 index has delivered total annualized returns of 11.68%. Clearly, the pharmaceutical sector has been a big underperformer.

Given the business developments, these pharma stocks can trend higher in the next few years. Overall returns are likely to beat index returns. Thus, it makes sense to consider some of the undervalued pharma stocks to buy for the portfolio.

Pfizer (PFE)

Pfizer (NYSE:PFE) stock has been in a downtrend, but the correction seems to be overdone. At a forward price-earnings ratio of 10.9, PFE stock is massively undervalued. Additionally, the stock offers investors an attractive dividend yield of 4.4%.

Through 2030, Pfizer has planned its growth strategy focusing on two areas. First, the company will continue to invest in research and development to deepen the product pipeline. Pfizer already has 101 potential drug candidates, with 12 drugs in the registration phase and 23 in phase three trials.

As new products are launched, revenue growth is likely to be steady. Pfizer is targeting $20 billion in incremental revenue from new molecular entities by 2030. Furthermore, Pfizer has been active on the acquisition front in the last year. The company targets $25 billion in incremental revenue from new business developments through 2030.

With these developments, PFE stock is poised for a reversal rally. I would hold with patience for the next 24 to 36 months for high total returns.

AstraZeneca (AZN)

AstraZeneca (NASDAQ:AZN) is another undervalued pharma stock to buy for high total returns. In the last 12 months, the stock has been marginally higher by 13%. However, I believe that the best part of the rally is still to come. AZN stock also offers an attractive dividend yield of 2.6%.

It’s worth noting that the company has guided for healthy revenue growth. Through 2025, AstraZeneca expects to deliver a low double-digit CAGR. Beyond this period, the company believes it’s poised for an industry-leading growth rate. If this holds, AZN stock is attractive at a forward price-earnings ratio of 20.2.

I believe that the growth expectations are realistic. For 2023, AstraZeneca has a phase three pipeline of 30 drugs. Of this, the company believes that 10 drugs have blockbuster potential. The over pipeline currently stands at 178 projects. With a strong global presence and visibility for the continued launch of drugs, AstraZeneca has a bright outlook.

Merck (MRK)

Merck (NYSE:MRK) is an undervalued quality pharma stock even after a 23% rally in the last 12 months. MRK stock trades at a forward price-earnings ratio of 16.5 and offers a dividend yield of 2.54%.

In terms of growth, there are two catalysts. First, Merck has 30 programs in phase three and 80 in phase two. The late-stage clinical development program looks attractive and catalyzes revenue growth. It’s worth noting that Merck has invested $11.4 billion in research and development in the last 12 months. Significant R&D investments will continue to boost the company’s late-stage pipeline.

Further, Merck announced the acquisition of Prometheus Biosciences (NASDAQ:RXDX) for a consideration of $10.8 billion. The acquisition will boost the company’s presence in the immunology segment. With strong financial flexibility, inorganic growth will continue to support the company’s growth outlook.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.

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Why Risky Rivian Stock Is a No-Can-Do, No Matter What Today’s Earnings Bring

As you may already know, the next big event for Rivian Automotive (NASDAQ:RIVN) is today. That is, the latest quarterly results for RIVN stock will hit the street post-market.

Given that the electric vehicle (or EV) maker’s quarterly production and delivery numbers were released over a month ago, there may not be too many negative surprises.

In fact, with expectations low, even mixed results and updates to guidance may be sufficient to keep RIVN shares on their current upward trajectory.

But while earnings may not necessarily drive the next move lower for Rivian, don’t assume that means that it’s safe to enter a position at today’s prices.

Why? Mostly, because a key issue (more below) continues to persist. Due to this factor, shares risk experiencing additional sharp price declines over the next few months.

RIVN Stock and Today’s Quarterly Earnings Release

Back in February, when Rivian last released quarterly results, the market reacted negatively to news of lower-than-expected revenue and flat annual production guidance.

However, the aforementioned production and delivery figures for the preceding quarter represented a sequential decline. This already placed pressure on shares last month, so another post-earnings selloff for RIVN stock may not happen.

Investors may focus on the more positive aspects of the earnings report. In turn, using it as justification to send the stock moderately higher. Positives that may emerge from the EV maker’s earnings include the potential for the company to report quarterly losses in-line or slightly below estimates.

There is also the possibility that Rivian releases an upward revision to its 2023 vehicle production forecast.

Yet, while the earnings report may be sufficient to get the stock back to $15 per share, or maybe even back toward $20 per share, I wouldn’t count on it continuing to make a strong recovery from there. Again, there’s one issue in particular that threatens to reverse any post-earnings gains, and then some.

Cash Burn Remains a Big Risk

In past articles on RIVN stock, a key red flag that I have focused on is the EV company’s cash burn problem. Sure, heavy cash burn isn’t out of the ordinary for early stage electric vehicle companies. But Rivian’s cash burn issue could pale in comparison to that of another high-profile EV upstart, Lucid (NASDAQ:LCID).

As InvestorPlace contributor Thomas Niel recently argued, Lucid itself has admitted that it could burn through its current cash position as soon as early next year. In contrast, Rivian’s CFO Claire McDonough has previously stated that the company’s cash position ($11.6 billion as of Dec. 31, 2022) gives it enough funds to sustain itself through 2025.

That said, this forecast may be subject to change. At least, that’s the view of Battle Road Research’s Ben Rose and Johnathan Rowe. As Barron’s recently reported, this sell-side analyst team has downgraded RIVN from “hold” to “sell.”

A key reason for their downgrade has to do with the potential for cash burn to accelerate this year. Per Rose and Rowe, numerous factors could drive this. Examples include Tesla’s aggressive vehicle price cuts as well as the current economic slowdown.

The Takeaway

Depending on the degree in which industry- and macro-related headwinds worsen demand for Rivian’s vehicles, the likely gap between this company’s cash runway and that of Lucid may be much shorter than currently expected.

Worse, Rivian may soon have to admit that it’s more or less in the same boat as Lucid. The company may have to sell billions worth of additional shares this year to shore up its cash position.

For reference, RIVN has a market cap today of just $13 billion. The prospect of heavy dilution from a multibillion-dollar capital raise could be enough to send shares down to single-digit prices.

In short, while downside risk for RIVN stock is perhaps low in the near term, it may be quite high as you extend the time horizon. With this, consider it best to keep staying away.

RIVN stock earns a D rating in Portfolio Grader.

On the date of publication, Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.

The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

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