The main headlines impacting markets lately can be put into three broad categories: US inflation, which remains stubbornly high and shows no signs of slowing, geopolitical matters, mainly the war in Ukraine, and also China’s COVID lockdowns. These are pulling in various, sometimes contradictory, directions, and can make for a confusing investment situation.
Observing the market conditions for investment giant JPMorgan, global market strategist Marko Kolanovic believes that investors should keep their portfolios heavy on stocks.
“We retain a pro-risk view and continue to recommend OWs [i.e. Buy positions] in equities… Prior to the Ukraine war, growth was expected to accelerate to well above trend as we reopen from the Omicron wave and see an unleashing of pent-up consumer and corporate demand. Although growth prospects have been downgraded over the past month, much of this impulse remains and we still see supports from strong labor markets, light investor positioning, healthy consumer and corporate balance sheets, easing policy in China, and fiscal supports in several countries to offset part of the drag from high energy prices,” Kolanovic opined.
Following this lead, JPMorgan’s stock analysts have been picking out equities which they see as potential winners, with potential to gain 40% or more in the coming months. We’ve used the TipRanks platform to pick up the latest scoop on these picks; here are the details.
Silvergate Capital (SI)
We’ll start with Silvergate, a California-based commercial bank that has a focus on the digital currency sector. Silvergate serves a wide variety of business customers, including institutional investors, fintech software companies, and digital currency exchanges. The company started shifting to its digital focus back in 2013, after 25 years in banking, and as digital currency has grown, so has Silvergate. The bank currently has over 1,300 clients, and has been profitable for the last 20 years.
This mid-cap bank will report its 1Q22 earnings next week, but we can get a feel for its situation with a look back at Q4 and 2021. The bank saw 66 cents per share in net income, down from 88 cents in the prior quarter, but up 40% from 4Q20. Silvergate’s asset base was strong, having grown from $5.5 billion at the end of 2020 to $16 billion at the end of 2021, and the bank boasted an 18% sequential gain in average deposits from digital currency customers, to $13.3 billion.
Among the bulls is JPMorgan’s Steven Alexopoulos who notes that Silvergate is peculiarly well-suited to thrive as market conditions change.
“With all eyes on the Fed’s QT and the rate outlook, as the futures market is implying 10 rate hikes through the end of 2023, asset sensitivity is one of the key criteria that are on bank investors’ radar today. For investors looking to increase exposure to asset sensitive banks, we believe they need not look any further than Silvergate, with the company being the most asset sensitive bank in the US. Silvergate is highly levered to rising short-term rates, with its net interest income projected to increase 60% for a 100 bp+ parallel shock in interest rates,” Alexopoulos explained.
In light of these comments, Alexopoulos rates SI shares an Overweight (i.e. Buy), and his $200 price target suggests it has an impressive one-year upside potential of ~59%. (To watch Alexopoulos’ track record, click here)
It’s clear from the 8 unanimously positive analyst reviews on this stock that Wall Street is in broad agreement with the bulls here – and gives SI a Strong Buy analyst consensus rating. SI shares are trading for $126, and their $201.13 average target neatly matches the JPM view. (See SI stock forecast on TipRanks)
The next JPM pick we’re looking at is Sprinklr, an experience management firm, offering business customers a SaaS platform to unify electronic communications – voice calls and messaging, emails, and live chat – through an AI-enabled engine. The firm is a tech unicorn, valued at approximately $2.7 billion before its IPO in June of last year. While the stock is down 22% since the IPO, the company still has a market cap of $3.53 billion.
Sprinklr has reported earnings 3 times as a public entity, and a look at the results shows a positive trend line. For fiscal Q422, which ended on January 31, the company had $136 million in total revenue, up 30% year-over-year, and the second consecutive quarter of top-line sequential gains. EPS has also been rising since the IPO. On a non-GAAP basis, it was recorded as a 9-cent loss per share in fiscal 2Q22 – but that moderate to a 5-cent EPS loss in the current quarter.
Looking ahead, Sprinklr is guiding toward $140 million to $142 million in total revenue for fiscal 1Q23, for a 3.6% sequential gain at the midpoint. The company expects growth in subscription revenue to drive this result, with subscriptions bringing in $123 million to $125 million. For the full fiscal year 2023, the company expects revenues between $607 million and $615 million; at the midpoint, this will represent a 24% gain over fiscal ’22, which in its own turn saw revenues grow 27% from fiscal ’21.
Covering Sprinklr stock for JPMorgan, 5-star analyst Mark Murphy writes: “We remain encouraged by the company’s ongoing product innovations and believe that a healthy pipeline headed into FY23 creates an attractive backdrop for the company and stock, particularly at depressed current valuation levels… We continue to believe Sprinklr is well positioned to capitalize on a higher rate of investments toward customer experience as a source of competitive differentiation and believe that a strong growth runway for the company’s growing, sophisticated platform presents an attractive risk-reward dynamic longer-term.”
With these comments as a base, Murphy rates Sprinklr shares an Overweight (i.e. Buy); his $20 price target implies an upside of ~45% for the next 12 months. (To watch Murphy’s track record, click here)
After less than a year in the public markets, Sprinklr has already picked up 9 analyst reviews. These break down to 5 Buys and 4 Holds, giving the stock a Moderate Buy analyst consensus rating. The average price target of $16.86 implies an upside of ~22% from the current trading price of $13.83. (See Sprinklr stock forecast on TipRanks)
Cara Therapeutics (CARA)
We don’t think about our skin much, but the skin is the body’s largest organ, and an itch can be a symptom of something wrong underneath. Cara Therapeutics is a late-clinical, commercial-stage biopharma company with a single product – difelikefalin, under the trade name KORSUVA – developed as a treatment for pruritis, the fancy name for itchy skin.
As an injectable treatment, KORSUVA received FDA approval last year as a treatment for itchy skin related to chronic kidney disease, in adults currently undergoing hemodialysis treatments. The company is conducting its launch of KORSUVA this month in collaboration with Vifor, its commercial partner. The partners have assembled marketing and sales reps, and Cara reports that sufficient stocks of KORSUVA have been manufactured and are warehoused pending distribution orders.
In addition to the above approved application, KORSUVA is undergoing Phase 2 and 3 clinical trials as an oral treatment for itching skin caused by chronic kidney disease (CKD), chronic liver disease (CLD), atopic dermatitis (AD), and notalgia paresthetica (NP). Phase 3 trials on the CKD and AD indications are set for initiation in 1H22.
Cara saw a windfall revenue in 4Q20, due to partnership fees from Vifor. Since then, the company has seen minimal revenues, although it expects that to change as the KORSUVA launch proceeds. Cara had $236.8 million in cash on hand at the end of December, 2021, to fund its operations.
JPMorgan’s Jessica Fye covers this biopharma as it emerges into the commercial realm, and she is impressed with what she sees.
“We see potential for >$700mm 2030 WW sales for Korsuva injection, which we see setting a valuation support for shares. Indeed, at current levels, we see CARA shares reflecting risk-adjusted commercial potential of Korsuva injection in hemodialysis patients alone with limited downside from near-term clinical readouts involving oral Korsuva,” Fye noted.
“With the stock down [25%] from its November highs but no fundamental change to how we think about Korsuva Injection launch nor the chances of success from upcoming oral readouts and taking into account the relatively strong balance sheet, we see a more favorable risk/reward at current levels,” the analyst added.
These comments support Fye’s Overweight (i.e. Buy) rating on CARA shares, while her $19 price target suggests a 12-month upside potential of 40%. (To watch Fye’s track record, click here)
The rest of the Street supports Fye’s thesis. In fact, the average price target is even more upbeat; at $26, the figure is expected to yield 12-month returns of 91%. The stock boasts a Strong Buy consensus rating, based on a unanimous 4 Buy reviews. (See CARA stock forecast on TipRanks)
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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.