As 2023 starts gearing up for the long haul, Wall Street is still taking a bearish view of the markets. We’re still dealing with the same headwinds, a combination of stubbornly high inflation, rapidly rising interest rates, gloomy economic indicators, the continuing war in Ukraine, uncertainty over China’s lockdown policies, a supply chain that is only slowly unsnarling itself… the list can go on.
But despite the grim outlook right now, there are still some signals that give reasons for longer-term optimism. Weighing in from Bank of America, a team of analysts report that the Bank’s ‘Sell Side Indicator’ is nearing a ‘Buy’ signal – and they use that signal to support their prediction of a 16% gain on the S&P 500 during 2023.
The Sell Side Indicator tracks the Wall Street strategists’ average recommended stock allocation – and the BofA team notes that, “the indicator started the year within 1ppt of a ‘Sell’ signal, it ended the year only 1.5ppt from ‘Buy,’ the closest it has been to ‘Buy’ since 2017.” Historically, when the indicator is that near a Buy sign, the next 12 months have shown positive returns an impressive 95% of the time.
Bank of America’s analysts have also taken note, and they have begun pointing out stocks that stand to gain should markets jump in the coming months. We’ve used the TipRanks database to pull up some of their stock choices, and found Buy-rated equities with solid upside potential for the year ahead. Here they are, along with the BofA commentaries.
SpringWorks Therapeutics, Inc. (SWTX)
The first BofA pick we’re looking at is Springworks Therapeutics, a clinical-stage biopharmaceutical firm working in the precision medicine niche, to develop or acquire new medications that offer help to patients suffering from dangerous cancers that currently have few or no approved treatments. Springworks currently has 17 projects in the research pipeline, at stages varying from preclinical development to Phase 3 human trials.
The company’s leading drug candidate is nirogacestat, an oral, selective, small molecule gamma secretase inhibitor currently undergoing several simultaneous clinical trials. The most advanced research track is against adult desmoid tumors, a disfiguring soft tissue cancer – that currently has no approved treatments. Springworks recently completed the Phase 3 DeFi trial of nirogacestat for patients with desmoid tumors, and this past September presented positive trial data showing a 71% reduction in the risk of disease progression. The company has followed up the Phase 3 trial with a New Drug Application (NDA) submission to the FDA at the end of December.
Nirogacestat is also the subject of a Phase 2 trial, testing the drug as a monotherapy for the treatment of recurrent ovarian granulosa cell tumors. The first patient was dosed in this study during the third quarter of 2022.
Springworks’ second leading drug candidate, mirdametinib, is the subject of a Phase 2b clinical trial, ReNeu, in the treatment of both adult and pediatric patients with NF1-PN, or NF1-associated plexiform neurofibromas. These are another set of cancers, causing both pain and cosmetic abnormalities, which have high unmet medical needs. The ReNeu trial has been fully enrolled, and Springworks anticipates releasing a data update during 1H23.
These advanced clinical trials should spark investor interest, according to Bank of America analyst Alec Stranahan.
“Advanced-stage study with promising efficacy metrics (ORR: 41%) places nirogacestat at a prime position to become first approved DT therapy and disrupt currently deficient SOC. Similarly, favorable efficacy and tolerability for mirdametinib opens opportunity for SpringWorks to one-up selumetinib by being the first approved therapy for NF1-PN in both children and adults,” Stranahan opined.
“Concerns however remain with regards to the small market size and potential for competition to cap revenues and profits from these indications if approved. That said, the balance of best-in-class or best-in-disease potential, plus multiple shots on goal in larger indications across SpringWorks’ pipeline underpins our Buy rating.”
That Buy rating comes with a $45 price target, suggesting a one-year upside potential of 66%. (To watch Stranahan’s track record, click here)
Overall, all four of the recent analyst reviews on Springworks are positive, making the Strong Buy consensus rating unanimous. The stock is selling for $26.27, and its $60.25 average price target implies a gain of 122% by the end of this year. (See SWTX stock forecast on TipRanks)
BioNTech SE (BNTX)
Next up is a German-based biotech firm in the large-cap category – the company has a total market cap of $36 billion, even after losing 32% of its share value in the last 12 months.
BioNTech has a diverse development pipeline, with more than 30 research tracks at all stages of development, from preclinical discovery work to Phase 2 and 3 clinical trials. The company is working on immunotherapies with applications in the treatment of cancer, infectious diseases, and other serious health conditions. BioNTech works on both fully-owned programs and partnership programs with other drug companies.
The diverse pipeline is based on several drug development platforms, featuring mRNA technology; anti-body based development; cell therapies; and small molecule-based drug development. The mRNA platform has generated the bulk of the pipeline programs, 24 in total. This platform produced BNT162b2, the company’s approved, commercial-stage mRNA vaccine for COVID-19. The vaccine is available for use in the US, the EU, the UK, and Canada, and the company’s COVID vax program is responsible for much of its revenue stream.
BioNTech also has an active program, through its iNeST (individualized neoantigen specific immunotherapy) platform, of anti-cancer vaccines under development. Notable among these is BNT122, or autogene cevumeran, which is currently undergoing a Phase 2 trial in the treatment of colorectal cancer. The drug candidate is also in a Phase 1 trial as both a monotherapy and combo treatment against locally advanced or metastatic solid tumors.
On the financial side, BioNTech finished the third quarter of 2022 with more than 13 billion Euros in cash and cash equivalents on hand. The company reported over 3.46 billion Euros in revenue for 3Q22, the last quarter reported, and a total of 13 billion Euros revenue for the first nine months of 2022. As noted, the bulk of this revenue comes from the company’s approved COVID vax. Looking forward, BioNTech has raised its full-year 2022 revenue guidance to the range of 16 billion to 17 billion Euros, taking into account increased revenue from the COVID vax program.
Tazeen Ahmad, one of BofA’s 5-star analysts, likes BNTX’s position, both in research and commercialization, and writes: “We view the current valuation as an attractive entry oppy given several near-term opportunities for upside coming from an expanded oppy for the COVID vaccine, de-risking of the growing oncology pipeline, and a robust platform with several shots on goal backed by a strong cash position… We view the recent update from MRNA/MRK’s PCV program in melanoma as having a positive read through to BNTX’s iNeST platform (BNT122), and providing POC validation ahead of BNT122’s readout in combo with pembro in 1L advanced melanoma in 1H23.”
Ahmad’s comments come along with a Buy rating and a $239 price target that indicates confidence in a share gain of ~61% through 2023. (To watch Ahmad’s track record, click here)
Overall, BNTX stock has picked up 10 recent analyst reviews, with an even split among them supporting a Moderate Buy consensus rating. The current trading price of $148.50 and the average price target of $207.78 imply an upside of ~40% on the one-year horizon. (See BNTX stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a 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.
