It's not uncommon for stocks that have significantly outperformed for several months to take a breather. It's especially understandable in the middle of a stock market and global economic situation that's peppered with question marks.
But Wall Street's pros believe some of the best stocks to buy right now are those that have already run circles around the broader market in 2020.
It's difficult to draw a bead on the market right now. Headlines such as "Strategist sees a huge rally coming" sit right alongside others that say "With the Nasdaq trading above 11,000, stocks have run too far, too fast." Not to mention, there are constant undertones of uncertainty regarding the COVID-19 pandemic, social unrest, high unemployment and a looming election hover over the market.
So, how exactly should investors go about determining what kinds of stocks could take off in this environment?
One approach is to turn to the Wall Street analyst community. The pros are intimately familiar with their coverage areas and thus can provide insights that most others simply can't. Moreover, they often offer insights on names that don't get the same press coverage as the market heavyweights. And according to TipRanks' database, Wall Street is optimistic about seven names that have already put together outstanding returns so far this year.
Here are seven of the pros' best stocks to buy now. Each of these stocks has been red-hot in 2020, rallying between 24% and 260% for the year to date. But they stick out because despite those runs, Wall Street is still broadly bullish and expects plenty more upside – in most cases, more than 30%.
Data is as of Aug. 16
Plug Power
- Market value: $4.2 billion
- TipRanks consensus price target: $12.12 (6% upside potential)
- TipRanks consensus rating: Strong Buy
Plug Power (PLUG, $11.40) manufactures hydrogen fuel cells for electrically powered vehicles and equipment. Its first primary focus was selling them to power forklift truck makers in North America and Europe, though it has since expanded to serving other vehicle types.
Among the pros' best stocks to buy now, PLUG is the hottest, surging 261% in 2020. The most recent catalyst was an earnings surprise, with Plug Power beating the consensus estimate by nearly 67% with a narrower-than-expected quarterly loss of 3 cents per share.
Adding to the good news, Plug Power announced that U.K.-based supermarket chain Asda will buy a turnkey solution for its warehouse forklift fleet. This includes fuel cells, hydrogen fueling equipment, hydrogen and service. Asda is the third-largest supermarket chain in the U.K. and is effectively controlled by Walmart (WMT).
While Wall Street is extremely bullish – with eight Buy ratings over the past three months, versus just two Holds – this growth stock is the only name on this list with single-digit implied upside. Shares have run up so rapidly of late that they're just 6% away from analysts' consensus price target. That could force the hand of some pros, who must decide whether to upgrade their targets or downgrade the stock on valuation concerns.
One positive sign? Several analysts have indeed been raising their PTs of late. That includes Roth Capital analyst Craig Irwin (Buy), who recently raised his 12-month price target from $12 per share to $13, reflecting 14% upside potential. According to Irwin, catalysts that are likely to drive the stock even higher are, "1) additional pedestal forklift customers, 2) probable launch of a fuel cell truck, 3) stationary product customer commitments, and 4) details on expected CI scores and LCFS credit values for UHG plants."
You can visit TipRanks to see how the Street's stock-price forecast for PLUG breaks down.
JOYY
- Market value: $6.5 billion
- TipRanks consensus price target: $109.00 (35% upside potential)
- TipRanks consensus rating: Strong Buy
China-based JOYY (YY, $80.58) is the parent company of YY, a popular social media and streaming platform that boasts 520.1 million global average mobile monthly active users (MAUs), 77% of which come from markets outside of China. The company's users contribute to a social community by creating and sharing a variety of entertainment content.
JOYY posted impressive operating results in the first quarter of 2020, despite the negative impact of the COVID-19 pandemic. Revenue jumped 49.6% year-over-year to $1.01 billion. Growth was particularly strong for Bigo Live, the company's global live streaming platform. Bigo's sales rocketed 92.4% higher to $278.5 million, driven by a nearly 38% increase in MAUs.
Wall Street's pros have unanimously sounded off on the bullish side over the past three months, with six Buy calls versus no Holds or Sells. In addition to the consensus Strong Buy rating, analysts give it an average price target of $109, which implies upside potential of 35% over the next 12 months.
JPMorgan Chase analyst Daniel Chen (Overweight, equivalent of Buy) wrote last month, "We raise our 2020/21 EPS estimates by 14/7% and lift our price target to a street-high $125 to factor in more positive view on Bigo's (JOYY's international arm) growth outlook."
Chen argues that shares are still undervalued, even after a 53% run in 2020. "We believe the current share price hasn't fully factored in Bigo's growth potential and we expect strong Bigo revenue growth in 2Q20 and turning profitable in 4Q20 will be near term share price catalysts," he writes.
That $125 price target implies 55% upside potential over the next year, putting it among the best stocks you can buy at the moment. See what other analysts are saying about JOYY.
DraftKings
- Market value: $12.0 billion
- TipRanks consensus price target: $47.09 (39% upside potential)
- TipRanks consensus rating: Strong Buy
DraftKings (DKNG, $33.91) is an online gaming company that provides customers with sports betting and iGaming opportunities.
DKNG shares have more than tripled in 2020. For comparison's sake, the S&P 500 is up just 4%, and most traditional casino and gaming companies are still well in the red this year. DraftKings has cooled off from its recent high just below $45 per share, but Wall Street analysts still put DKNG among their best stocks to buy right now.
"We believe DraftKings represents an attractive long-term opportunity to invest in the secular trend of online sports betting, which represents a massive addressable market that is still in its early stages," writes Northland Securities analyst Greg Gibas (Outperform, equivalent of Buy).
Naturally, COVID-related delays, cancelations and even season stoppages are an ongoing concern for DraftKings. The company's stock has taken hits after Major League Baseball cancelations, and shares have trickled downward as some college football conferences have announced they would push their seasons to the spring.
But Gibas, who has a $50 price target on DKNG, is looking farther down the road. "While near-term growth will hinge on the return to sports events following the COVID-19 pandemic, and long-term growth will depend on state-by-state legalization, we believe the company's premier brand reputation, asset-light business model with vertical integration, cross-sell potential on its established user base, technology infrastructure, and unique / sustainable differentiation makes DraftKings a compelling long-term pure-play investment," he writes.
Wall Street has been extremely consistent about DraftKings over the past three months. Eleven analysts (including Gibas) have issued Buy-equivalent ratings, while just one has called the stock a Hold. Find out how the Street's average price target for DKNG breaks down.
Acceleron Pharma
- Market value: $5.5 billion
- TipRanks consensus price target: $129.80 (42% upside potential)
- TipRanks consensus rating: Strong Buy
Acceleron Pharma (XLRN, $91.50) is a clinical-stage biotech company that focuses on serious and rare diseases. The company has one FDA-approved drug – Reblozyl (luspatercept), designed for the treatment of blood disorders – which it developed in partnership with Bristol-Myers Squibb (BMY). Acceleron also has several other candidates at different stages of clinical development, most notably sotatercept, a treatment for pulmonary arterial hypertension (PAH).
Acceleron recently reported a lower-than-expected loss on Aug. 6. A 34-cent-per-share deficit was far better than analysts' expectations for a 55-cent loss. Moreover, revenues of $39.8 million (+43.7% year-over-year) beat expectations by nearly 24%.
"Reblozyl sales of $55 million (-$11.1M to XLRN) in Q2 were solid despite the impact of COVID-19," writes Cowen analyst Yaron Werber (Outperform, $137 price target). "Recall, office visits were about 30% below baseline according to IQVIA's pharmaceutical market tracking in June. We think the strong uptake of Reblozyl is due to its favorable efficacy and safety profile."
XLRN shares have gained 72% year-to-date, but Werber thinks the stock can appreciate more from here. "The strong Reblozyl franchise will give Acceleron the flexibility it needs to pursue their potentially game changing PAH therapy, sotatercept, which should drive the stock higher over the long-term," he writes.
Other analysts share his enthusiasm, issuing nine Buys versus just one Hold over the past three months. For more information on XLRN, take a look at TipRanks.
United Therapeutics
- Market value: $4.9 billion
- TipRanks consensus price target: $157.14 (44% upside potential)
- TipRanks consensus rating: Strong Buy
United Therapeutics (UTHR, $109.47) is a biotech company that develops products to address the unmet medical needs of patients with chronic and life-threatening conditions. It sells four products for pulmonary arterial hypertension: Remodulin, Tyvaso, Adcirca and Orenitram.
UTHR's second-quarter results, out in late July, were good but not great. Revenues of $362 million beat the Street's call by 6%, while earnings of $2.41 per share were merely in line with the consensus estimate. Higher sales of Orenitram and Tyvaso offset lower sales of Remodulin and Adcirca.
"Both Tyvaso (inhaled treprostinil) and Orenitram (oral treprostinil) exhibited strong growth, at 9%-plus and 40%-plus year over year, respectively," Oppenheimer analyst Hartaj Singh writes. "While most BioPharma companies are reporting declines in quarter over quarter sales, United Therapeutics reported an increase, highlighting management's execution focus."
The stock is up a healthy 24% year-to-date, but Singh thinks UTHR has at least 51% more to go, based on his $165 price target. "Given UTHR trading at compressed multiples to its peer group, we believe the Street is under-appreciating: (1) the strength of the UTHR business model, (2) a strong and experienced management team, and (3) newly launched products and pipeline that will help bridge the "patent cliff" and get back to growth," he writes. "We are bullish."
For the most part, other analysts agree, with 6 Buys and 1 Hold translating to a Strong Buy analyst consensus. While not as aggressive as Singh's, the consensus price target of $157.14 still implies substantial upside potential of 44%. Discover more UTHR insights from the Street at TipRanks.
MyoKardia
- Market value: $5.3 billion
- TipRanks consensus price target: $144.00 (45% upside potential)
- TipRanks consensus rating: Strong Buy
MyoKardia (MYOK, $99.24) develops therapies for serious and rare cardiovascular diseases. Its lead candidate is mavacamten, a treatment to alleviate obstructive hypertrophic cardiomyopathy (HCM).
Investors have not been disappointed so far in 2020. News that mavacamten met all of its primary and secondary endpoints in a Phase 3 clinical trial sent shares spiking in May. Analysts estimate that peak sales, should mavacamten gain FDA approval. While shares have cooled off a bit since May, the good news hasn't; in late July, the FDA awarded MyoKardia's HCM treatment a Breakthrough Therapy Designation, which is intended to expedite the development and review of a drug candidate.
Separately, MyoKardia also has agreed to collaborate with Fulcrum Therapeutics (FULC) to develop therapies for the treatment of genetic cardiomyopathies.
Wedbush analyst David Nierengarten (Buy, $127 price target) writes, "Overall, we like the agreement, which is both back-loaded (low-risk) and allows access to a platform that we view as strongly synergetic with MYOK's core capabilities and mission – developing small molecule drugs for genetically-defined diseases – and which has demonstrated rapid translation to the clinic to date."
The four analysts that have sounded off on MYOK shares over the past few months call the company a Buy. In fact, according to S&P CapitalIQ data, all 11 analysts covering MyoKardia have Buy-equivalent ratings, putting it among the best stocks to buy right now. The analyst consensus price of $144.00 implies shares should gain roughly 45% over the next 12 months. See MYOK's full analyst consensus and price target breakdown on TipRanks.
Allogene Therapeutics
- Market value: $5.1 billion
- TipRanks consensus price target: $54.00 (46% upside potential)
- TipRanks consensus rating: Moderate Buy
Allogene Therapeutics (ALLO, $36.93) develops allogeneic CAR-T cell therapies for the treatment of solid tumors and hematological malignancies. Typically, these types of treatments involve changing a patient's T cells (an immune system cell) in the laboratory so they will attack the cancer cells. Allogene's "off-the-shelf" treatments, however, allow a patient to be treated right away.
Like many early-stage biotechnology stocks, Allogene is absorbing losses while it tries to bring its first product to market. The company reported a net loss of $61 million in its second quarter, and management expect full-year losses to run between $260 million and $280 million. To improve its balance sheet, the company completed an equity offering in June.
"We have updated our forward estimates to reflect the recent equity offering of $632.5 million," Oppenheimer analyst Mark Breidenbach (Outperform, $55 price target) writes. "With about $1.1 billion in cash, we estimate Allogene has sufficient resources to sustain operations through key clinical updates and beyond 2023."
ALLO shares aren't for the faint of heart. The stock soared 75% across just a few days in mid-May after the company announced positive results from a trial of its CAR-T ALLO-501 treatment (along with its ALL-647 antibody) in patients with non-Hodgkin lymphoma.
"Early Phase 1 results from the ALPHA trial showed encouraging activity," writes Breidenbach. "Specifically, a subgroup analysis of CAR-T naïve patients showed a 75% objective response rate, which falls within our expectations for autologous CD19 CAR-Ts. With regard to safety, ALLO-501 checked key boxes including low incidence of serious adverse events and no evidence of graft vs. host disease."
Shares have lost nearly a third of their value since then. But Breidenbach remains high on ALLO stock, based on his "conviction that allogeneic CAR-T therapies will become a significant class of CAR-T therapies, and that Allogene can successfully develop its lead products for hematological malignancies."
Much of the analyst community agrees. ALLO has garnered 11 Buy ratings recently versus just four Holds. Better still: An average $54 price target implies 46% upside over the next 12 months, suggesting it's among the most lucrative stocks you can buy right now. You can view more analyst information on ALLO on TipRanks.
Robert Lichtenstein is a content writer at TipRanks, a comprehensive investing platform that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.
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