Morgan Stanley bets on these 3 actions; It sees over 40% to the upside
Does the epic stock market rally just need some breathing room? The past few weeks have seen stocks take their first significant correction since the bull market started in March. Now, the question swirling down the street is: will the rally pick up again or is another downside coming? According to Mike Wilson, Morgan Stanley̵
7;s chief US equity strategist, the uncertainty surrounding the presidential election and the stall on the next stimulus package could lead to dips in September and October. “On the correction, there is still a downside as markets digest the risk of a Congressional lockdown on the next fiscal deal. Even if we think something will eventually work out, it will likely take another weeks to cross the goal line, “he noted. However, Wilson argues that the recent volatility in no way spells the end of the current bull market.” We think this correction is just that, a correction in a new bull market. It is normal for markets to retreat after such an incredible run as we have experienced since March. Also, when a new bull market coincides with a new economic cycle, the bull market usually lasts for years, not months, “explained the strategist. Taking Wilson’s perspectives to heart, our focus has shifted to three stocks that get a thumbs up from Morgan Stanley. As company analysts see more than 50% upside potential in store for each, we used TipRanks database to get the full scoop Akero Therapeutics (AKRO) With its innovative drugs designed to restore metabolic balance and stop the progression of NASH, a severe form of non-alcoholic fatty liver disease, Akero Therapeutics wants to address the unmet medical needs of patients around the world. Based on the strength of its lead candidate, Morgan Stanley is beating the table. Representing the company, 5-star analyst Matthew Harrison tells clients that AKRO’s treatment for NASH, efruxifermin (EFX), has a “best-in-class profile.” EFX is the company’s main resource and has been designed to mimic the biological activity of fibroblast growth factor 21 (FGF21), which regulates multiple metabolic pathways and cellular processes, to reduce liver fat and inflammation, reverse fibrosis, increase insulin sensitivity and improve lipoproteins. for Harrison, NASH is a complex disease, with patients usually having multiple comorbidities such as obesity, type 2 diabetes, increased triglycerides, increased LDL cholesterol, and low HDL cholesterol. “A promising therapeutic solution would not only treat the multiple components of NASH, but would also have an acceptable side effect profile given the potential comorbidities,” the analyst explained. This is where AKRO therapy comes in. “In June, Akero presented best-in-class data from his Phase 2a study. These data indicate that EFX improved the two FDA-recommended liver histological endpoints resulting in weight loss, improved cardiovascular health (increased cholesterol Good HDL, decreased triglycerides, no increase in bad LDL cholesterol) and improved factors related to blood glucose control. This benefit / risk profile beats the competition, “said Harrison. Looking at the indication as a whole, Harrison sees NASH as a very broad opportunity given that approximately 20 million people in the United States suffer from the condition. are trade barriers. One of these is the fact that “NASH is currently undiagnosed in all but a very small percentage of the prevailing pool as diagnosis currently requires invasive liver biopsy.” Therefore, in addition to demonstrating a positive risk / benefit profile, AKRO will need to find patients and ensure payer support if the candidate receives FDA approval, in Harrison’s opinion. That said, Harrison believes AKRO is up to the task. “We believe that given EFX’s clean safety profile and large-scale effects, Akero is likely to largely overcome these commercial hurdles,” he commented. Harrison added, “Importantly, because Akero’s treatment is injectable, we only assume that the drug will penetrate the sickest patient population where there are currently at least 400,000 patients diagnosed and seeking treatment in the United States.” , assigns a 60% chance of success and estimates that the maximum uncorrected sales for the US and EU will reach $ 4.5 billion. Based on all of the above, Harrison rates AKRO as overweight (i.e. a buy) along with $ 70. price target. If his thesis were to come to an end, a potential twelve-month gain of 93% could be in the cards. (To see Harrison’s track record, click here) Do other analysts agree? They are. In fact, only the Buy ratings, 6, were issued in the last three months. Therefore, the message is clear: AKRO is a strong buy. Given the average price target of $ 58.50, the stock could rise 61% over the next year. (See AKRO inventory analysis on TipRanks) TransDigm Group (TDG) Next we have TransDigm Group, which is a leading manufacturer, designer and supplier of highly engineered aerospace components, systems and subsystems. Its products are used on nearly all military and commercial aircraft in service today. Given its ability to weather the COVID-19 storm, Morgan Stanley sees a bright future ahead of it. Morgan Stanley analyst Kristine Liwag said, “We consider TransDigm to be the most defensible business model in the commercial aerospace industry.” However, this is not to say that the company has not faced serious challenges: in recent years, management has been confronted with how to evaluate its defense business, the sustainability of its pricing strategy in the aerospace sector. , the durability of its balance sheet with leverage and the ability to withstand a recession. That said, Liwag remains optimistic for the future. “TDG has passed short thesis after short thesis in recent years and we don’t expect these concerns to repeat themselves,” he noted. According to Liwag, TDG’s “ability to maintain margins during a global pandemic” transmits its operational strength. To that end, his estimate for EBITDA margins is well above the rest of Street. The analyst also points out that the company cut SG&A spending by $ 89 million year-over-year in fiscal third quarter of 2020. “We assume the company will retain at least half of those savings, with the rest coming back in the form of variable sales, ”he said. Liwag added, “We are positive about TransDigm, particularly as the resumption of global air traffic would be favorable for TransDigm’s main profit maker, the aftermarket. Also, we believe TDG has the means to acquire weaker players.” In April, management raised $ 1.5 billion of additional debt to reduce liquidity risks and provide additional buffer. “A large debt load is part of management’s strategy to deliver a private equity-like return to its shareholders. . Historically, the company has used debt to acquire businesses with similar attributes to TDG’s portfolio of 90% proprietary products and 75% unique suppliers. If air passenger traffic continues to normalize, we would expect TDG to use its incremental capital to acquire ailing assets that fit its strategy, “commented Liwag. All of this prompted Liwag to leave his bullish call and the $ 772 price target. This target conveys his confidence in TDG’s ability to climb 48% higher in the next year. (To see Liwag’s track record, click here) Looking at the breakdown of consensus, over the past three months 7 buys and 5 takes were posted. Therefore, TDG gets a moderate buy consensus rating. Based on the average price target of $ 500.58, the shares are set to remain tight for now. (See analysis of the TDG title on TipRanks) Cemex SAB (CX) Cemex considers itself one of the main players in the construction materials sector, with the company that produces and distributes cement, born and aggregated. As its risk / reward profile has just gotten more positive, now may be the time to buy stocks, Morgan Stanley says. Covering the stock for Morgan Stanley, analyst Nikolaj Lippmann believes CX’s bullish drive for the third quarter and FY20, which was significantly ahead of the consensus, was “the catalyst that creates a bridge to favorable risk-return change. “. Additionally, the stock is trading at 6.4 2020e EV / EBITDA, which is cheap relative to its historical performance and peers, according to the analyst. That said, Lippmann argues that “CX is primarily a good, strong debt reduction story with a call option on what could be a great US cement market if the US Congress approves an infrastructure package in 2021 .. . If we get a US infrastructure package beyond 2020, it would add the icing on the cake, we think, and take the market from good to possibly great. “Although a large multi-year package depends on the results of the US presidential and congressional elections, even in the base case, Lippmann expects cement to show pricing power in the United States. It should be noted that Lippmann thinks it is possible that next year will be relatively quiet, but if so, he expects the industry to stop at 90% capacity utilization and grow from there. Furthermore, prices in Mexico have held up. According to Lippmann, this “materially limits downside risk and helps to positively distort the risk-reward ratio.” What else is working in favor of CX? The demand for cement since the beginning of the year has pleasantly surprised Lippmann, with an increase seen during the first phase of the pandemic. He points to the do-it-yourself and maintenance work of the Department of Transportation during times of low traffic and rugged housing as the drivers of this demand. Everything CX did convinced Lippmann to rate the stock as an overweight (i.e. Buy). Along with the call, it set a price target of $ 6, suggesting a 50% upside potential. (To see Lippmann’s track record, click here) Moving on to the rest of the analyst community, opinions are almost equally divided. 6 buys and 5 tricks add up to a moderate buy consensus rating. At $ 4.16, the average price target implies a 4% upside potential. (See Cemex Stock Analysis on TipRanks) To find good ideas for trading stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buys, a newly launched tool that combines all of TipRanks’ equity insights. those of the analysts present. 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