The savvy investor knows that the best time to buy is when a stock is priced low – it’s just the old game of ‘buy low and sell high,’ the age-old advice on how to make money. But with the S&P at near record levels, it’s hard to tell when a stock is priced low.
The key is just to take them as individuals. The stock market is the world’s greatest real-time experiment in averaging over large mass numbers. The markets as a whole can go up, while a few individual stocks are slipping to the bottom. And when a stock hits bottom, as long its basics are sound, it becomes a buying opportunity.
Wall Street’s analysts make their reputations by finding these opportunities, and bringing them to our attention. Using TipRanks database, we were able to find 3 stocks that are down from their recent peaks, while some analysts are recommending to ‘buy the pullback.’ Let’s take a closer look.
Iovance Biotherapeutics (IOVA)
We’ll start with Iovance Biotherapeutics, a mid-cap biotech firm in the field of immune-oncology, developing tumor-infiltrating lymphocyte (TIL) therapies for cancer treatment. At base, the technology aims to use the patient’s own immune system to attack the cancer.
The company’s prime drug candidate, lifileucel is on track for a Biologics License Application to the FDA, the next step in the ongoing approval process. The drug has shown promise as a treatment for metastatic melanoma, and follow-up studies are underway in the Phase 2 clinical studies. Additionally, lifileucel is under investigation for application against cervical cancer; the program is enrolling patients in Phase 2 study, and enrollment of patients in Cohorts 1 and 2 has been completed.
This background, along with the stock’s 40% fall since its recent peak in February, have combined to catch the attention of 5-star analyst Joseph Pantginis from H.C. Wainwright.
“[We] believe the pullback in the shares create a compelling entry point again for investors ahead of the 2021 planned BLA filings for its TILs in both melanoma and cervical cancer. Recall, importantly, that melanoma has RMAT status and cervical has Breakthrough Therapy designation…”
The analyst added, “We believe the recent encouraging data and trial modifications are indications of lifileucel’s clinical promise and strengthen the case for its commercialization ahead of anticipated BLA filings.”
Pantginis backs these comments with a Buy rating and $50 price target that implies an upside of 57% in the coming 12 months. (To watch Pantginis’ track record, click here)
The cutting edge med tech has attracted attention from Pantginis’ colleagues, as well. The stock has 5 recent reviews, and all are to Buy, making for a unanimous Strong Buy analyst consensus rating. IOVA has an average price target of $54.80, suggesting a 12-month upside of 72% from the share price of $31.88. (See IOVA stock analysis on TipRanks)
Quidel Corporation (QDEL)
The next ‘pullback’ stock we’re looking at is Quidel, a $5.9 billion company in diagnostic healthcare. Quidel, based in southern California, has worldwide operations, offering products in a variety of point-of-care diagnostic testing niches. The company scored a major win last year when it received FDA approval for a COVID-19 antigen test. Earlier this month, Quidel announced emergency use authorization for its Quickvue at-home COVID-19 test kit, available to patients with a medical prescription.
In February, the company reported its Q4 results for 2020, showing $809.2 million in total revenue, a 69% quarter-over-quarter increase – and an even more impressive 431% year-over-year gain. The increase was driven by COVID-19-related products, which generated $678.7 million in quarterly sales. EPS came in at $10.78, compared to the 71-cent earnings in the year-ago quarter.
The corona pandemic has been a boon to the medical testing sector, and Quidel has seen a large part of that benefit. The company reported full-year gains similar to its Q4 results. For 2020, Quidel showed $1.66 billion revenues, up 211% year-over-year, with a COVID-19 revenues of $1.16 billion. EPS for the year was $18.60, compared to $1.73 in 2019.
Ironically, the success of medical efforts against COVID-19 both boosted Quidel – and set it up for the current pullback. As the vaccination program continues and expands, and the spread of the virus slows down, the need for rapid, mass testing will decline Quidel is not likely to see its COVID business fully evaporate in the near term, but for the mid-term it is likely to see it start reverting to a pre-pandemic normal. That prospect has investors wondering if the current high share valuation can last.
This thesis has Craig-Hallum analyst Alexander Nowak bullish on QDEL. Looking at the company’s recent success, he writes, “This stock has almost round tripped during COVID, but the business has vastly accelerated during the same time period. QDEL increased its customer base by 60% in a single year, more than doubled its placements, signed long-term testing contracts, 5x capacity to support more tests, markets, geographies, moving into the alternative care channels, building the home testing market and generated significant cash.”
And turning to the future, the 5-star analyst adds, “But when COVID is fully over we still see QDEL generating $10 in normalized earnings + $47 cash/share and this is worth more than double the current valuation. For investors who can look past what will be volatility, the pullback is an excellent buying point.”
To this end, Nowak rates QDEL shares a Buy, and sets a $341 price target implying an upside of 148% for the year ahead. (To watch Nowak’s track record, click here)
Turning now to the rest of the Street, where QDEL receives mostly Buys from Nowak’s colleagues – 3, as it happens. An additional 1 Sell can’t detract from a Moderate Buy consensus rating. Given the $239 average price target, the analysts expect shares to rise by 71% from current levels. (See QDEL stock analysis on TipRanks)
Sunrun, Inc. (RUN)
Shifting gears, we’ll take a look at an alt-energy company, Sunrun. This firm specializes in solar power generation setups for home use. Customers looking to install and run home rooftop solar panels can choose from purchase or leasing options, and can use the power generated in a variety of ways, either for home use or to sell back to the local electric utility provider.
Sunrun shares have slipped 40% since their recent peak in January. The decline comes on sentiment more than anything else. The solar sector generally has surged since the November election, on belief that the Biden Administration will provide regulatory encouragement for the industry – but that recent surge has investors slightly worried that, going forward, Sunrun will not perform up to the hype.
However, the decline certainly wasn’t prompted by faults in performance. At the end of February, Sunrun reported $320 million in 4Q20 revenues, a 31% year-over-year gain. The strong revenues were driven by an 18% yoy increase in customer base, giving the company 550,000 total customers. Among those customers, the average contract life has another 17 years remaining, and the annual recurrent revenue is $668 million.
Taken altogether, these factors prompted Truist analyst Tristan Richardson to reiterate his Buy rating.
“[We] think the pullback represents an attractive opportunity leading into an accelerated growth profile in 2021 and customer margin tailwinds (storage, VSLR synergies). We modestly raise our near-term installation forecast and look for greater than 20% YoY growth,” Richardson opined.
The analyst continued, “Amongst a backdrop in recent weeks of growth equities and risk assets selling off (including solar) as interest rates have shown volatility, we underscore the importance from a the matic perspective the largest US installer’s ability to drive home an accelerated growth profile as to not accentuate the problem from a fundamental perspective.”
Richardson backs his stance with a $95 price target, indicating confidence in a 66% one-year upside potential. (To watch Richardson’s track record, click here)
The Truist view on Sunrun is no outlier; there are 14 reviews of this stock, and they include 11 Buys against just 3 Holds, giving the stock a Strong Buy consensus rating. Shares are priced at $57.28 and their $82.10 average price target suggests an upside of 44%. (See RUN stock analysis 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.