The analysts at Wells Fargo have been scrutinizing the market, or more specifically, scrutinizing the winners and the losers of the current market conditions.
In a recently published note, senior equity analyst Chris Harvey writes, “Risk-on and small-cap outperformance has turned this equity market into a stock picker’s paradise.”
Obviously, then, Harvey sees small-cap stocks doing well right now, with plenty of options for investors to choose from.
While small caps generally amount to a riskier investment, one distinct advantage they hold over larger names is in the possibility for bigger returns. This is where the risk/reward paradigm comes into play.
Following up on Harvey’s note, the firm has been making a slew of recommendations, finding small-cap equities on the cusp of growth and ones that promise 70% or greater returns in the coming year. We ran two of them through TipRanks database to see what other Wall Street’s analysts have in mind.
Ping Identity Holding (PING)
Starting in the tech sector, the first Wells Fargo pick we’re looking at is Ping Identity Holding Corp, which specializes in identity management. The company offers a range of products which allow customers to control login and access to networks and databases. While it has been in business for almost 20 years, Ping Identity has been a public company only for the last year and a half.
In the company’s most recent quarterly report, for 4Q20, Ping reported mixed results and saw shares decline 20% in the immediate aftermath. EPS was a net loss of 4 cents per share. Top-line revenues, at $63.2 million, were down 7% year-over-year, but were up 5.5% sequentially and marked the second-highest quarterly top line the company has seen since going public. For the full year, total revenue hit $243.6 million, a result with was driven by a 15% yoy increase in annual recurring revenue (ARR), which hit $259.1 million. The company reported a 34% increase in customers with more than $1 million in ARR, a solid gain in an important metric.
Covering the stock for Wells Fargo, analyst Philip Winslow was particularly impressed with the ARR gain.
“Ping reported solid Q4 results with ARR ahead of expectations. ARR growth of 15% year-over-year was ahead of consensus estimates of $256.1 million driven by continued adoption of SaaS solutions which accelerated more than anticipated and represents +15% of total ARR,” the 5-star analyst wrote.
Winslow added, “The company is experiencing continued signs of pent-up demand as customers phase in purchases as projects previously put on hold due to COVID-related budgetary pressures are emerging in the pipeline, with enterprises modernizing legacy systems whose shortcomings of were exposed over the past year.”
To this end, Winslow rates PING an Overweight (i.e. Buy) and has a $40 price target that indicates potential for 76% upside in the next 12 months. (To watch Winslow’s track record, click here)
Winslow is not an outlier in his bullish stance, but there is some division on Wall Street regarding Ping. The analyst consensus view is a Moderate Buy, based on a dozen reviews breaking down to 7 Buys and 5 Holds. The shares are priced at $22.59 and their $33.71 average price target suggests a one-year upside of 49%. (See PING stock analysis on TipRanks)
Sangamo Therapeutics (SGMO)
Let’s switch gears and look at the biosciences sector. Sangamo is a biotechnology company with a focus on creating genomic medicine therapies in the treatment of genetic diseases. The company’s pipeline includes 17 different programs in various stages of development, targeting a range of conditions including IBD, beta thalassemia, sickle cell disease, and hemophilia A.
Back in December, the company reported an update from its ongoing collaboration with Pfizer on giroctocogene fitelparvovec. This is a gene therapy product in development as a treatment for hemophilia A, and follow-up data from the Phase 1/2 Alta study showed the drug was well-tolerated and safe in the small cohort of patients tested. Giroctocogene fitelparvovec is now starting the patient dosing phase of the Phase 3 AFFINE trial.
In February, Sangamo reported that it has begun a global collaboration with Biogen on the development and commercialization of new gene regulation therapies. The therapies under consideration will target Alzheimer’s, Parkinson’s, and other neurological diseases.
Among the bulls is Wells Fargo analyst Yanan Zhu, who writes of the big picture: “Overall, we continue to see significant upside potential in the company’s genomic medicines pipeline programs and platforms, in particular the regulatory T (Treg) cell therapy platform, which may address a broad range of autoimmune diseases, and the ZFP-TF gene regulation platform, which may address certain difficult-to-target neurological indications…”
In light of these comments, Zhu reiterates the firm’s Overweight (i.e. Buy) rating on the stock, and set the price target at $29, suggesting a robust upside of 158% (To watch Zhu’s track record, click here)
Overall, SGMO has drawn optimism mixed with caution when it comes to consensus opinion among sell-side analysts. Out of 5 analysts polled in the last 3 months, 2 are bullish on the stock, while 3 remain sidelined. Yet, the bulls have the edge as the average price target stands at $19.40 and indicates a 72% upside. (See SGMO 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.