As 2022 has now kicked into action, we should take a moment to understand current conditions. Yes, corona is still with us. The Omicron variant is spreading faster than others – but it is also less dangerous, and that brings the very real possibility that the true danger of the pandemic is receding. And yes, inflation is high – but the US Federal Reserve has rate hike in the pipeline, the traditional curative for high inflation. There’s a sense that inflation can be brought back down in 2022, if central banks move intelligently.
So, yes, there are headwinds. But in the opinion of Oppenheimer strategist John Stoltzfus, “The noise stemming from negative projections coming from some traders, skeptics, bears and fear-mongers of late should not obscure the signals of progress that have been made societally and economically since the pandemic struck globally in March 2020 through to the current day.”
Looking at the macro picture ahead, Stoltzfus writes of “expectations that an economic recovery stateside coming out of the COVID-19 emergency will help boost economic growth around the world and lead to a global economic expansion.”
As for stateside growth, the Oppenheimer view is a rise in the S&P 500 to 5,330 by the end of 2022. This would make for a gain of approximately 11% in the index. While not as strong as 2021’s 27% uptick, it is certainly nothing to sneer at, and certainly no indication of broad losses ahead.
Going forward from this, the stock analysts at Oppenheimer are busy picking out the equities they see supporting those gains this year. Using the TipRanks database, we’ve found two stocks that the firm’s top analysts have picked out for 70% or better gains. Here are the details.
Biomea Fusion (BMEA)
We’ll start with Biomea Fusion, a medical research biopharmaceutical company focused on the development of new cancer treatments. The company’s research track features irreversible small molecules designed to treat patients with genetically defined cancers. These are developed though a proprietary FUSION System platform, and the lead candidate, BMF-219, has recently received its FDA clearance of the Investigational New Drug application.
That milestone clears the path for Biomea to enter into the clinical stage, and the company has initiated a Phase 1 ‘first-in-human’ clinical trial, to test ‘the safety, pharmacokinetic (PK) and pharmacodynamic (PD) profile of BMF-219.’ The trial will enroll patients with relapsed or refractory acute leukemia. Updates on this trial are expected later in 2022.
The switch to clinical-stage research requires capital, and Biomea held its IPO in April 2021. The company put 9 million shares of common stock on the market, priced at $17 each. This was at the top of the expected pricing range, and the 9 million share offering was upsized from the 7.5 million originally expected. The company raised $153 million in the IPO.
It has been a rough initiation period for the stock; BMEA shares have fallen since they started trading and are down 60% from the peak reached in June.
The shares might be down, but this could spell opportunity, as noted by Oppenheimer’s 5-star analyst Hartaj Singh.
“We believe that the company’s lead compound BMF-219 recently entering Phase 1 clinical trial (NCT05153330) in adult patients with relapsed or refractory acute leukemia could be among the first treatments to successfully target the menin-MLL complex in this tumor type,” Singh writes. “With a clear understanding of disease biology, BMEA’s competency and experience in medicinal chemistry and a potentially fast-to-market approach in these cancer types, we believe that execution now is critical to beat other clinical incumbents in this space. BMEA management has brought BMF-219 from preclinical research into the clinic in ~4 years (vs. avg. 6.5), and the company’s platform technology is introducing other candidates in 2022.”
To this end, Singh puts an Outperform (i.e. Buy) rating on BMEA shares, and his $22 price target implies an upside of 195% for next 12 months. (To watch Singh’s track record, click here)
Some stocks slip under the radar, picking up few analyst reviews despite sound performance, and this is one. Singh’s is the only recent analyst review on record here. (See BMEA stock analysis on TipRanks)
Local Bounti Corporation (LOCL)
The second Oppenheimer pick we’ll look at here is Local Bounti, a produce grower and a leader in the field of controlled environment agriculture. The company grows a variety of produce, primarily lettuce and herbs, in above-ground greenhouses. The growing process uses up to 90% less land and water than traditional agricultural activities, and provides fresh produce year-round.
Greenhouse agriculture offers additional advantages, as well. Local Bounti’s products are non-GMO, free of pests and herbicides, and stay fresh longer. The food is grown both affordably and sustainably. On the drawback side, the growing model has a notoriously high overhead. Local Bounti, which was founded in 2018, recently moved to meet that requirement through a SPAC transaction and entry to the public trading markets.
The company completed a business combination with Leo Holdings III on November 22, and the LOCL ticker started trading on Wall Street that day. However, it has been a difficult start and the stock has slipped 35% since then.
That said, the company has caught the eye of Oppenheimer’s 5-star analyst Colin Rusch, who writes: “Leveraging manufacturing industry best practices, LOCL is accelerating plant cycle times to increase pounds per acre, while offering customers a unique and expanding SKU set. Concentrated in the western US, LOCL is seeking to provide consistency, resiliency, and diversity to the traditional in-field lettuce and leafy greens market in what it views as a $10B TAM. We believe LOCL’s seasoned leadership team and design for unit economics position it well to succeed in this capital-intensive industry…”
In line with his optimistic approach, Rusch gives LOCL shares a Buy rating and his $11 price target suggests a 70% share appreciation in 2022. (To watch Rusch’s track record, click here)
Oppenheimer is not the only one of the Street’s firms with a positive view here; the stock has a unanimous Strong Buy consensus rating based on 3 positive analyst reviews. LOCL shares are selling for $6.45 and their average price target of $11.33 suggests a one-year upside potential of ~76%. (See LOCL stock analysis on TipRanks)
See what top Wall Street analysts say about your stocks >>
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.
Leave a Reply