As an indication of how the stock market has suffered so far this year, the 2022 selloff was unlike anything seen in the past 80 years. While there were a multitude of reasons for the market-wide rout, the collapse was most acute among growth stocks.
As Christopher Harvey, head of equity strategy at Wells Fargo, explains, “Selling is about ‘growth’, not economic growth. Rather, it’s about the style of growth, the mispricing of and risk appetite (or lack thereof).
But given the huge compression in valuations, Harvey thinks “in some cases, growth valuations are quickly becoming attractive.” In fact, Harvey thinks many stocks shouldn’t go much further from here, anticipating that a bottom will be found “by early summer.”
Meanwhile, Harvey’s fellow analysts at Wells Fargo have identified two stocks they see as now poised to rise. Both have had miserable performances so far this year – but Wells Fargo sees them progressing by at least 60% from here. We scoured the names in the TipRanks database to get a sense of what the rest of Wall Street has in mind for those names. Here is the truth.
TELUS International (TEXT)
Let’s start with the technology sector, with TELUS International. This Canadian company is a global IT and customer service provider. For more than 600 customers around the world, Telus designs and develops next-generation solutions that support the digital transformations of companies. These digital experiences range from AI and bots, to platform transformation, big data, cloud contact center and UX/UI design; distinctive solutions are delivered to customers to help them attract and retain customers.
The company went public just over a year ago – in February 2021 – with an initial public offering of 42.55 million subordinate voting shares at a price of $25 each. Gross proceeds were $1.06 billion, of which net proceeds to TELUS were approximately $490 million. The stock has gotten off to a good start, rising for most of 2021, but like so many others, the stock price has fallen significantly lately – since peaking in October, the stock is down 46 %.
On the other hand, revenue and earnings have grown steadily since their IPO and the trend continued in the latest quarterly report – for 4Q21. Revenue reached $600 million, which was a 35.7% year-over-year increase and topped street call by $4.4 million. Adjusted EPS of $0.28 also topped the consensus estimate of $0.24. For 2022, revenue is expected to be between $2.55 billion and $2.6 billion and adj. EPS between $1.18 and $1.23. Both above Street expectations.
It was the prospect of further growth in the “critical” area of digital transformations that attracted Wells Fargo analyst Jeff Cantwell.
“We see significant opportunity ahead of TIXT given its $225 billion TAM, of which it has entered
Consistent with its bullish stance, Cantwell rates TIXT as overweight (i.e. buy), and its price target of $35 supports growth of around 62% for the year ahead. (To see Cantwell’s track record, Click here)
Most on the street agree with Cantwell’s thesis; the stock benefits from a moderate buy consensus rating, based on 6 buys versus 2 takes and a single sell. The average price target stands at $32.10, which suggests that the stock will appreciate by around 49% over the coming year. (See TIXT stock forecast on TipRanks)
Now let’s move on to something completely different. Hyperfine is a medical device company that manufactures the world’s first portable, FDA-cleared, take-to-patient MRI system. The Swoop, as it’s called, can also be plugged into a standard electrical outlet and get crucial images – all much faster than traditional MRI systems. By dramatically reducing the duration of the MRI workflow and removing the risk of patient transport from the equation, the device could potentially deliver better results. Additionally, adoption could be accelerated given the much cheaper price of the HYPR system.
And there is a large and growing market to enter. The medical imaging segment, worth approximately $15.9 billion and driven by macroeconomic trends such as an aging population and growing demand for early detection of chronic diseases, is expected to grow at a CAGR single-digit average through 2028.
Hyperfine went public late last year via the SPAC route. However, it has been a trial by fire with shares down 51% year-to-date.
This partly reflects the market’s sourness on more speculative names. In 4Q21, the last reported quarter, Hyperfine generated revenues of just $0.436 million. That said, it was more than double the amount from the previous year, and Wells Fargo’s Larry Biegelsen expects that number to grow much more over the next few years.
The 5-Star Analyst forecasts revenue of $11 million in 2022, rising to around $30 million in 2023, with net loss per share dropping from -$1.03 in 2022E to -$0.93 in 2023E.
Explaining his bullish outlook, the analyst highlights several points that underpin the company’s value proposition. These are “1) a highly differentiated first-class portable MRI technology, 2) a market expansion opportunity in the multi-billion dollar medical imaging market, 3) favorable economics driving penetration into emerging markets and 4) a promising pipeline of additional indications and entry into brain detection.
To that end, Biegelsen rates HYPR as overweight (i.e. buy) while his price target of $8 leaves room for 12-month growth of around 132%. (To see Biegelsen’s track record, Click here)
Some companies are flying under the radar on Wall Street and HYPR seems to be one of them right now. Biegelsen’s note is currently the only one recorded. (See HYPR stock forecast on TipRanks)
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Disclaimer: 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.