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Goldman Sachs Says These 3 Stocks Are Ready to Rip Higher
Current market conditions are pushing investors into stocks – and the result is record-high valuations. The S&P 500 has hit a new all-time high, and the NASDAQ, which peaked in February, remains within 3% of its record level and is headed back up. While this is obviously good for investors’ portfolios, there is some concern that we may be looking at a stock bubble. Weighing in from Goldman Sachs, however, strategist Petter Openheimer believes those worries are overblown. He recently led a comprehensive study of asset bubbles over the past three centuries – and comes to the conclusion that stocks, while high, are justifiably so. He notes that interest rates are historically low, keeping down returns in other assets and making stocks the best option for strong returns. In addition, Openheimer notes that some high-profile stock sectors – he uses Big Tech as his example – are bringing in the profits needed to underpin the stock values. “While the technology companies of today have become very large, they’re also extremely profitable. They’ve seen roughly three times the average sales growth of the rest of the market, and roughly twice the average net income growth over the last few years…. being large and seeing strong price appreciation is not the equivalent of being a bubble, I think, because these have actually been very profitable parts of the market,” Openheimer noted. With that in mind, Openheimer’s colleagues among Goldman’s stock analysts have been scouring the market, finding the stocks that are primed to see gains in today’s environment. We’ve opened up the TipRanks database to get the details on three of these Goldman picks. Let’s take a closer look. Oscar Health (OSCR) The first Goldman Sachs pick we’ll look at is Oscar Health, a disruptive company in the health insurance industry. Oscar has a tech focus and provides a new type of health insurance: telemedicine, technological healthcare interfaces, and a transparent claims pricing system all combine to make the famously opaque health insurance industry easier for patients to navigate. The company was founded in 2012, and now serves over 520,000 customers in 18 states. Early in March of this year, Oscar held its IPO. The company offered over 37 million shares at $39 each, $1 above the $36 to $38 initial guidance, and raised over $1.4 billion. Investors will get their first look under the hood of Oscar in the 1Q21 earnings release, which has been scheduled for this coming May 13. Covering the stock for Goldman Sachs, analyst Robert Jones believes OSCR presents a compelling risk reward. “OSCR, in our view, represents an opportunity to buy into a differentiated offering that is levered to attractive secular themes in healthcare (increased consumerization, proliferation of tech-enabled health offerings, etc) and capable of growing at a 40%+ organic top-line rate. We also see meaningful upside optionality in currently nascent opportunities in small group and MA end-markets, as well as tech platform monetization. While we have appreciation for competitive risks in the IFP end-market and the company’s multi year timeline to profitability, we think these are appropriately accounted for in the current trading multiple,” Jones commented. To this end, Jones puts a Buy rating on OSCR, to go along with his generally optimistic outlook. His price target, at $44, implies an upside of ~76% for the next 12 months. (To watch Jones’s track record, click here) In its short time on the public markets, Oscar has received 6 analyst reviews, including 5 Buys against a single Hold, making the consensus view a Strong Buy. The shares are priced at $25.06 and the average target of $37.83 suggests room for 51% growth in 2021. (See OSCR stock analysis on TipRanks) Zai Lab, Ltd. (ZLAB) Some biotech companies operate with a precision approach, developing targeted treatments for specific conditions; others take a shotgun approach, creating and testing a wide range of therapeutic agents against an equally wide range of conditions, from cancers to autoimmune diseases to infectious agents. Zai Lab, based in China, is clearly in the latter category. The company’s pipeline includes no fewer than 21 agents under development as treatment for conditions varying from ovarian and gastric cancers to glioblastomas and mesothelioma to autoimmune skin conditions like psoriasis. The pipeline projects are at all stages, from pre-clinical research to Phase 3/Pivotal clinical trials to approval for treatment. Zai Lab’s chief products are niraparib, Optune and ripretinib: Under the trade name Zejula, niraparib has been approved in China since December 2019 as a maintenance therapy for adults with ovarian and fallopian tube cancers. It was approved by the US FDA for similar use in April of 2020. Optune is Zai Lab’s trade name for tumor treating fields (TTFields), a new treatment regime that uses electric fields, tuned to particular frequencies, to inhibit the cell division that causes tumor growth. Optune has been approved for use, and marketing, in mainland China, Hong Kong, Japan, the US, the EU, and Switzerland. The treatment is used to target glioblastoma tumors in the brain. Looking forward, Zai Lab expects that the recent Chinese approval of ripretinib (trade name Qinlock) as a treatment for gastrointestinal stromal tumors (GIST) will open up new opportunities to expand the patient base. Ripretinib is the company’s third approved product in China in a span of 15 months. Zai Lab will be submitting regulatory filings to expand the use of TTFields to mesothelioma later this year. In his coverage of Zai Lab for Goldman, Ziyi Chen sees the company’s continued success with the regulators as a primary factor supporting the stock value. “We see the [Qinlock] approval as a further validation to Zai Lab’s robust clinical development and regulatory communication capability (approval 8.4 months from NDA acceptance and 22 months from in-licensing), confirming one of our thesis points from our initiation…. In addition, we believe Qinlock will be eligible for this year’s NRDL price negotiation (last year’s cutoff Aug 17, 2020) although no official guidance has been given by the company,” Chen wrote. In line with these comments Chen rates ZLAB shares as a Buy and gives the stock a $205 price target. At current levels, his target implies a robust 64% one-year upside. (To watch Chen’s track record, click here) With three reviews on record, all to Buy, the Strong Buy consensus rating ZLAB is unanimous. The stock is selling for $129, and its $207.29 average price target, slightly more bullish than the Goldman Sachs target set by Chen, suggests ~61% growth this year. (See ZLAB stock analysis on TipRanks) Coupang (CPNG) When an online sales site hits it big, to say, “It’s the next Amazon,” usually, that’s all hype. But Coupang, by all appearances, is the real deal. The South Korean e-commerce company, founded in 2010, showed over US$5.9 billion in sales in 2019, doubled that to $12 billion in 2020, and is on its way toward dominating the South Korean online retail market. Coupang sells an enormous range of products on its site, from household furnishings and kitchen utensils to childcare items to pet supplies and automotive needs – and that is only a small selection of their categories. The company boasts a Rocket Delivery network, guaranteeing same-day or next-day delivery on more than 5 million items in stock, and claims a 99.6% 24-hour delivery rate. A major e-commerce player, posting numbers like that, would be ripe for an IPO – and Coupang went public on Wall Street this past March. The company offered 130 million shares at $35 each, and raised $4.55 billion. Among the bulls is Goldman Sachs analyst Eric Cha, who initiated coverage of Coupang with a Buy rating and a $62 price target. Investors stand to pocket ~35% gain should the analyst’s thesis play out. Backing his stance, Cha writes: “Coupang has disrupted Korea’s e-commerce market with its 1P-based service, dubbed ‘Rocket Delivery.’ The vast assortment of low-priced 1P products delivered free of charge the next day (or within hours) to Coupang Wow members will be difficult for competitors to match and seems to be driving mind-share as well as GMV. We expect the company to continue to place priority on GMV growth by expanding to new service offerings (i.e., Fresh and Eats) as well as new categories.” Not everyone is as enthusiastic about Coupang as Cha, as TipRanks analytics reveal CPNG as a Hold. In fact, out of 5 analysts polled in the last 3 months, Cha seems to be the sole bull. Meanwhile, the 12-month average price target stands at $50.60, which implies ~9% upside from current levels. (See CPNG stock analysis on TipRanks) To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. 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.
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