COVID-19 has changed the rules, yet growth is still the name of the game. Sure, it’s a strange time for growth investors. On the one hand, the Commerce Department just announced that in Q2 2020, real gross domestic product (GDP) decreased at an annual rate of 32.9%, with unemployment remaining at alarmingly high levels. On the other, stocks have been firing on all cylinders, with the S&P 500 bouncing back from March lows and turning positive year-to-date.
That said, there are names that have positioned themselves for growth to the upside, according to the Street’s pros. Already notching some serious gains since the start of 2020, these companies have solid footings within their respective industries, with their growth prospects set to remain strong through the back half of the year and beyond.
Past performance certainly doesn’t guarantee future results, but it’s an important factor to consider when searching for high-growth plays. Bearing this in mind, we used TipRanks’ database to pinpoint three stocks that have not only exhibited impressive year-to-date performances, but are also primed to rip even higher. All three tickers have received rave reviews, with analysts noting each appears undervalued.
Ballard Power Systems (BLDP)
Providing fuel cell (FC) power, Ballard Power Systems gives its clients access to innovative clean energy solutions that deliver a better performance at a reduced operating cost. Its year-to-date gain comes in at a whopping 98%, and some analysts believe there’s still plenty of fuel left in the tank.
Four-star analyst Craig Irwin, of Roth Capital, counts multiple near-term catalysts as the reason for his optimistic approach, noting that they could “materially impact the revenue trajectory, and extend Ballard’s leadership in fuel cell technology for heavy-duty and light-duty vehicles.”
What are these catalysts? First and foremost, Irwin points to more clarity regarding Chinese, German, and UK FC subsidy programs. So far, the company has already delivered more than 700MW of FC products including modules and stacks for over 760 FC buses and 2,200 FC trucks that are currently in service, and 12,000 stacks for FC forklifts in operation.
With Chinese subsidies potentially getting resolved, Irwin believes revenue from the Weichai JV could increase from $35-$40 million in 2020 to $135-$195 million per year, as production is slated to accelerate to 2,000-3,000 HD modules. Although there’s less certainty when it comes to the Bits road-Ocean/Synergy relationship, the analyst argues “it has similar potential to Weichai.”
As for the Audi/VW opportunity, Irwin reminds investors that BLDP was approached for its development services back in 2013, with Audi/VW already spending over $110 million to date. “We estimate the contract has $15-$54 million in remaining capacity, and have always expected a commercial endpoint,” he commented.
To this end, Irwin thinks his 2025 estimate “could easily be satisfied by delivery of modules for 2,500 U.S. and European FC buses and 6,000 kits for Chinese JV partners serving the HD market.” Adding to the good news, he said, “We believe Ballard is fully capitalized for the business plan through 2025, where potential for a more aggressive slate of customer deployments might be the most likely thing to require additional capital needs.”
It’s clear why Irwin continues to take a bullish stance. In addition to keeping a Buy recommendation on the stock, he lifted the price target from $20 to $25. A twelve-month gain of 76% could be in store, should the analyst’s thesis play out in the year ahead. (To watch Irwin’s track record, click here)
Turning now to the rest of the Street, opinions are split almost evenly. 3 Buys and 2 Holds add up to a Moderate Buy consensus rating. In addition, the $20.20 average price target brings the upside potential to 42%. (See Ballard Power Systems stock analysis on TipRanks)
Plug Power (PLUG)
Moving on to another fuel cell company, Plug Power offers hydrogen fuel cell (FC) systems designed to replace traditional batteries in electrically-powered vehicles and equipment. Even though it has already posted a year-to-date gain of 144%, several members of the Street believe this is just the beginning for PLUG.
On July 16, the company launched its line of zero-emission stationary fuel cell systems called GenSure HP (high power). The products were built for large-scale, high-power backup power applications including data centers, energy storage systems, microgrids and other high-power commercial facilities.
Digging deeper into the details, the platform’s product lineup will boast power configurations ranging from 500 kW to 1.5 MW, and the GenSure HP units will be configured using the modular 125 kW ProGen fuel cell engines that PLUG released in February of this year. PLUG is expected to kick off production of these units in December 2020, and they will be available for purchase in 2021. Adding to the good news, management stated it will offer GenSure HP as part of its turnkey packages that include power, fuel, installation, permitting and aftermarket service.
Weighing in on this development for H.C. Wainwright, four-star analyst Amit Dayal tells clients that there are big implications. With an addressable market opportunity of roughly $15 billion, the move demonstrates the “leverage the company has with respect to its fuel cell and hydrogen platform.”
Expounding on this, Dayal stated, “Though this is a competitive market, we believe the company’s ability to offer a full-stack solution that includes servicing and maintenance, should provide an edge. We believe existing relationships with customers such as Amazon with respect to data center opportunities could prove beneficial. We believe material contribution from this new product line should begin in 2021. We expect more color on this initiative to be provided in the company’s 2Q20 earnings call.”
Dayal is a bit conservative when it comes to PLUG’s net revenues. The analyst estimates the figure could reach $1.1 billion in 2024, compared to the company’s guidance of $1.2 billion. However, from 2020 to 2028, he thinks revenues could increase from $278.8 million to $2.6 billion, at an eight-year CAGR of 32%.
“We believe that the company should be able to grow its gross margins (excluding effect of warrants) from 14.3% in 2020 to 36.3% in 2028 as revenues rise. We expect the company to begin generating net profits in 2023,” Dayal added.
Everything that PLUG has going for it keeps Dayal with the bulls. To this end, he maintained a Buy rating and $14 price target. What does this mean for investors? Upside potential of 82% is on the table. (To watch Dayal’s track record, click here)
The bulls represent the majority on this one. Out of 10 total reviews published in the last three months, 8 analysts rated the stock a Buy, while 2 said Hold. So, the word on the Street is that PLUG is a Strong Buy. The $9.87 average price target implies shares could rise 28% in the next twelve months. (See Plug Power stock analysis on TipRanks)
Zai Lab Ltd. (ZLAB)
Switching to the healthcare sector, Zai Lab develops innovative and potentially transformative therapies for cancer, autoimmune and infectious diseases. Given its new deal with Turning Point Therapeutics and its 83% year-to-date gain, it’s no wonder ZLAB has scored praise from the analyst community.
Among the healthcare name’s fans is Guggenheim’s Seamus Fernandez. The five-star analyst tells clients the recently inked deal could mean big things. As per the terms of the agreement, ZLAB will get the exclusive development and commercialization rights for repotrectinib in Greater China (mainland China, Hong Kong, Macau, Taiwan) for $25 million upfront. There’s also a possible $151 million in milestones and mid-to-high teen percentage royalties on net repotrectinib sales in Greater China.
On top of this, Fernandez points out that ZLAB will open additional trial sites for the ongoing pivotal Phase 2 TRIDENT-1 study in Greater China and has the right of first negotiation for the next two Turning Point pipeline products that seek similar partnership opportunities in the region. He added, “We note the current estimated patent life is to 2034-35; we believe ZLAB could file in China at or around the same time (2022-23) as TPTX files repotrectinib assuming relatively quick turnaround to update the existing IND with Chinese authorities.”
According to Fernandez, the deal is “another example of ZLAB’s continued best-in-class licensing strategy in oncology.” Going further, he explained, “As a pioneer advancing the in-licensing business model in China, ZLAB management has partnered with several biopharma companies… we note that ZLAB’s business development strategy, which targets overlapping areas of promotion within oncology, should add significant ‘operating leverage’ to the P&L with each new product launch.”
Speaking to the therapy’s potential, repotrectinib’s efficacy and safety was in line with Rozlytrek’s, which is currently the preferred drug for ROS1m+ NSCLC. Therefore, it could address the unmet need of the 20,000-30,000 NSCLC patients with ROS1 as the driver mutation.
It should also be noted that combination study updates for ZLAB and MacroGenics’ MGD013 are set to be presented at a scientific conference in 2H20, with this potentially reflecting an important aspect of HER2 therapy development plans, in Fernandez’s opinion.
“The preliminary results for margetuximab in combination with MGD013 in HER2+ positive tumors (~43% ORR in HER2+ tumors), which compares to a ~12% ORR for margetuximab in HER2+ tumors (3 median prior lines) and the pembrolizumab + trastuzumab combination, which showed a ~15% ORR in PD-L1 positive breast cancer and no response in PD-L1 negative breast cancer (PANACEA trial), were compelling. The results were fascinating given that the ~43% ORR were in patients that were low expressers of PD-L1,” Fernandez commented.
Based on all of the above, Fernandez reiterated a Buy rating. He also bumped up the price target from $75 to $105, suggesting 38% upside potential. (To watch Fernandez’s track record, click here)
Do other analysts agree with Fernandez? They do. Only Buy ratings, 3, in fact, have been issued in the last three months, so the consensus rating is a Strong Buy. At $94.67, the average price target implies shares could surge 24% in the next year. (See Zai Lab stock analysis on TipRanks)
