July signed off with a bang, in what turned out to be the stock market’s best month since November 2020. Better-than-anticipated Q2 earnings from some of the world’s biggest companies alongside comments from the Fed around easing future rate hikes put investors in an optimistic mood once again.
Is the rally sustainable or are we about welcome back the bear market shortly? From a purely technical perspective, Oppenheimer’s Head of Technical Analysis Ari Wald sees reasons to believe the surge has legs.
“For the S&P 500, incremental positives include last week’s defense of the 50-day average and fresh inflection in the weekly MACD,” Wald explained. “We see upside into 4,300 and are open to a higher low above 3,920 in the seasonally weak September period. Overall, we maintain our view that the index is on the road to recovery and think 4,600 (~12% upside) is reasonable by year-end.”
Taking Wald’s outlook into consideration, we wanted to take a closer look at two stocks earning a round of applause from Oppenheimer, with the firm’s analysts forecasting over 80% upside potential for each. We’ve used the TipRanks platform to gauge the rest of the Street’s sentiment. Let’s take a look at the results.
Carlyle Group (CG)
We’ll start off with global alternative asset management firm Carlyle Group. Since its foundation in 1987, the company has turned into one of the world’s most successful alternative asset managers, boasting assets under management (AUM) totaling $376 billion. The business is split into three different segments consisting of Global Private Equity ($169 billion AUM), Global Credit ($141 billion) and Global Investment Solutions which is focused on offering investors resources and investment opportunities.
The company has a proven track record of producing returns in each of its categories, with private equity annualized gains of 15% and private credit annualized gains of 10%.
Like many others, Carlyle shares are still down significantly for the year, but the market liked the look of the latest set of quarterly results, released last week. In Q2, total segment revenue increased by 26.2% year-over-year to $1.16 billion, beating the $1.1 billion consensus estimate. There was a beat on the bottom-line too, as adj. EPS of $1.17 came in above the $1.04 forecast.
Year-to-date, total assets under management have increased to $376 billion, a 25% uptick, while fee-earning assets under management have risen by 34% to $260 billion.
Reflecting on the quarter and on the segment’s performance so far this year, Oppenheimer’s Chris Kotowski thinks that within the group, CG is “particularly well positioned for more uncertain markets.”
“While the market has sold-off CG and the ‘Alt’ group generally versus the S&P 500, it’s our strong conviction that these companies are highly resilient in recessions and generally emerge as winners,” the 5-star analyst writes. “CG’s 2Q22 results increase our conviction in that thesis. It was a strong quarter in terms of earnings and investment performance. The only nit that one could pick is that fundraising on the current flagship private equity fund seems to be taking longer. In the end, however, it’s investment performance that will drive fundraising, and that has remained outstanding.”
These comments form the basis of Kotowski’s Outperform (i.e., Buy) rating and $70 price target. If everything goes as planned, according to the analyst, CG will provide one-year returns of a handsome 81%. (To watch Kotowski’s track record, click here)
The Street concurs. While two analysts remain on the sidelines, all 10 other recent reviews are positive, naturally making the consensus view here a Strong Buy. The average target stands at $54, leaving room for share appreciation of ~40% over the 12-month timeframe. (See CG stock forecast on TipRanks)
Aldeyra Therapeutics (ALDX)
Let’s turn now to something altogether different. Aldeyra is a biotech focused on developing novel therapies to treat immune-mediated ocular and systemic diseases. Rather than directly inhibiting or activating single protein targets, the company’s method is to discover pharmaceuticals that modulate immunological systems, with the aim of optimizing multiple pathways while at the same time keeping toxicity to a minimum.
Aldeyra’s pipeline has several drugs in development; ADX-629, an orally administered RASP modulator, currently in Phase 2 studies indicated to treat several systemic immune-mediated diseases. There’s also ADX-2191, being developed to prevent proliferative vitreoretinopathy and for the treatment of retinitis pigmentosa and primary vitreoretinal lymphoma. But leading the way is reproxalap, which has been in Phase 3 clinical trials as a treatment for patients with dry eye disease and allergic conjunctivitis.
For the former indication, the company only recently released data from a double-masked, vehicle-controlled crossover clinical trial in which the drug met its end goals. Aldeyra is planning for a submission of the data in a New Drug Application (NDA) for reproxalap in dry eye disease.
Following the positive results, Oppenheimer’s Justin Kim believes the setup to registration has become “increasingly clarified.” The analyst has now raised the probability of success (PoS) for the drug in dry eye from 70% to 80% in the US and from 50% to 70% in the EU.
Outlining his positive thesis, Kim writes, “We believe Aldeyra’s late-stage ophthalmology pipeline in allergic conjunctivitis and dry eye diseases offers a favorable risk-reward to current share levels, coupled with long-term pipeline optionality from ADX-2191 in proliferative vitreoretinopathy and systemic RASP applications. As Aldeyra reaches potential commercialization in the 2023 timeframe, we anticipate the shares could experience significant re-rating.”
Overall, Kim thinks the stock has some way to go, and by some way, we mean 159% of upside. Those are the returns investors are looking at, should the stock make it all the way to Kim’s $13 price target. No need to add, the analyst’s rating is a Buy. (To watch Kim’s track record, click here)
And what about the rest of the Street? It’s Buys all around – 7, in total – providing this name with a Strong Buy consensus rating. If Kim’s target looks optimistic, then up against his colleagues’ forecast, it appears conservative; at $24.40 the average target makes room for 12-month gains of 386%. (See Aldeyra stock forecast 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.