Oppenheimer Says These 2 Stocks Have Double-Digit Gains in Sight
2023 is well underway now, and the key story is the sudden change in sentiment on the financial front. Last year’s bearish trend and headwinds are well known. Stubborn inflation, the Fed’s rapid increase in interest rates, the risk of recession, China’s shutdowns, and Russia’s Ukraine invasion; they all weighed on investors.
But after the calendar change, the mood changed, turning to a strong positive sentiment. Inflation data from December came in much better than expected, and with the Fed’s anti-inflationary rate policy seeming effective, the central bank could start slowing down its monetary tightening efforts. Russia is still on the move against Ukraine, but China is clearly moving away from ‘Zero COVID’ and toward normal economic activity.
“Thus far the New Year has ushered in enough positive sentiment to offset uncertainty that remains on the landscape as the Federal Reserve’s efforts to curb inflation appear to be gaining traction and even credibility among enough investors and traders to see stocks worldwide move higher on increased expectations that a hard landing in the US might be avoided," said John Stoltzfus, chief investment strategist at Oppenheimer.
"Such a scenario could lead to a recovery in the US and elsewhere around the globe as countries tweak their monetary policies and China pivots from zero-COVID tolerance and reboots its economy," Stoltzfus added
Taking Stoltzfus’ outlook into consideration, Oppenheimer analyst Matthew Biegler is pounding the table on two stocks, noting that each has the potential to generate double-digit returns for investors in 2023. Using TipRanks’ database, we found out that the rest of the Street is also on board, as each boasts a “Strong Buy” consensus rating.
Relay Therapeutics (RLAY)
First up is Relay Therapeutics, a clinical-stage biotech company using its proprietary Dynamo platform to create novel, first-in-class drug candidates targeting intractable or treatment-resistant conditions, particularly cancers. The company’s leading candidates, currently undergoing human clinical trials, are RLY-4008 and RLY-2608. The former is a treatment for FGFR-2 altered cholangiocarcinoma, a bile duct cancer, and the latter is a treatment for PIK3CA mutant breast cancer.
Relay saw a significant jump in share price last month, after the company released highly positive proof-of-concept data on RLY-4008. The drug candidate, a small-molecule selective FGFR2 inhibitor, showed an impressive 88% response rate across all doses – reportedly more than double that achieved by pan-FGFR inhibitors currently on the market. While further clinical trials are planned, this drug candidate has clearly demonstrated a high potential for success.
Additionally, Relay has a strong candidate in RLY-2608. Breast cancer gets a lot of press, and so a potentially effective treatment is bound to attract investor attention. On RLY-2608, Relay is continuing to enroll patients in a first-in-human trial, across two dose escalation cohorts.
Relay has deep financial pockets to cover the expenses of developing novel drug candidate. As of the end of 3Q22, the company had $1.1 billion in cash and liquid assets, almost 15% more than it had reported at the end of 2021.
Oppenheimer's Biegler sees RLY-4008 as the key point for investors here. He writes: “Underscoring the power of Relay’s platform, RLY-4008 is (to our knowledge) the only pure FGFR2- selective inhibitor and has roughly doubled response rates in FGFR2-driven cholangiocarcinoma relative to earlier-generation pan-FGFR inhibitors. We believe the FGFR2 opportunity provides a nice floor for the stock, and it also validates the power of Relay’s discovery platform.”
Taking this stance forward, Biegler rates RLAY shares an Outperform (i.e. Buy) and his price target of $33 implies a one-year gain of ~55%. (To watch Bielger’s track record, click here)
Overall, this early stage clinical research firm has picked up reviews from 6 Wall Street analysts in recent weeks – and they are all in agreement that it’s one to Buy, making the Strong Buy consensus rating unanimous. Shares are priced at $21.32 and their $39 average price target indicates potential for a ~83% upside on the 12-month horizon. (See RLAY stock forecast)
Tyra Bioscience (TYRA)
Next from the Oppenheimer picks is Tyra Bioscience, a precision oncology company working on the development of purpose-built therapies designed to overcome tumor resistance for better patient outcomes. The company has an extensive pipeline of drug candidates at the pre-clinical level, and one program, TYRA-300 that has begun human clinical trials. This drug candidate is worth a second look.
TYRA-300 is selective inhibitor of FGFR3, with a potent action. The drug is intended to overcome two major limits in currently approved FGFR inhibitors: their activity against ‘treatment-emergent resistance mutations,’ and their selectivity for FGFR3 over other isoforms. TYR-300, which is under investigation as a treatment for bladder and solid tumors, has entered the clinical phase and the company has already begun dosing patients. TYRA-300 is the first orally dosed FGFR3 inhibitor to enter a clinical trial — the SURF301 study was initiated during Q4 of last year.
This clinical trial should spark investor interest, according to Oppenheimer's Biegler. He writes, "Tyra is a straightforward story that we believe is flying under investors’ radar. The company is following a familiar path—we’ve seen time and again that next-generation inhibitors (seeking to mitigate resistance mutations and improve selectivity) have been able to drastically improve outcomes for patients… We think Tyra is poised to accomplish [this] in urothelial carcinoma with lead candidate TYRA-300."
These comments back up Biegler’s Outperform (i.e. Buy) rating on the stock, and his $17 suggests ~26% upside for the next 12 months.
As Biegler pointed out, Tyra has not attracted much notice; in fact, there are only 3 recent analyst reviews on record for the stock. However, they are all positive, giving the shares their Strong Buy consensus rating. (See Tyra stock forecast)
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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.