These Stocks have a 90% upside potential despite turbulence in the economy


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Rising inflation was the story of 2022. The latest report shows that it reached 8.5%. To fight it, the Federal Reserve is raising interest rates and cutting back on the money supply – but that has an immediate effect of strengthening the dollar, which will negatively impact corporate earnings in the overseas markets.

Morgan Stanley chief U.S. equity strategist Mike Wilson sees the strong dollar as a headwind that can’t be dodged, at least not for long, and expects the stock market will continue to fizzle, especially when corporate earnings start getting revised downwards.

“Based on the extreme [dollar]The U.S. dollar has risen 16% in the past year thanks to this rally. This is about as extreme as it gets historically speaking and unfortunately it typically coincides with financial stress on markets, a recession or both,” Wilson noted.

That’s not to say there aren’t any compelling plays out there. Morgan Stanley’s stock analysts argue that only a few have a chance to win against this backdrop. They point to two stocks that offer exciting opportunities.

While the firm’s analysts believe both are poised to surge at least 90% in the year ahead, we wanted to get the rest of the Street’s opinion. After using TipRanks’ database, we learned that each ticker boasts a “Strong Buy” consensus rating from the analyst community and triple-digit upside potential.

Iveric Bio (ISEE)

We’ll start in the healthcare sector. Iveric Bio, a biopharmaceutical firm, focuses on developing innovative medication to treat retinal disease. We find that Iveric currently has Zimura as its main drug candidate in its clinical trials program. It is currently being tested for Stargardt disease (age-related maculardegeneration) in late-stage trials.

This is an eye condition that can cause serious vision problems. It is autosomal recessive and causes progressive loss of retinal photoreceptor cell function. Zimura is being investigated as a possible treatment for AMD and geographic atrophy secondary.

Post-hoc analysis of the Phase 3 GATHER1 study was released by the company. It showed a 22% decrease in progressive damage 18 months after Zimura treatment. The GATHER1 study’s original analysis was used to justify the currently underway GATHER2 trial, a Phase 3 study of 400 patients with top line data expected to be released during 3Q22.

Additional clinical trials of Zimura are on the planning boards, including a new trial of the drug in the treatment of intermediate AMD set to start in Q4 after planned interactions with the FDA. Phase 2b of the STAR trial in the treatment for autosomal recessive Stargardt disorder has already started, and patient enrollment is ongoing.

Analyst at Morgan Stanley Michael UlzI am optimistic about this biotech. After reviewing the company’s clinical trials, Ulz comes down squarely with the bulls: “We expect positive data from the Ph3 GATHER2 study in 3Q22 (likely September), supported by success of the first pivotal study (GATHER1) and additional de-risking factors that further increase our conviction…. We have increased our probability of success for Zimura to 75% from 65%…”

“Our scenario analysis indicates a favorable risk/reward with opportunity for meaningful upside on reductions in lesion growth of ≥20% (+75% to +125%, though we note our expectations could be conservative); while disappointing results would drive meaningful downside (-70% to cash ~$3/share),” Ulz added.

Ulz rates Iveric shares as a Buy based on the above factors and targets a $30 price, which represents a staggering 155% upside from current levels. (To watch Ulz’s track record, Click here)

This is not the only bullish view of Iveric. ISEE stock has received no less than 8 analyst reviews. These reviews have broken down 7 to 1 for Buys over Holds. For a Strong Buy consensus view, ISEE stock has been rated as a Strong Buy. The shares are priced at $11.75 with a $24.13 average target, which suggests gains of 105% over the next 12 months. (TipRanks offers ISEE stock forecasts)

Xponential Fitness (XPOF)

Now we’ll make a sharp change in direction, and look at Xponential Fitness. This company is a franchise and curation company in the personal training sector. The company has a range of brands offering a wide variety of fitness activities. These include yoga, dance and Pilates, rowing and cycling, running, as well as boxing and other fighting sports. Xponential is a company that aims to make boutique-quality fitness accessible to a wider range of people. The company operates in 48 US States, Canada and dozens more countries through master franchise agreements.

In May of this year, Xponential announced a master franchise agreement in Mexico that will take three of its brands ‘south of the border.’ The included brands are StretchLab, Rumble and AKT. The new Master Franchisor has the rights to license up 60 studios in Mexico over the next ten years.

This is just the latest in Xponential’s expansionary moves. The company also opened 99 studios, and sold 260 additional franchise licenses in 1Q22. Overall, Xponential’s count includes a total of 4684 franchise licenses sold and 2,229 studios in operation as of the end of the first quarter.

Xponential Fitness became public in July 2013 and has experienced solid top-line growth. Due to steady growth in the network franchisees, studios, and studios, each quarter has seen consecutive revenue gains.

The company’s top line in 1Q22 was $50.4 million. This is a solid 73% increase over the previous year. This was driven by a 70% growth in North American system-wide sales, and same-store sales in North America (the company’s largest market) grew 47% in Q1 – compared to a 24% decline in the year-ago quarter.

This is the background against which Morgan Stanley’s Brian HarbourLooks at the stock. The analyst rates XPOF Overweight (i.e. His $25 price target suggests potential for 92% share growth in the next 12 months. (To watch Harbour’s track record, Click here)

Backing his bullish stance, Harbour writes: “If the recession bear case is in store, we don’t expect fitness stocks to be defensive per se. But fundamentals aren’t likely to fare badly, in our view, and we still view XPOF as an interesting growth story that can be a relative winner in boutique fitness and stand among quality franchisors in the public markets, with an early track record of meeting or beating IPO-era targets.”

Once again, we’re looking at a stock with a Strong Buy analyst consensus rating. The stock’s average price target is $27.33, which represents a 110% increase from the current $13.02 share price. (TipRanks has a stock forecast for XPOF)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ The Best Stocks to Purchase, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: This article does not reflect the opinions of the featured analysts. This information is for informational purposes only. Before making any investment, it is important to conduct your own analysis.


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