Analysts see an attractive entry point in these 2 ‘Strong Buy’ stocks

It’s hard to put a positive spin on the current state of the stock market. While the 2022 action has seen moments of relief for the most part, the trend has been decidedly downbeat, as evidenced by the performance of major indices. All are down at least double digits; the tech-heavy NASDAQ’s 30% decline was the most acute, while the S&P 500 is now down 17% year-to-date.

That said, while it’s hard to see ownership stocks sink to the bottom, the downside is that investors can pick up shares of good companies on the cheap. Of course, the hardest part is identifying the good companies – those that will flourish once the market-wide sell-off subsides. This is where a guiding hand from Wall Street’s pros comes in handy.

Using TipRanks’ database, we identified two names whose stock price is down more than 40% this year; however, the analysts believe that both offer good value right now and are expected to move higher in the coming months – and higher we are talking triple-digit gains. Let’s take a closer look at that.

Hippo Holdings (HIPO)

The first stock we’ll look at, Hippo Holdings, is made up of many things: a technology company, a smart home company, and an insurance company — but usually that’s all together. Hippo combines artificial intelligence and data technology to streamline and improve the homeowners insurance market. The company’s system allows clients and agents to work together to create fine-tuned policies that directly meet the homeowner’s needs. Policies are established on the basis of statistical data from the neighbourhood, but also on the basis of the contents. On Hippo’s side, the company derives income from underwriting policies and commissions from sales offices.

The housing market boomed in the second half of last year and the first half of 2022, and Hippo reported good earnings during that time, but shares of the company are down 81% year-to-date. That loss widened even as the company reported a 44% year-over-year increase on the top line, from $21.3 million in the quarter last year to $30.7 million in its recent 3Q22 report.

One reason for the share price decline and investor reluctance may lie in Hippo’s regular net losses. That loss deepened to $129.2 million in 3Q22 under GAAP measures; this compared unfavorably to the $30.9 million losses from 3Q21. The larger losses were partially impacted by the recent Hurricane Ian in Florida.

Full-year 2022 corporate guidance forecasts revenue of $119 million to $121 million, and adjusted net loss in the range of $197 million to $203 million — but long-term guidance predicts improvements in 2023 and a turn to profitability in late 2024.

Analyst Matthew Carletti, who covers this underwriting stock for JMP, takes a balanced stance on recent headwinds, writing, “We believe Hippo’s modern, proactive approach to coverage, alongside its omni-channel distribution and strong customer retention, will result in strong growth for many years there’s no hiding the fact that Hippo’s loss ratio left a lot to be desired not too long ago but after significant pricing and reinsurance action it’s seen significant improvement over the past few quarters and we believe it’s giving investors more visibility and confidence on the company’s path to profitability.”

“We believe that HIPO’s shares are attractively valued, currently below enterprise value (EV). While we recognize that Hippo has struggled since becoming a publicly traded company in mid-2021…we believe that the underperformance of the shares exaggerated,” the analyst summarized. upwards.

According to Carletti, HIPO earns an Outperform (ie Buy) rating, and its $70 price target implies massive 443% upside potential over the next 12 months. (To view Carletti’s track record, click here)

Overall, Hippo recently picked up ratings from 5 Wall Street analysts, including 4 to Buy against only 1 to Hold (Neutral), for a Strong Buy consensus rating. The shares are selling for $12.89 and have an average price target of $54.70, suggesting a strong year-over-year gain of 324%. (See HIPO stock forecast on TipRanks)

Schrodinger, Inc. (SDGR)

The second downed stock we’ll look at is both a software and pharmaceutical company. Schrödinger uses a physics-based platform to accelerate innovation, using a combination of physics, chemistry and predictive modelling. The result is a discovery platform that opens new molecules faster and cheaper than traditional methods. The company has marketed its platform to external customers and is also using it to leverage an internal drug discovery research journey.

That research program includes a variety of drug candidates currently in the discovery and preclinical stages, as well as one, SGR-1505, which is undergoing a Phase 1 clinical trial. The trial opened for enrollment this month and is designed as a dose-escalation study of the drug candidate’s safety, pharmacokinetics and pharmacodynamics. SGR-1505 is a potential treatment for relapsed or refractory B-cell malignancies.

So far this year, Schrödinger has underperformed the overall markets, falling 48%. That doesn’t mean the company lacks potential, according to Craig-Hallum analyst Matt Hewitt.

“We believe Schrödinger ticks all the right boxes for high-growth investors. In recent years, the company has established itself as a software-driven disruptor in the pharma/biotech space, with a core product (FEP+) still in the early stages of adoption. Combined with an attractive pricing model, significant opportunities outside of pharma/biotech, and optionality in the form of internal pipeline/collaborations, we see plenty of reasons for high-growth investors to own the stock,” said Hewitt.

In line with this optimistic assessment, Hewitt rates SDGR stock a buy, and his $60 price target indicates room for an impressive 232% gain on the one-year horizon. (To view Hewitt’s track record, click here)

Overall, SDGR stocks, with 6 recent analyst ratings including 5 to buy and 1 to hold, have a Strong Buy consensus rating from the street. The $60.83 average price target implies a 237% upside from the current trading price of $18.05. (See SDGR stock forecast on TipRanks)

To find great ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that brings together all of TipRanks’ stock insights.

disclaimer: The opinions expressed in this article are solely those of the named analysts. The content is for informational purposes only. It is very important to do your own analysis before making an investment.

Leave a Reply

Your email address will not be published. Required fields are marked *