Consumer spending has long been the engine of the US economy, which is what made the social lockdown policies put in place against COVID so devastating. By forcing the public to stay home, the policies effectively shut down the main source of economic activity. Fortunately, we are now on an upswing; COVID is on the wane, most of the restrictions have been, or are being, lifted, and economic activity starting to buzz again. A flood of cash, from stimulus checks, tax credits, and accumulated savings, have put consumers in a spending mood.
Writing from Wells Fargo, chief economist Jay Bryson notes that the combination of ready cash and the end of winter “…led to a blockbuster month for retailers in March. Total retail sales surged 9.8% during the month, a gain exceeded only by the surge tied to the reopening of the economy in May of last year after the lockdowns. The gain pushed the total level of sales a stunning 17% higher than it was before the pandemic.”
Bryson does see reason for a note of caution, as he points out that the stimulus cash has been sent – and mostly spent. He describes the effect now as ‘fading.’ He adds, however, that consumers’ accumulated savings have potential to outweigh the falloff in government stimulus checks.
“Excess savings combined with the expected reopening of the service economy this summer, supports our forecast for a consumer spending boom this year that will rival any in living memory,” Bryson noted.
The stock analysts at Wells Fargo have been busy, too, finding the stocks that will gain in the environment Bryson describes. We’ve used the TipRanks platform to look up two of those Wells Fargo picks. These are Buy-rated stocks with high upside potential. We are talking returns of at least 60% over the next 12 months.
Bloom Energy (BE)
We’ll start with a look at Bloom Energy, a ‘green’ company in the alternative energy sector. Bloom produces solid oxide fuel cells, an alternative technology to current batteries or petro-fuels. Solid oxides produce electrical power through electrochemical conversion, giving the advantages of power efficiency and low emissions. Their main disadvantage is a high operating temperature. To date, Bloom has installed some 600 megawatts’ capacity worth of fuel cells.
Bloom’s business started to accelerate toward the end of 2020, as can be seen from the company’s financial results. The fourth quarter saw a quarterly top line of $249.4 million, the best in over two years and up 16.8% year-over-year. The successful fourth quarter was driven by a 16.6% increase in order acceptances.
Earlier this year, Bloom joined with 10 other alt energy companies in an initiative called Hydrogen Forward, to focus on promoting the development of hydrogen-based fuel sources and lobbying for the industry in Washington. The formation of the coalition signals that hydrogen energy companies are determined to make their voice heard – and with new Biden Administration’s commitment to a ‘green’ economy, Bloom and its partners may find sympathetic ears in the capital.
In the meantime, Wells Fargo analyst Praneeth Satish is initiating coverage of the stock with an Overweight (i.e. Buy) rating and a $43 price target that implies a one-year upside of 69%. (To view Satish’s track record, click here)
“The company has a successful track record of cost reductions, having lowered its cost/kW by ~60% over the past 5 years. We project continued improvement in gross margin and expect BE to generate positive cash from operating activities in 2021. In addition, we believe BE is ~1 year away from turning FCF positive. Note that cost reductions and scale should also benefit BE’s expansion initiatives, as its solid-oxide technology is used across all the identified new applications with limited incremental R&D or manufacturing investments,” Satish wrote.
So, that’s Wells Fargo’s view, let’s turn our attention now to rest of the Street: BE’s 5 Buys and 3 Holds coalesce into a Moderate Buy rating. Going by the $34.80 average price target, shares are anticipated to be changing hands at a 37% premium over the next 12 months. (See BE stock analysis on TipRanks)
Affimed (AFMD)
We’ll switch gears for the next stock. Affimed is an immune-oncology researcher in the biopharma world, looking into new therapies for cancer patients. The company’s ‘redirected optimized cell killing’ (ROCK) platform is used to develop innate cell engagers capable of reactivating the patient’s own immune cells to combat tumors. The company has 6 separate programs in its development pipeline, most in the preclinical stage of research. The company’s focus is on the treatment of hematological and solid tumors.
Of Affimed’s drug candidates, AFM13 is the first to have reached the clinical trial stage. The candidate has trials ongoing for the treatment of peripheral T cell lymphoma and CD30-postive T cell lymphoma, as well as transformed mycosis fungoides. Other lines of research are in earlier phases of development. AMF13 is a CD16A-based innate cell engager, and has shown promise of some therapeutic efficacy as well as a favorable safety profile.
In March, Affimed announced that it will be continuing REDIRECT, a Phase 2 study of AFM13 as a treatment for CD30-postivie T cell lymphoma. So far, the study has shown some anti-tumor response in both Cohort A and Cohort B of the patient base. Affimed’s recent program update also showed significant progress with AFM24, the company’s second most advanced program, now in a Phase 1 trial of its efficacy against solid tumors.
In his report on Affimed for Well Fargo, analyst Nick Abbott gives the stock an Overweight (i.e. Buy) rating and a $18 price target that indicates a potential for 62% upside in the year ahead.
Backing his stance, Abbott writes, “Our Overweight rating on AFMD reflects our view on AFMD’s approach to immuno-oncology (IO) with focus on the ROCK platform of innate cell engaging bispecific antibody development as a monotherapy, in combination with checkpoint inhibitors and in combination with cell therapy. Positive interim analysis of the registration-directed REDIRECT trial of AFM13 provides validation of the ROCK platform, in our view.”
Wall Street’s analysts are unanimous here, giving the stock 5 positive reviews in recent weeks for a Strong Buy consensus rating. The shares are priced at $10.42 and their $14 average target implies ~25% one-year upside. (See AFMD stock analysis 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.
