In this piece, we will take a look at Oppenheimer’s favorite stocks for the next 12 months and the top 32 stock picks.
The tail end of August is appearing to turn a fresh page for Wall Street. The highlight event of the month was the Federal Reserve’s Jackson Hole Economic Summit, where Fed Chair Jerome Powell was expected to set the tone for the central bank’s interest rate cut cycle. Powell didn’t disappoint and commented that the “upside risks to inflation have diminished. And the downside risks to employment have increased” which leads him to conclude that the “time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
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Naturally, investors took this in full stride and the benchmark S&P flagship index soared by 1.01% to be just 1% shy of its record high in July. Before Chair Powell’s comments, earlier in the month, investment bank Oppenheimer had released its latest list of 32 stocks for the next twelve months. These stocks have been picked on the basis of their fundamentals, say the firm’s analysts, and are the “most timely” as per the firm’s analysts.
This latest set of stock picks comes as the firm has grown progressively bullish about the stock market over the course of 2024. The year started out with a report that set a 2024 close target for the flagship benchmark S&P index at 5,200. Right now, the index is at 5,634, so safe to say, the market has continued to defy expectations primarily because of investor mania for artificial intelligence. As he quoted chief investment strategist John Stoltzfus’s 5,200 index target, analyst James Watt admitted that while 2024 is the crucial election year in America, his firm’s clients should instead focus on the economy.
Taking a bullish view, the analyst shared that with “growing GDP, a jobs picture that continues to be strong, moderating inflation, and stable interest rates, our economic statistics look good.” Watt also commented on the interest rate scenario and conceded that “long term interest rates are notoriously hard to predict.” However, the economists’ expectations back then were “anywhere between one and three interest rate cuts,” and these could lead to the “tremendous amount of cash on the sidelines which will eventually be invested over the coming years” creating further upward pressure on equities.
One key factor that Watt mentioned is something that we’ve come across in analysis done by other investment firms too. Sharing “that the universe of investable stocks has significantly decreased over the years,” he also shared that “there are only 35 companies with a capitalization over $200 billion and just 83 companies with a capitalization over $100 billion.” These “are the companies the vast bulk of funds are invested in,” with the analyst warning that the key implication from this could lead to the supply and demand driving “the price of these dramatically due to limited supply.”
As the second quarter of 2024 came to a close, Watt’s views on the bifurcation in the stock market based on market capitalization remained unchanged. In his overview for Q3 2024, the analyst shared that “the NASDAQ and S&P are not really diversified when it comes to performance.” Since this concentration in just a handful of securities tends to nudge investors towards a non diversified stock portfolio, the analyst added that this “anomaly hasn’t always been the case but the long term benefits of diversification have remained a constant way to get through various market gyrations.”
However, by Q3, the financial firm’s views on the benchmark flagship S&P index had evolved. By then, Stoltzfus has first increased the target to 5,500 from 5,200 in March, sharing that an evolution in investor “mindset driven not so much by fear and greed but a need to invest for intermediate to longer-term goals suggest to us an opportunity to tweak our target higher.” As if this wasn’t enough, the strategy lead was out with another revision in August.
This boosted the target to 5,900 on the back of an upward revision of the P/E multiple to 23.1 from the earlier 22. Two additional key factors that drove the strategist’s optimism were an innovation cycle that was both cyclical and secular driving all 11 S&P sectors, and a generational shift in investment strategies driven “not so much by fear and greed but a need to invest for intermediate to longer term goal.”
Stoltzfus followed up a month later with an in depth analysis of the top 500 S&P index firms’ Q2 earnings to see which sectors had done well despite the mixed economic climate. Mind you, this analysis came just before his firm had released its latest set of 32 stocks, so it is important to learn its conclusions from the Q2 2024 earnings season. The strategist shared that the four sectors that were seeing double digit earnings growth were health care, financials, utilities, and consumer discretionary. Their earnings growth sat at 17%, 13%, 15%, and 16%, respectively. Stoltzfus added that nine out of 11 sectors had shown positive earnings growth, with the 8.5% overall growth leading to a surprise upside.
Looking at the robust data set, the analyst concluded:
“We remain overweight US equities while maintaining some meaningful exposure to international developed and emerging markets as the US Central Bank moves towards easier policy on greater confidence that its efforts to put untoward levels of inflation in check have been or are growing closer to being met. Volatility should be expected as the economy and the markets navigate the transitions taking place in the economy and monetary policy in a move towards greater normalization.”
So, as Oppenheimer continues to keep its eye on the evolving US economy and markets, we decided to see which stocks are on its radar.
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Our Methodology
To make our list of Oppenheimer’s top stocks, we ranked its latest list of 32 stocks by the average analyst share price percentage upside.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
32. CarMax, Inc. (NYSE:KMX)
Share Price Upside: -10%
Number of Hedge Fund Investors In Q2 2024: 35
Average Analyst Share Price Target: $77.3
CarMax, Inc. (NYSE:KMX) is one of the biggest user car dealers in America. Like Walmart, which has had to evolve to keep up with the rise of eCommerce firms, CarMax, Inc. (NYSE:KMX) has also struggled to compete with online used car retailers and firms that offer their franchises to those willing to buy. However, Oppenheimer is optimistic for its future, and shares that it is “increasingly optimistic that digitally focused investments undertaken by CarMax over the past few years have strengthened key operational and financial levers.” Heading into the future, the key to CarMax, Inc. (NYSE:KMX)’s hypothesis is its ability to scale up its digital business model and improve the links between user car sellers and buyers. Additionally, the firm will also have to ensure that its business model, which focuses on a fixed margin per car, is able to compete with rivals that are focused on growth and more willing to sacrifice their margins. Firms like CarMax, Inc. (NYSE:KMX) benefit from slower economic conditions which tend to push consumers toward buying used cars, but this also contributes to rising prices. Conversely, in a good economy, as their demand falls, prices follow, making it tougher for CarMax, Inc. (NYSE:KMX) to maintain fixed margins.
CarMax, Inc. (NYSE:KMX)’s management shared key details for its omni channel and EV sales strategies during the Q2 2024 earnings call:
“We have launched a number of EV research tools through Edmunds to help educate and build trust with consumers. We’ve also established test stores in California to evaluate new capabilities that support our operational readiness for increased EV sales and also enhance the customer experience. Finally, we have continued to further enhance our omni-channel capabilities we are rolling out our new order processing system to our stores and plan for it to be available nationwide later this year.
The system helps associates guide customers through each step of the buying journey and provides a more seamless experience for consumers who prefer to blend self-progression with assistance from associates.”
31. The Goldman Sachs Group, Inc. (NYSE:GS)
Share Price Upside: -9%
Number of Hedge Fund Investors In Q2 2024: 68
Average Analyst Share Price Target: $465.1
The Goldman Sachs Group, Inc. (NYSE:GS) has become one of the most troubled investment banks on Wall Street, particularly due to the lackluster performance of its retail business and struggles in a high interest rate era. However, 2024 has been a stable year for the bank, with The Goldman Sachs Group, Inc. (NYSE:GS)’s shares having gained 53% since April 2023. This strength follows the bank’s decision to close its consumer banking business arm, after the ill fated attempt to diversify its business. Since it’s a key player in the investment banking and mergers and acquisitions market, The Goldman Sachs Group, Inc. (NYSE:GS) benefits from low interest rates too as a looser monetary policy environment increases the number of deals. Oppenheimer believes that The Goldman Sachs Group, Inc. (NYSE:GS) “has a strong franchise and there are multiple revenue, cost, and capital optimization strategies that can be implemented, but the market is still valuing the stock as though the returns will remain unchanged indefinitely.”
Ariel Investments mentioned The Goldman Sachs Group, Inc. (NYSE:GS) in its Q4 2023 investor letter. Here is what the firm said:
“Global investment bank, Goldman Sachs Group, Inc. (GS), also increased in the period on solid earnings results. The top- line came in strong led by elevated financing activity and an improvement in advisory revenues, despite weak transaction volumes within the investment banking segment. Should conditions remain conducive, management remains cautiously optimistic the business will experience continued recovery in both capital markets and strategy activity. Meanwhile, GS continues to successfully execute on its strategic initiatives to improve the overall return of the company. It is right sizing headcount and narrowing its ambitions in consumer strategy through divestitures and an enhanced focus on driving profitability in Platform Solutions by 2025. With potential regulatory capital constraints from B3E, GS noted it will reign in buybacks over the short-term but maintain its dividend. Looking ahead, we continue to view the near and long-term outlook for Goldman as attractive at current levels, given favorable business trends, continued positive momentum on strategic initiatives and active expense/capital management programs.”
30. Sweetgreen, Inc. (NYSE:SG)
Share Price Upside: -1%
Number of Hedge Fund Investors In Q2 2024: 27
Average Analyst Share Price Target: $37.2
Sweetgreen, Inc. (NYSE:SG) is a specialty American restaurant chain that focuses primarily on salads and other foods for the health conscious consumer. One distinctive fact about the firm is that it has partnered up with growers to develop a supply chain of vegetables that allows it to control product quality and freshness. This offers Sweetgreen, Inc. (NYSE:SG) a key competitive advantage over potential rivals that might be interested in competing with it since while selling salads might have few barriers to entry, developing a supply chain does. At the same time, the specialty nature of its business means that Sweetgreen, Inc. (NYSE:SG) has to ensure market penetration and carefully map out its stores to ensure that they are operating in areas that are favorable to its products. Its business is also highly cyclical but also benefits from keeping an eye on the future as healthy foods are growing in popularity among millennials and Gen Z. As for Oppenheimer, it believes that Sweetgreen, Inc. (NYSE:SG)’s “fundamentals are improving with new SSS drivers, expanding restaurant margins, and new market unit economics hitting hurdles.”
Meridian Funds mentioned Sweetgreen, Inc. (NYSE:SG) in its Q1 2024 investor letter. Here is what the firm said:
“Sweetgreen, Inc. operates restaurants serving fresh and healthy foods in the United States. The salad-focused restaurant concept has invested heavily to develop a captive network of growers that help ensure the freshness of its produce, a distinct competitive advantage. Additionally, management’s investment in automation technology, known as the “Infinite Kitchen,” has shown strong promise of significant labor cost savings, a reduction of order fulfillment errors, and increased restaurant throughput. While Infinite Kitchen has only been tested in a handful of stores to date, initial data supports the potential for automation technology to significantly improve both margins and average unit volumes. The stock rose in the quarter on accelerating same-store sales growth and better than expected guidance from management. In addition, investors took notice that material margin improvements could quickly reduce Sweetgreen’s cash burn, a prior source of concern. Sweetgreen was a new position for the Fund in the quarter.”
29. Clearwater Analytics Holdings, Inc. (NYSE:CWAN)
Share Price Upside: -1%
Number of Hedge Fund Investors In Q2 2024: 20
Average Analyst Share Price Target: $24.4
Clearwater Analytics Holdings, Inc. (NYSE:CWAN) is a midsized specialty software as a service (SaaS) company that provides accounting analytics and aggregation services to financial professionals in the insurance and investment management industries. The firm also serves the needs of governments, and its business model focusing on accounting means that some of the volatility that SaaS firms suffer from in slowing economies is removed from the hypothesis. At the same time, Clearwater Analytics Holdings, Inc. (NYSE:CWAN) is nevertheless evaluated on its ability to grow revenue and maintain costs. The firm also benefits from recurring revenue more so because businesses are unlikely to switch their financial software providers unless they are forced to do so or if they perceive significant value propositions being available elsewhere. Clearwater Analytics Holdings, Inc. (NYSE:CWAN) also benefits on this front due to its specialty nature, as it benefits from being able to focus on the countless nuances of accounting. Oppenheimer comments that the firm should “demonstrate sustainability over the medium-term because of the underlying value proposition of its SaaS offerings, strong brand recognition and referenceability.”
Wasatch Global Investors mentioned Clearwater Analytics Holdings, Inc. (NYSE:CWAN) in its Q1 2024 investor letter. Here is what the firm said:
“Clearwater Analytics Holdings, Inc. (CWAN) was also a major detractor. The company develops cloud-native software that allows clients to simplify their investment-accounting operations. Although management projected robust revenue growth of about 18% for the 2024 calendar year, analysts had been hoping for even better growth. As a result, the stock sold off. In our experience, Clearwater’s management team tends to underpromise and then overdeliver. As a result, we bought more shares on the stock-price weakness. And we still expect annual revenue growth to exceed 20% for the next several years.”
28. Nasdaq, Inc. (NASDAQ:NDAQ)
Share Price Upside: -1%
Number of Hedge Fund Investors In Q2 2024: 37
Average Analyst Share Price Target: $69.86
Nasdaq, Inc. (NASDAQ:NDAQ) is the firm behind the NASDAQ exchange, the biggest technology focused stock exchange in the world and the second largest in terms of market capitalization. This provides it with the best moat possible in its industry, but simultaneously, it also makes Nasdaq, Inc. (NASDAQ:NDAQ) vulnerable to a lack of diversification which can make it suffer in the off chance of a paradigm shift in the financial market. However, the firm is aware of this, and its efforts at diversification have yielded benefits over the course of the past few years. As of Q2 2024, roughly 78% of Nasdaq, Inc. (NASDAQ:NDAQ)’s revenue of $1.1 billion came from the firm’s non exchange business which includes software products to help fight money laundering and manage risk. The SaaS nature of its non exchange products also opens up the opportunity for recurring revenue for the firm, and it can benefit from an improved outlook of its exchange business in a lower interest rate environment because of more listings on the NASDAQ exchange and higher business SaaS spending. Oppenheimer agrees with us as it comments that the recovery “of IPO and strength in equities markets can support listing and index businesses and help accelerate organic growth.”
Oakmark Funds mentioned Nasdaq, Inc. (NASDAQ:NDAQ) in its Q2 2024 investor letter. Here is what the fund said:
“Nasdaq is a global technology company that pro- vides platforms and services for capital markets and other industries. Over the past decade, under the leadership of CEO Adena Friedman, Nasdaq has transformed from a traditional equity exchange into a collection of fast-growing, high-quality software and data businesses with the majority of revenue coming from non-exchange segments. Nasdaq’s recent acquisition of Adenza led some investors to question management’s capital allocation disci- pline. However, we believe the subsequent share price reaction more than compensates for the risk that Nasdaq overpaid for Adenza. More importantly, the experience seems to have catalyzed a renewed focus on organic growth, debt pay- down, and capital return. Despite Nasdaq’s potential for faster than average growth, high mix of recurring revenue, and impressive operating margins, the stock trades at a P/E multiple in line with the broader market. We were pleased to purchase shares in this excellent business for an average price.”
27. Carrier Global Corporation (NYSE:CARR)
Share Price Upside: 1%
Number of Hedge Fund Investors In Q2 2024: 45
Average Analyst Share Price Target: $71.71
Carrier Global Corporation (NYSE:CARR) is one of the biggest industrial products providers in America. Its products include cooling, automation, fire management, and other systems for use in residential, commercial, and industrial properties. Since Carrier Global Corporation (NYSE:CARR) sells large scale systems and heavy duty products, it tends to thrive when inflation is low and businesses can easily borrow money to fund their construction projects. Additionally, it also means that there is significant revenue visibility for the firm in the form of pre orders and backlogs which can also provide a pulse for future trends. Carrier Global Corporation (NYSE:CARR)’s considerable assets, as evidenced by a hefty $10 billion in cash and equivalents mean that it can adequately weather any economic storm. They also provide it with key economies of scale to keep costs low for expensive items and develop important customer partnerships. The stock might be in for some turbulence though, as Carrier Global Corporation (NYSE:CARR) is currently focused on divesting its non air conditioning business. Oppenheimer is optimistic though as it states that the firm “demonstrated ability to deliver above-average incremental and improving FCF conversion.”
Diamond Hill Capital, though, isn’t. Here’s what it said in its Q4 2023 investor letter:
“HVAC products and services provider Carrier Global is seeking to sell its non-HVAC business, creating some uncertainty around the stock’s near-term outlook. We exited our position in favor of more compelling opportunities.”
26. International Flavors & Fragrances Inc. (NYSE:IFF)
Share Price Upside: 2%
Number of Hedge Fund Investors In Q2 2024:46
Average Analyst Share Price Target: $102.51
International Flavors & Fragrances Inc. (NYSE:IFF) is a specialty raw materials provider that sells chemicals and fragrances used in perfumes, materials used by the pharmaceutical industry, ingredients used in food and beverages, and other items. This lends its business a degree of diversification and cyclical and non cyclical exposure that few companies enjoy. For instance, it allows International Flavors & Fragrances Inc. (NYSE:IFF) to generate stable pharma revenue when the economy is slow, and when it picks up, then its scents division kicks into high gear due to higher discretionary spending by consumers. International Flavors & Fragrances Inc. (NYSE:IFF)’s scale, as evidenced by its 21,500 employees also gives it global exposure which further hedges the business against territory specific macroeconomic headwinds even as it divests its pharma division. Volumes and pricing power are key tenets of International Flavors & Fragrances Inc. (NYSE:IFF)’s hypothesis, and Oppenheimer believes that it has managed economic turbulence well since the firm “is emerging from the industry downturn as a healthier business as it continues to execute on its strategy, productivity initiatives, and balance sheet optimization.”
International Flavors & Fragrances Inc. (NYSE:IFF)’s management shared key details for the lessons that it has learned over the past years during its Q2 2024 earnings call:
“As I did last quarter, I would like to give a brief update on our progress as we work across the organization to refresh our strategy and focus on a business-led operating model. IFF has had a challenging last three years. Constraints on our balance sheet led the Company to underinvest in our core businesses and focused on divestitures. The Company was not structured to effectively navigate the complex and fast moving environment, and we underperformed relative to our peers. We have now had several quarters of growth as we have taken decisive actions to get our businesses back on-track. Our strategy moving forward will be driven by four key pillars: our people, our customer focus, our position as an innovation powerhouse and our operational excellence.
We will engage and empower our people to deliver customer success while we drive profitable market share growth over time. We will also continue to develop sustainable new products and applications that are aligned with our customers’ needs now and in the future, all while being relentless in our commitment to safety, quality and the efficiency in our operations. We have already taken several steps toward resetting and refocusing our operating model, including the announced divestiture of Pharma Solutions, which is still on-track to close in the first half of 2025, and our pivot to an end-to-end business-led operating model that will promote greater accountability and better performance. We are also working hard to improve employee engagement and are seeing positive results.”
25. TransMedics Group, Inc. (NASDAQ:TMDX)
Share Price Upside: 3%
Number of Hedge Fund Investors In Q2 2024: 29
Average Analyst Share Price Target: $180.25
TransMedics Group, Inc. (NASDAQ:TMDX) is one of the more interesting health care stocks that you’re likely to come across. This is because it is an organ transplant services provider that enables the preservation of the liver, heart, and lungs that are destined for transportation. TransMedics Group, Inc. (NASDAQ:TMDX) augments this business specialty by also providing a robust logistics network that also includes air assets which are key as transplant surgeries often require fast organ transportation in order to save patients’ lives. TransMedics Group, Inc. (NASDAQ:TMDX)’s focus on organ donation also means that it stands to benefit from a sizeable market that will only grow in the future especially when medical science further expands the use of animal organs in humans. TransMedics Group, Inc. (NASDAQ:TMDX)’s market was validated recently when a Swedish firm announced that it would acquire a peer donation company for a hefty $477 million price tag – indicating that firms are willing to fork out substantial amounts for similar businesses. As for the firm’s industry leading OCS system, Oppenheimer shares that it “represents a disruptive technology that could potentially revolutionize solid organ preservation and transport.”
Headwaters Capital Management mentioned TransMedics Group, Inc. (NASDAQ:TMDX) in its Q2 2024 investor letter. Here is what the firm said:
“TransMedics (TMDX) +104%: TransMedics posted strong first quarter results and raised full year revenue guidance. The results were validation of the Company’s strategy to own and operate an internal logistics fleet to drive increased adoption of their revolutionary organ care system. Market penetration in each organ (liver, heart and lung) remains low and when combined with the potential to grow the overall market should support strong revenue growth for the company for many years.”
24. Crescent Capital BDC, Inc. (NASDAQ:CCAP)
Share Price Upside: 3%
Number of Hedge Fund Investors In Q2 2024: 10
Average Analyst Share Price Target: $19
Crescent Capital BDC, Inc. (NASDAQ:CCAP) is an asset management company that is referred to as a business development firm since it provides loans, private equity, and other capital to firms seeking to expand their businesses. One factor that differentiates Crescent Capital BDC, Inc. (NASDAQ:CCAP) from its rivals and somewhat insulates it from the risky nature of the capital provision industry is the fact that its loans are guaranteed by the borrower’s assets. Additionally, Crescent Capital BDC, Inc. (NASDAQ:CCAP) seeks to invest in non cyclical businesses, which hedges it against economic downturns – a key factor since 90% of its portfolio is made of loans. Another key borrower selection criterion for the firm is a loan to book value of less than 30%. As per Oppenheimer, Crescent Capital BDC, Inc. (NASDAQ:CCAP) “seeks to maximize the total return to its stockholders by generating current income and capital appreciation by investing in secured and unsecured debt, as well as related equity securities.”
Crescent Capital BDC, Inc. (NASDAQ:CCAP)’s management shared additional details for its loan portfolio during the Q2 2024 earnings call:
“That being said, we have continued to closely monitor the impact of borrowing costs on our portfolio companies given the elevated interest rate backdrop. The weighted average interest coverage of the companies in our investment portfolio at quarter end remained stable at 1.7x as compared to the prior quarter.
As a reminder, this calculation is based on the latest annualized base rate each quarter. We also continue to closely monitor how our portfolio companies are managing fixed operating costs. Our analysis demonstrates that our portfolio companies in the aggregate are well positioned to address fixed charges with operating cash flows and available balance sheet liquidity. As expected, we saw a modest decrease in the aggregate of all utilization during the second quarter with approximately 57% of aggregate vulnerable capacity available across the portfolio at a quarter end, which is sufficient in our view. It is worth noting that we have seen an increase in repricing requests given tight spreads. Our approach to repricing is that a portfolio company ought to have demonstrated improvement in creditworthiness since underwrite through growth and deleveraging in order to reward or repricing.
The strength of our portfolio continues to benefit from the substantial amount of equity invested in our companies. Most of it is applied by large and well as private equity firms with whom we have long-standing relationships and have partnered with in multiple transactions. And we note that the weighted average loan to value in the portfolio at the time underwrite is approximately 40%.”
23. AppLovin Corporation (NASDAQ:APP)
Share Price Upside: 5%
Number of Hedge Fund Investors In Q2 2024: 54
Average Analyst Share Price Target: $94.91
AppLovin Corporation (NASDAQ:APP) is a new age digital advertising company headquartered in Palo Alto, California. It operates a variety of platforms that enable video game advertisers and publishers to work through auctions, improve publisher revenue optimization, and generate marketing analytics. Crucially, AppLovin Corporation (NASDAQ:APP)’s products, such as its contextual tracking engine, are used by its gaming advertisers but they can also be used in the highly growing connected television market which relies on the internet. This is because the internet provides advertisers with a large amount of data from which to generate insights, and AppLovin Corporation (NASDAQ:APP)’s tertiary presence in the game-ad industry could help it capture a mutli billion dollar market. Oppenheimer believes that the firm’s “growing scale and broadening customer relationships continue to improve its core product performance, which will likely accelerate its market penetration and growth.”
ClearBridge Investments mentioned AppLovin Corporation (NASDAQ:APP) in its Q1 2024 investor letter. Here is what the firm said:
“We also added AppLovin, a disruptor in the IT sector that helps developers market and monetize their mobile apps. Powered by its proprietary targeting engine, the company’s software segment grew robustly in 2023 and should benefit from improving AI efficiency. We believe growth of the company’s targeting engine is still in the early innings as precision continues to improve, its adoption and dataset grow and AppLovin starts to license the engine to e-commerce advertisers, which could open up a brand new multibillion dollar market.”
22. Alcon Inc. (NYSE:ALC)
Share Price Upside: 5%
Number of Hedge Fund Investors In Q2 2024: 22
Average Analyst Share Price Target: $101.25
Alcon Inc. (NYSE:ALC) is a Switzerland based eye care products provider. A former Novartis business, the firm enjoys a global brand presence as well as considerable resources through its $1.1 billion in cash and equivalents. Its resources are key for Alcon Inc. (NYSE:ALC)’s competitive advantage since they enable the firm to invest in emerging technologies for one of the most sensitive and complex human body organs, the eye. Additionally, its scale also allows Alcon Inc. (NYSE:ALC) to enjoy lower costs, which leads to margins – along with volumes – being a key part of its hypothesis. Additionally, the firm is also sensitive to manufacturing disruptions because of the high purity requirements of its raw materials. Like sizeable pharma firms, Alcon Inc. (NYSE:ALC) benefits from a presence in everyday use products such as eye drops, and high technology products such as intraocular lenses – allowing it to target growth and volume simultaneously. Oppenheimer is optimistic about the firm’s pipeline, which includes the UNITY phaco/vitreoretinal system and the dry-eye drug AR-15512.
Alcon Inc. (NYSE:ALC)’s management shared details for its new contact lens during the Q2 2024 earnings call:
“In addition, we will further expand our reusable portfolio with the upcoming launch of PRECISION7. PRECISION7 is a new contact lens specifically designed for a one week replacement schedule that’s based on a unique proprietary technology. We expect PRECISION7 to help drive continued share gains in the reusable category, where we have historically been under indexed. As a reminder, one point of share gain in the global reusables category corresponds to approximately $40 million of revenue for Alcon. We’re working with a handful of eye care professionals in the US who have started fitting PRECISION7 and early feedback has been excellent. We will continue to collect this feedback with select customers through 2024 ahead of a broader commercial launch in 2025.”
21. XPO, Inc. (NYSE:XPO)
Share Price Upside: 6%
Number of Hedge Fund Investors In Q2 2024: 37
Average Analyst Share Price Target: $132.19
XPO, Inc. (NYSE:XPO) is a global trucking company with a presence in the US, Canada, France, the UK, and other countries. Its business is geared mostly towards cyclical industries such as eCommerce, food, and retail. This means that XPO, Inc. (NYSE:XPO) benefits from growth in American and other industrial output as it allows the firm to secure more shipment orders. As a result, XPO, Inc. (NYSE:XPO)’s revenue growth has been negligible over the past few years and was flat between 2022 and 2023 as US manufacturing continued to bear the impact of high rates and the post coronavirus era. However, with the Fed now officially on its way to reducing rates, US manufacturing could pick up and allow XPO, Inc. (NYSE:XPO) to benefit from a boom in demand for shipments. Oppenheimer also believes that its European divestiture will serve XPO, Inc. (NYSE:XPO) well as it comments that the firm’s “valuation builds as it ultimately divests its European Transportation business, and evolves its customer service-focused strategy, capacity, and the efficiency of its North American LTL business.”
XPO, Inc. (NYSE:XPO)’s management shared key details for its current and future performance during the Q2 2024 earnings call:
“For July, we estimate tonnage and shipments per day to be about flat year-over-year with both trends outperforming seasonality. On a two-year stack basis, July shipments per day and tonnage per day meaningfully accelerated versus June. Our pricing trends remain strong as we continue to align our pricing with our service quality and premium offerings. For the second quarter, our contract renewal pricing was up year-over-year by 8%. We also delivered another quarter of above market yield growth. We grew yield excluding fuel by 9% compared with the prior year. While our improving weight per shipment was a modest mix headwind to yield, our revenue per shipment ex-fuel increased sequentially for the 6th consecutive quarter and was up 7.4% year-over-year.
We expect to continue increasing both yield and revenue per shipment quarter-over-quarter in the back half of this year, reflecting ongoing momentum with our pricing initiatives.”
20. Freshpet, Inc. (NASDAQ:FRPT)
Share Price Upside: 6%
Number of Hedge Fund Investors In Q2 2024: 39
Average Analyst Share Price Target: $146.81
Freshpet, Inc. (NASDAQ:FRPT) is a mid sized American company that sells meals and other food items for pets. It is one of the few companies of its kind that operates in the fresh pet meal industry. This provides Freshpet, Inc. (NASDAQ:FRPT) with a competitive advantage in its niche, particularly given the growth in US pet ownership over the past couple of decades. Data shows that while 56% of American households owned a pet in 1988 this jumped by ten percentage points to sit at 66% in 2024. At the same time, since it’s a pure play pet food provider, Freshpet, Inc. (NASDAQ:FRPT) is highly vulnerable to cyclical downtrends. This was evidenced by data from the American Pet Products Association’s (APPA) survey which showed that 19% of pet owners planned to spend less on their companies, a notable uptick over the 9% figure for 2020. Oppenheimer is quite bullish though as it shares that it looks “very favorably upon [its] global growth prospects and see multiple sales drivers for the company.”
Artisan Partners mentioned Freshpet, Inc. (NASDAQ:FRPT) in its Q4 2023 investor letter. Here is what the firm said:
“Freshpet sells refrigerated, fresh pet food. Our thesis is predicated on the company sitting at the intersection of two significant, long- duration trends: health and wellness, and the humanization of pets. It also has a sticky customer base, high barriers to entry and a unique distribution model. However, given a challenging backdrop of consumers trading down and increased promotional activity, we decided to move on as the stock approached our estimate of private market value.”
19. CyberArk Software Ltd. (NASDAQ:CYBR)
Share Price Upside: 10%
Number of Hedge Fund Investors In Q2 2024: 55
Average Analyst Share Price Target: $308.39
CyberArk Software Ltd. (NASDAQ:CYBR) is a cybersecurity company that enables firms to manage their employee identities. Being a software as a service (SaaS) provider, CyberArk Software Ltd. (NASDAQ:CYBR) benefits from stable recurring revenue which is contingent on its ability to grow its customer base. CyberArk Software Ltd. (NASDAQ:CYBR) is also benefiting from the rise in cloud adoption in the industry as well as increasing requirements by the SEC which require firms to promptly disclose any cybersecurity events. Additionally, the broader corporate sector is also seeing a rise in the adoption of multi factor authentication identity management solutions due to rising cyber attacks. This introduces additional tailwinds for CyberArk Software Ltd. (NASDAQ:CYBR), and the firm has managed to hedge the broader drop in enterprise spending by posting 36% and 34% ARR growth during its Q4 2023 and Q1 2024, respectively. Oppenheimer believes that the firm “has established itself as a leader in the privileged account management sector and has expanded into new growth areas.”
Another growing identity management area is machine identity management, as AI creates new opportunities and threats for the industry. Here’s what CyberArk Software Ltd. (NASDAQ:CYBR)’s management had to say during the Q1 2024 earnings call:
“The world of securing machine identities is changing rapidly. Organizations are grappling with a larger variety and an ever-growing number of machines from applications to bots to workloads to IoT devices. Each one of these machines needs to be secured and managed across the life cycle of multiple identity components from secrets to digital keys to certificates. The proliferation of AI is further accelerating the growth and complexity of machine identities. This is becoming a top security challenge.
Traditionally, managing machines often sits outside the security teams remit of control. However, this practice exponentially increases risk and is unsustainable in today’s threat landscape. Customers increasingly realize they need to scale their machine identity security programs beyond local vaults, loosely enforced policies and opensource tools. They need an enterprise-ready machine identity security approach that can scale and is tied into their human identity security program through a single platform. One great win that exhibited all I am describing was with a CyberArk customer who has been with us since 2018. We expanded our long-standing relationship with the Department for Work and Pensions in the U.K. with an expanded program while kicking off a robust secrets management program.”
18. The Timken Company (NYSE:TKR)
Share Price Upside: 11%
Number of Hedge Fund Investors In Q2 2024: 31
Average Analyst Share Price Target: $94.2
The Timken Company (NYSE:TKR) is an industrial products company that makes and sells items such as ball bearings, lubrication systems, chains, clutches, and brakes. As has been the case with other industrial firms, its share price performance has been rather muted as of late as the stock has posted a modest 14% in gains over the past twelve months. This is because industrial spending in the US has dropped due to high interest rates, but with rate cuts on the horizon, The Timken Company (NYSE:TKR) could benefit from reignited demand. This was clear in August when after the Fed Chairman’s latest comments at Jackson Hall that cemented investor optimism for rate cuts, The Timken Company (NYSE:TKR)’s shares closed 2.6% higher. Additionally, key data points that could provide insights into The Timken Company (NYSE:TKR) future include the ISM’s supply chain survey and labor market surveys to determine the course of an economic uptick. The firm also has important exposure to the renewable energy industry in the form of wind energy products, particularly in China. These could create long term tailwinds, and Oppenheimer concurs as it shares that The Timken Company (NYSE:TKR) s “long-term strategic transition, with the team’s aggressive investments in renewable energy and automation.”
The Timken Company (NYSE:TKR)’s management commented on its renewable energy exposure during the Q2 2024 earnings call when it shared:
“We were — we were flattish, slightly up and win from Q1 to Q2. So we think we’ve certainly bottomed. There is usually a little seasonality from first half to second half, but we have the backlog to stay flattish for the rest of this year. I’d say, it is too early to call next year, tends to be a longer lead time item. So as we get to next quarter’s call, I think we should have a good feel how we are going to at least start the year. But definitely could be up. It’s probably impossible to be up back to peak levels just because of the level we’re operating at. It would take us a while to ramp back up to those levels. So probably the fastest for that would be ’26 or ’27, but yes we could be up next year.”
17. Wix.com Ltd. (NASDAQ:WIX)
Share Price Upside: 14%
Number of Hedge Fund Investors In Q2 2024: 42
Average Analyst Share Price Target: $191.78
Wix.com Ltd. (NASDAQ:WIX) is an Israeli software company that enables web development, payment collection, logo generation, website management, and web application buying and selling on an online marketplace. A SaaS company, Wix.com Ltd. (NASDAQ:WIX)’s valuation is dependent on its customer growth, revenue growth, and cost control as evident through free cash flow (FCF) generation. Additionally, since it’s a mid sized SaaS company, Wix.com Ltd. (NASDAQ:WIX) has to ensure bookings growth as well as introduce new products to ensure that larger SaaS businesses do not eat its market share. On the latter front, the firm has launched a new product called the Wix Studio which is an end to end website development platform that could see rising popularity with a growing number of businesses worldwide that are searching for convenient ways to set up their websites. Oppenheimer is impressed with the continued launch of new products, the company has evolved into a small to medium-sized business Cloud/SaaS platform.’s new products as it shares that through its ” continued launch of new products, the company has evolved into a small to medium-sized business Cloud/SaaS platform.”
Wix.com Ltd. (NASDAQ:WIX)’s management commented on Wix Studio’s adoption during the Q2 2024 earnings call:
“The number of Studio accounts and rate of new partners joining the Wix platform through Studio continue to outperform expectations. We also saw an acceleration in the pace of Studio subscription purchases. This, along with strong retention of existing subscriptions and the ramping of partners purchasing their second, third, and fourth Studio packages, drove quarter-over-quarter Studio bookings growth of 20%. Our platform is increasingly resonating with the professional community, as we continue to deliver best-in-class innovations and grow our partner ecosystem. Second, we continue to build up our suite of AI capabilities as a result of the numerous AI initiatives and work streams across weeks. Last quarter, we introduced our plan to embed AI assistance across our platform and products.”
16. Arcosa, Inc. (NYSE:ACA)
Share Price Upside: 16%
Number of Hedge Fund Investors In Q2 2024: 25
Average Analyst Share Price Target: $105.8
Arcosa, Inc. (NYSE:ACA) is a mid sized engineering and construction firm based in Dallas, Texas. It is a diversified construction materials and products company that sells items such as aggregates, tower structures, and steel components for vehicles. Arcosa, Inc. (NYSE:ACA)’s business, which is geared solely towards construction products makes the firm sensitive to high interest rates as they depress construction activity and real estate performance. Consequently, the fact that its shares have 22% over the past twelve months is unsurprising. Equally unsurprising is the fact thatArcosa, Inc. (NYSE:ACA)’s stock soared by 4.6% the day Fed Chairman Jerome Powell confirmed that interest rate cuts would start soon. This suggests pent up momentum for the stock, and Arcosa, Inc. (NYSE:ACA) could benefit if construction activity picks up. Additionally, since it is an American company, the firm could also see tailwinds from government spending through the Bipartisan Infrastructure Act. Oppenheimer believes that Arcosa, Inc. (NYSE:ACA) has “well-established positions in attractive markets with favorable long-term demand drivers, which should provide it with compelling organic and acquisition opportunities.”
Arcosa, Inc. (NYSE:ACA)’s management touted the benefits of a recent acquisition during the Q2 2024 earnings call:
“It’s a very, very stable market. When you look at the financials over a long period of time, are very stable, with high margins, a very good market. This company has done a great job expanding over the last several years. And there are opportunities to consolidate not only in the main market of the New York, New Jersey area, but they also have other quarries around it. So there are opportunities. One thing that’s very interesting when you look at the competitors in the region, you have many of the big guys around it, which is something we like. We like to compete against some of the larger peers. But there are also some smaller bolt-on opportunities for the future. As I said before, our priority right now is deleveraging, and that’s going to be our focus.
And there are opportunities to grow organically, and implement some other actions to improve efficiency, et cetera. But also to learn from this company. This company has done a fantastic job and there are things we can bring to them, but there are also things we can learn from them. So very excited about it.”
15. C3.ai, Inc. (NYSE:AI)
Share Price Upside: 16%
Number of Hedge Fund Investors In Q2 2024: 18
Average Analyst Share Price Target: $28.39
C3.ai, Inc. (NYSE:AI) is a software company that allows users to develop and deploy applications along with managing their customer relationship management, supply chain, and other business processes. Despite having rebranded itself recently to capitalize on Wall Street’s fervor for AI stocks, C3.ai, Inc. (NYSE:AI)’s story is mixed as while the firm has somewhat delivered on the growth aspect of its business valuation, it has nevertheless left a lot to be desired on the cost control front. In its latest fiscal quarter, C3.ai, Inc. (NYSE:AI)’s revenue grew by 20% annually, and as management was keen to point out during the earnings call, the quarter also accelerated revenue growth over the previous three quarters’ 11%, 17%, and 18% annual growth. However, this growth also came at the expense of higher operating costs, which jumped by 11% annually. C3.ai, Inc. (NYSE:AI) is currently transitioning into a pay per use business model, and this might have affected its subscription revenue which marked a 41% annual growth during the quarter a marked jump over the previous quarter’s 23%. Oppenheimer is bullish on C3.ai, Inc. (NYSE:AI) primarily because of its platform level support for ChatGPT.
However, Bireme Capital isn’t. Here’s what it had to say during the Q4 2023 investor letter:
“Our final new short position is in a company called C3.ai. Originally named “C3 Energy,” C3.ai has changed its name multiple times based on whatever hot new trend they were supposedly capitalizing on. The “energy” theme was about smart grid and cap-and-trade. Then the firm changed its name to “C3 IoT” to attempt to capitalize on the Internet of Things buzz. After that trend fizzled out, the moniker was altered once more, with the company capturing the “AI” ticker in December 2020 – a savvy move if it wants to sell stock to credulous investors, but irrelevant to its business prospects. As Kerrisdale put it, the company is a “minor, cash burning consulting and services business masquerading as a software company.”
The company incinerated $200m last year and is set to burn more cash in this one. They may grow mid-teens this year after just 5% growth in FY 2023, but there is really no comparison to truly fast growing software businesses like SNOW (33% growth this year), Gitlab (31%), and Datadog (26%).
With an EV/sales multiple of 9x, we think the stock is grossly overvalued.”
14. Regal Rexnord Corporation (NYSE:RRX)
Share Price Upside: 17%
Number of Hedge Fund Investors In Q2 2024: 32
Average Analyst Share Price Target: $195.63
Regal Rexnord Corporation (NYSE:RRX) is a diversified industrial equipment manufacturer that makes and sells products such as gears, motors, switches, bearings, and other associated items. This provides it exposure to a broad set of industries, including mining, agriculture, food and beverage, and cooling. This means that Regal Rexnord Corporation (NYSE:RRX) thrives when the economy is growing as the firm has the chance to capture tailwinds from a wider set of industries. However, it also means that the firm struggles when the economy is slow, a fact that is also apparent in its stock price which is up a modest 8.31% over the past twelve months. Amidst this downturn, Regal Rexnord Corporation (NYSE:RRX) has focused on reducing its debt and preparing itself for the eventual recovery in industrial spending by launching new products such as a new maintenance platform for industrial manufacturing. As per Oppenheimer, Regal Rexnord Corporation (NYSE:RRX)’s “long-term profit improvement initiatives…look increasingly enabling for broadened share gain momentum and strategic mix management initiatives.”
Diamond Hill Capital mentioned Regal Rexnord Corporation (NYSE:RRX) in its Q2 2024 investor letter. Here is what the firm said:
“Regal Rexnord (RRX) were pressured against a backdrop of macroeconomic concerns which are seemingly making investors hesitant to own leveraged cyclical companies like RRX. However, we maintain our conviction in the outlook for RRX and believe that over the long term, it will capitalize on merger synergies to improve margins, increase organic growth and generate meaningful free cash flow, which should allow it to deleverage.”
13. Broadcom Inc. (NASDAQ:AVGO)
Share Price Upside: 17%
Number of Hedge Fund Investors In Q2 2024: 130
Average Analyst Share Price Target: $198.48
Broadcom Inc. (NASDAQ:AVGO) is one of the most diversified technology companies in the industry. It plays an essential role in the semiconductor industry by designing and selling modems that are used in smartphones, selling switches and other products used in networking equipment, and modules and other products used in satellite systems, charging products, and other items. As if this weren’t enough, Broadcom Inc. (NASDAQ:AVGO) also plays a key role in the cybersecurity industry as it operates an enterprise cloud security system, and the firm also provides network load balancing, virtualization, and automation through cloud computing. Naturally, this means that not only is Broadcom Inc. (NASDAQ:AVGO) able to profit from gadgets and other computing hardware, but it also allows the firm to earn stable recurring revenue through the cloud and cybersecurity products. As a result, Oppenheimer’s optimism is unsurprising, as it shares that Broadcom Inc. (NASDAQ:AVGO) enjoys ” substantial EPS and [free cash flow] growth driven, in part, by its long record of successful accretive M&A,” and that it also “has one of the most strategically and financially attractive business models in semiconductors.”
Aristotle Atlantic Partners mentioned Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter. Here is what the firm said:
“Broadcom is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. The company strategically focuses its research and development resources to address niche opportunities in target markets and leverage its extensive portfolio of U.S. and other patents and other intellectual property to integrate multiple technologies and create system-on-chip component and software solutions that target growth opportunities. Broadcom designs products and software that deliver high performance and provide mission-critical functionality. The company has a history of innovation in the semiconductor industry and offers thousands of products that are used in end products such as enterprise and data center networking, home connectivity, “set-top boxes broadband access”, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Broadcom differentiates itself through its high-performance design and integration capabilities and focuses on developing products for target markets where it believes it can earn attractive margins.
We view Broadcom’s semiconductor business as being very well positioned to benefit from secular growth in data center networking, which is being driven by AI and cloud computing. The company continues to invest in research and development, and we see this as a competitive advantage for the company. Broadcom’s infrastructure software business is a recurring revenue business model that provides mission-critical mainframe support software to its customer base. The recent VMware acquisition will enhance this business strategy and accelerate the growth rate of this business unit, as VMware’s product suite includes key tools for AI server upgrades. Our long-term investment thesis is supported by Broadcom’s success in its strategy of maintaining technology and market share leadership in mission-critical markets with high switching costs and deep profit pools.”
12. Beazer Homes USA, Inc. (NYSE:BZH)
Share Price Upside: 18%
Number of Hedge Fund Investors In Q2 2024: 21
Average Analyst Share Price Target: $38.25
Beazer Homes USA, Inc. (NYSE:BZH) is an American homebuilder headquartered in Atlanta, Georgia. While a relatively smaller firm compared to mega homebuilders, it is the only homebuilding stock on Oppenheimer’s latest list. Just like other homebuilders and the broader real estate industry, Beazer Homes USA, Inc. (NYSE:BZH) sees its business slow down when interest rates are high and buyer affordability drops. However, the firm has some key advantages at its disposal. One of these is its adherence to the Department of Energy’s (DOE) zero energy framework that offers a $5,000 tax break to new homes that are able to reduce energy consumption to the extent that a renewable generation system could meet all their requirements. The second is Beazer Homes USA, Inc. (NYSE:BZH)’s lot inventory which places it well for a potential growth in homebuilding activity. As per Oppenheimer, the firm “is primed for growth, with closings expected to accelerate in FY25.”
Beazer Homes USA, Inc. (NYSE:BZH) commented on its competitive advantages during the Q2 2024 earnings call:
“We now have more than 28,000 lots, up 25% from last year, providing excellent visibility into our growing community count. And second, we reached a major energy efficiency milestone this quarter as we have now closed more homes to the DOE’s single-family, zero energy-ready requirements than any other homebuilder in the country.”
11. Tyra Biosciences, Inc. (NASDAQ:TYRA)
Share Price Upside: 19%
Number of Hedge Fund Investors In Q2 2024: 14
Average Analyst Share Price Target: $26.33
Tyra Biosciences, Inc. (NASDAQ:TYRA) is a small biotechnology company that is developing treatments for cancer and genetic diseases. It is a pre commercial, clinical stage company which means that the firm is a risky biotechnology investment compared to its peers that have products available for sale in the market. It also means that Tyra Biosciences, Inc. (NASDAQ:TYRA)’s stock depends on its R&D expenses, its cash burn rate, cash reserves, and the outcomes of its clinical trials. The firm’s lead drug candidate is the TYRA 300 for urinary tract cancer. This drug is in phase one trial for its primary use case, and the firm also hopes to expand its use to target other diseases such as bladder cancer and bone growth disorders. Oppenheimer is gushing about Tyra Biosciences, Inc. (NASDAQ:TYRA)’s lead drug, as it shares that “[w]e believe Tyra’s lead FGFR3 inhibitor could become a potential best-in-class therapy for FGFR3-mutant urothelial carcinoma and achondroplasia.”
10. Evolent Health, Inc. (NYSE:EVH)
Share Price Upside: 22%
Number of Hedge Fund Investors In Q2 2024: 29
Average Analyst Share Price Target: $40.15
Evolent Health, Inc. (NYSE:EVH) is a tertiary healthcare company that operates systems that allow medical professionals to conduct their daily activities. Some of its services offered include risk and plan management, benefits management, and reporting. It is one of the few players in the value based care market and operates unique platforms such as end of life care planning. With a growing population of seniors in America, this platform could offer Evolent Health, Inc. (NYSE:EVH) strong tailwinds for years to come. Additionally, its unique value proposition also makes the firm an attractive target for mergers, as was evidenced in 2024 when Evolent Health, Inc. (NYSE:EVH) ‘s shares soared by 17% when a Reuters report claimed that the firm was in talks for a potential private equity buyout. Oppenheimer believes that Evolent Health, Inc. (NYSE:EVH) “has an attractive growth proposition, driven by its ability to cross-sell new services, upsell its risk-based products to its large customers and add new evergreen contracts.”
Evolent Health, Inc. (NYSE:EVH)’s management shared details for its value creation efforts during the Q2 2024 earnings call:
“In short, we’re keeping our focus on the enduring theme of higher quality and lower cost, which is obviously has always enjoyed support by those on both sides of the aisle. Further, we believe our condition management model drives more of our value from patient navigation and provider engagement and further reduces any burdens on providers from the utilization management model. In fact, based on the examples we gave earlier and other data, we estimate that in oncology, over 80% of our value creation comes from action outside of traditional utilization management and we believe that percentage will go up in the time ahead.”
9. Maplebear Inc. (NASDAQ:CART)
Share Price Upside: 25%
Number of Hedge Fund Investors In Q2 2024: 56
Average Analyst Share Price Target: $44.54
Maplebear Inc. (NASDAQ:CART) is an American company that focuses on selling groceries online as Instacart. This creates a significant competitive advantage for the firm, as it provides it with exposure to both the high growth eCommerce industry as well as the essential item nature of the grocery industry. Due to this, Maplebear Inc. (NASDAQ:CART) can benefit from an uptick in economic health by growing its operational base by adding more retailers to the platform. It can also ensure that during a tough economy, revenue keeps flowing as consumers divert their spending towards essential items. As a result, key tenets of Maplebear Inc. (NASDAQ:CART)’s hypothesis are its retailer addition growth, delivery times, and cost control. The firm is also experimenting with new technologies, such as its Caper Carts which allow grocery carts to weigh and price items to enable the customer to skip the checkout process entirely. Maplebear Inc. (NASDAQ:CART) has partnered up with grocery giant Aldi for Caper Carts, and if successful, the platform could see growing adoption in the market. Oppenheimer believes that “Instacart can further leverage its current position as a top-2 player in grocery delivery, and the company has considerably improved its order unit economics since 2019.”
Maplebear Inc. (NASDAQ:CART)’s management shared details for its new technologies during the Q2 2024 earnings call:
“The beauty of all of our In-Store technologies is that they connect directly with Storefronts and with each other, so it’s really a seamless experience for customers to buy from retailers online and In-Store. For example, customers can reorder online what they bought with their Caper Carts in one tap, or bring their online shopping list to the screen of Caper Carts to avoid forgetting ingredients in the store.
This is increasingly important to retailers who are moving away from complex and fragmented point solutions and towards technology partners that can offer a simple and seamless customer experience across all of their channels. Scaling our marketplace and enterprise offerings both online and In-Store is also critical to our strategy because it’s laying the foundation for a massive one-stop-shop, omni-channel retail media network. While it may seem like new retail media networks are popping up left and right, right now, we know that brands have limited time and resources, and they will ultimately want to work with platforms that have scales across all channels. And this is exactly where Instacart ads will shine because of our leading scale, performance, measurement, data, and product capabilities.”
8. DraftKings Inc. (NASDAQ:DKNG)
Share Price Upside: 34%
Number of Hedge Fund Investors In Q2 2024: 56
Average Analyst Share Price Target: $48.86
DraftKings Inc. (NASDAQ:DKNG) is an online sports betting company in America that is one of the earliest movers in the highly growing industry. This has allowed it to hold a dominant place in the multi billion dollar market, as DraftKings Inc. (NASDAQ:DKNG) is the second biggest online betting company in America as per EKG, which estimates that the firm’s market share sits at 32%. DraftKings Inc. (NASDAQ:DKNG)’s larger rival in the market is Flutter Entertainment backed FanDuel, which commands a 35% market share. This means that when it comes to cost control, feature addition, player addition, revenue per player, and other key metrics, DraftKings Inc. (NASDAQ:DKNG) has to primarily compete with its larger rival while keeping an eye out for new upstarts with unique features. Additionally, estimates suggest that DraftKings Inc. (NASDAQ:DKNG) can grow its revenue by 21% in 2025 for a sizeable lead over FanDuel’s 12% expected growth. Oppenheimer believes that DraftKings Inc. (NASDAQ:DKNG)’s “competencies in product development and customer acquisition that DKNG utilized to become the daily fantasy sports (DFS) market leader will allow the company to be a critical player in accelerating the shift in U.S. sports betting from ~$150B wagered illegally/offshore to licensed domestic operators.”
Baron Funds mentioned DraftKings Inc. (NASDAQ:DKNG) in its Q1 2024 investor letter. Here is what the firm said:
“Shares of DraftKings Inc., a leading online sportsbook in the U.S., rose during the quarter following an earnings release that showed strong market share gains and an improved outlook for future profitability. Market share capture has been driven by investment in innovative product offerings that are resulting in strong customer retention. The company also announced the acquisition of JackPocket, a digital lottery courier service. We believe the acquisition will help DraftKings achieve a first-mover advantage in many states that offer the JackPocket service but have not yet legalized online sports betting and casino gaming. DraftKings is well positioned to expand margins and generate positive free cash flow as it grows revenues alongside the rapidly expanding U.S. sports betting market, in our view.”
7. Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP)
Share Price Upside: 38%
Number of Hedge Fund Investors In Q2 2024: 30
Average Analyst Share Price Target: $82.67
Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) is a small biotechnology company developing treatments for cancer and obesity. The firm’s two lead drug candidates are its weight loss drug called CRB-913 and its cervical cancer treatment dubbed as CRB-701. Among these, while CRB-913 is leading development as it is currently in a phase one trial in China, Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP)’s CRB-701 has generated more hype in investors. This is because the drug is a CB1 receptor inverse agonist, which regulates GLP-1 levels in the human body. A similar CB1 treatment is being developed by pharma giant Novo Nordisk, after its $1 billion acquisition in 2023 brought the technology into its portfolio. The results from the phase two trial of Nordisk’s treatment could help Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP)’s stock. Oppenheimer, for its part, is impressed with the firm’s cash reserves, as it outlines that Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP) “is well funded, with the current cash balance supporting operations through key catalysts through 2026.”
6. HCI Group, Inc. (NYSE:HCI)
Share Price Upside: 46%
Number of Hedge Fund Investors In Q2 2024: 21
Average Analyst Share Price Target: $138.75
HCI Group, Inc. (NYSE:HCI) is a Florida based insurance company. It primarily caters to the needs of homeowners and provides them with insurance against fires and floods. HCI Group, Inc. (NYSE:HCI) also operates properties and provides software products for claims management and other services. The fact that HCI Group, Inc. (NYSE:HCI) is based in Florida creates a risk for the firm due to the evolving nature of climate related impacts on the insurance industry in the region. As they face rising damages from climate catastrophes, insurance providers are either exiting the market or raising premiums, both of which make business difficult. At the same time, it also means that if HCI Group, Inc. (NYSE:HCI) is able to manage its portfolio efficiently, then it could raise premiums following the exodus of other insurance firms. On this front, it is already facing tailwinds from the depopulation of Citizens Property Insurance, and HCI Group, Inc. (NYSE:HCI)’s software business also provides it with a high margin division to boost profits. Oppenheimer believes that the stock is undervalued and HCI Group, Inc. (NYSE:HCI)’s shares “will move toward fair value, which we think is significantly above the current price.”
HCI Group, Inc. (NYSE:HCI)’s management shared key details for the Citizen Insurance depopulation during the Q2 2024 earnings call:
“First, Condo Owners Reciprocal Exchange, known as CORE, assumed additional policies from Citizens, and its total run rate premium is approximately $70 million. Second, we completed our annual reinsurance program in the quarter, which included a structure similar to last year, and retention at both of our insurance carriers was largely unchanged. We were pleased with the outcome and we appreciate the continued support of our reinsurance partners.
We believe reinsurers recognize the value of our technology and our claims organization. With reinsurance now secure, we expect our total reinsurance spend across all reinsurance towers to be approximately $92 million per quarter. This includes the consolidation of CORE’s reinsurance spend and minor risk transfer enhancements. I’d like to reaffirm a few statements I made last quarter related to the assumption of policies from Citizens. First, I mentioned that we were retaining more policies than we expected. As more policies come up for renewal and transition to our paper, this is still the case. The retention of policies continues to exceed our expectations. Second, I mentioned that the loss ratio was coming in better than expected. As this book becomes more seasoned, this is still the case.
The loss ratio on policies we assumed from Citizens is continuing better than expected. Given the proven success of our technology to select attractive policies from Citizens, we have applied to assume additional policies from Citizens. Homeowners Choice has been approved to assume up to 25,000 policies in October. TypTap has also been approved to assume 25,000 policies in October. And both companies have applied to participate in a November assumption as well. Additionally, CORE has been approved to assume policies from Citizens in October. We will update everyone on our plans closer to the assumption date. Overall, we posted another quarter of solid profitability, and we continue to make solid progress on our top line and bottom line.”
5. MoonLake Immunotherapeutics (NASDAQ:MLTX)
Share Price Upside: 46%
Number of Hedge Fund Investors In Q2 2024: 32
Average Analyst Share Price Target: $72.87
MoonLake Immunotherapeutics (NASDAQ:MLTX) is a small pre commercial stage biotechnology company that is developing a treatment for arthritis, psoriasis, and other associated ailments. This makes the firm’s hypothesis relatively simple since investors will react to the performance of MoonLake Immunotherapeutics (NASDAQ:MLTX)’s sonelokimab drug called SLK. SLK entered phase three trials in May this year, which removes some of the risk surrounding MoonLake Immunotherapeutics (NASDAQ:MLTX)’s shares due to the drug being in the later stages of development. An IL-17 inhibitor, the drug class is believed to hold the potential for becoming the primary line of treatment for the skin disease called hidradenitis suppurativa (HS). However, MoonLake Immunotherapeutics (NASDAQ:MLTX) might find it difficult to commercialize the product given the entrenched nature of the incumbents. Oppenheimer is bullish about the firm’s acquisition prospects as it considers “MLTX among the top likely acquisition targets in biotech today.”
4. Avadel Pharmaceuticals plc (NASDAQ:AVDL)
Share Price Upside: 49%
Number of Hedge Fund Investors In Q2 2024: 32
Average Analyst Share Price Target: $24.6
Avadel Pharmaceuticals plc (NASDAQ:AVDL) is a commercial stage specialty drug manufacturer that makes and sells a treatment for daytime sleepiness or narcolepsy called LUMRYZ. This provides it with a double edged sword, as while LUMRYZ being a commercially available drug enables Avadel Pharmaceuticals plc (NASDAQ:AVDL) to generate revenue, the lack of a diversified portfolio leaves the firm vulnerable to competition from others. As of June, 1,900 patients had started treatment with the medicine, and with the market estimated to sit at least 16,000 patients, Avadel Pharmaceuticals plc (NASDAQ:AVDL) could grow its revenue in the future. LUMRYZ enjoys a distinct advantage over competitors by virtue of being a drug that has to be taken only at bedtime. Avadel Pharmaceuticals plc (NASDAQ:AVDL) is also evaluating the drug’s efficacy in treating idiopathic hypersomnia, which could expand the drug’s future market. Oppenheimer states that “[w]ith a strong record of execution management is delivering, we see [Avadel] as undervalued at these levels.”
Avadel Pharmaceuticals plc (NASDAQ:AVDL)’s management shared details for the IH treatment during the Q2 2024 earnings call:
“As announced last week, we dosed our first patient in our Phase 3 REVITALYZ trial, evaluating LUMRYZ’s potential benefit in the adult IH population.
Based on feedback from physicians and experts in the field, we believe LUMRYZ has strong potential to improve care for those living with IH through its unique extended release formulation. In addition, we are expecting a potential approval decision by the FDA for our supplemental New Drug Application for LUMRYZ’s use in the pediatric narcolepsy population. The target action date is set for September 7. If approved, we believe LUMRYZ has the potential to address the needs of both pediatric narcolepsy patients, who could benefit from a full therapeutic dose of an oxybate given in a once-at-bedtime formulation; and the caregivers who currently have to awaken in the middle of the night, night after night, to administer a second dose of a first-generation oxybate to their children.”
3. Soleno Therapeutics, Inc. (NASDAQ:SLNO)
Share Price Upside: 51%
Number of Hedge Fund Investors In Q2 2024: 29
Average Analyst Share Price Target: $68.14
Soleno Therapeutics, Inc. (NASDAQ:SLNO) is a specialty biotechnology company that is developing a drug called Diazoxide Choline Extended-Release (DCCR) in tablet form to treat the rare and serious genetic disorder called Prader-Willi Syndrome (PWS). DCCR aims to treat a serious effect of PWS called hyperphagia, which makes patients feel excessive hunger that leads to overeating. Soleno Therapeutics, Inc. (NASDAQ:SLNO)’s DCCR is currently in the New Drug Application (NDA) stage, after the drug completed its phase three trials earlier this year. Depending on a variety of factors, such as a priority review by the FDA could mean that DCCR reaches the market by 2025 and unlocks catalysts for Soleno Therapeutics, Inc. (NASDAQ:SLNO)’s share price and income statement. The firm submitted NDA for DCCR in Q2, and the decision should take place around August 27th. Oppenheimer outlines that the “shares remain undervalued.”
2. Viking Therapeutics, Inc. (NASDAQ:VKTX)
Share Price Upside: 76%
Number of Hedge Fund Investors In Q2 2024: 50
Average Analyst Share Price Target: $113.55
Viking Therapeutics, Inc. (NASDAQ:VKTX) is a biotechnology company developing treatments for liver diseases and post surgical complications. Its lead drug candidate is the VK-2809 drug, which is intended to treat patients with steatohepatitis. However, another key aspect of the drug is the fact that it is a GLP-1 agonist, which also opens up the secondary weight loss drug market to Viking Therapeutics, Inc. (NASDAQ:VKTX). A key advantage of VK-2809 is that it is in tablet form, which makes the drug easier to administer as opposed to the injections that are currently dominating the market. Viking Therapeutics, Inc. (NASDAQ:VKTX) is also developing the VK-2735 drug that also targets the weight loss market and increases the firm’s exposure to this multi billion dollar industry. VK-2735 entered into Phase 2 trials in Q2, and Oppenheimer believes views the firm’s ” current market cap as undervalued compared to its peers.”
Baron Funds mentioned Viking Therapeutics, Inc. (NASDAQ:VKTX) in its Q2 2024 investor letter. Here is what the firm said:
“Another source of weakness in the sub-industry was Viking Therapeutics, Inc., whose shares pulled back aer increasing nearly 300% in the prior quarter. Viking develops metabolic disease medicines with focus on diabetes/obesity and MASH (metabolic steatohepatitis, i.e., fatty liver). The company’s lead asset is VK2735, an injectable and oral version of a GLP-1/GIP combination weight loss medication that directly competes with Lilly’s Mounjaro/Zepbound. Both of Viking’s main assets appear to be more efficacious than their competitors’ in two exceptionally large revenue end markets. Viking’s stock detracted as biotechnology specialists have leaned into an alternative mechanism for obesity called amylin inhibition and don’t view the company as an attractive acquisition target (an opinion we disagree with). The recent rebalance of the well-known SPDR S&P Biotech ETF (XBI) also pressured Viking’s share price due to forced selling by many long/short strategies to reweight their positions.”
1. Enovix Corporation (NASDAQ:ENVX)
Share Price Upside: 187%
Number of Hedge Fund Investors In Q2 2024: 22
Average Analyst Share Price Target: $30.3
Enovix Corporation (NASDAQ:ENVX) is an American company that makes batteries for consumer electronics, industrial use cases, and electric vehicles. This provides it with considerable exposure to a variety of industries, from the high growth EV sector, to the vast market of consumer electronics. At the same time, it also leaves Enovix Corporation (NASDAQ:ENVX) competing in a highly competitive industry with incumbents with decades of experience. This means that the firm has to develop competitive and differentiated products if it is to thrive, survive, and grow. On this front, Enovix Corporation (NASDAQ:ENVX) has some advantages, such as 100% silicon anodes in its batteries. Not only does this increase battery efficiency, but it also relaxes some of the constraints that battery manufacturers face from the copper supply chain. Enovix Corporation (NASDAQ:ENVX) aims to start high volume manufacturing by 2024 end, and the firm has already signed an agreement with a Fortune 200 company. Yet, expanding manufacturing is a tricky endeavor and Enovix Corporation (NASDAQ:ENVX) could face headwinds on this front. Oppenheimer shares that the firm is a “pioneer in the commercialization of silicon anode technology with defensible IP in product architecture and manufacturing processes which are enabling new form factors, functionality, and end-markets for its customers.”
Massif Capital mentioned Enovix Corporation (NASDAQ:ENVX) in its Q2 2024 investor letter. Here is what the firm said:
“Turning back to Enovix, the investment thesis at 10,000 feet has always been that if the company can produce the unique silicon anode battery it has developed at scale, management will bring to market a battery that, at worst, is an incremental improvement over what is currently available. This, in turn, leads to demand and the opportunity for premium pricing and superior cash flow compared to other battery producers.
This year, Enovix management has advanced the company toward realizing this thesis in two ways. First, the management team has significantly progressed the build-out of the firm’s first manufacturing line. Second, the management team continues to build out its future customer base, which adds credibility to management’s claim that they can produce a unique silicon anode battery at scale, which still is an unproven claim but one that is fast approaching a point at which it will be proven.
While management has advanced the firm’s business, it is worth highlighting that it is still a pre-revenue company that has yet to produce a product at scale. This means that the spread of values for the business remains very wide, and the potential for market participants to misprice that value is exceedingly high. As such, we have continued to sell both put and call options on ENVX when the premium on offer in option markets is compelling. Given the stock volatility, the premium is often appealing. Our latest effort, a series of call positions entered shortly after the end of the second quarter, yielded a premium that reduced our average entry price by 9% and only resulted in a change in our position size at prices we would want to trim our position at anyway.”
ENVX tops Oppenheimer’s top stocks when it comes to analyst upside. But our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ENVX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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