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Investors worry about the looming recession
JPMorgan remains risk-on
Three stocks with great upside potential
Inflation in the US recently hit its highest level in over 40 years, prompting the US Federal Reserve to hike interest rates. For monetary authorities, this tightening is the monetary policy This is a balancing act, however, because while higher interest rates help to dampen inflation, they can also slow down economic growth. As a result, many market participants are now fearing a recession.
JPMorgan remains risk-on
According to “TipRanks”, JPMorgan analyst Marko Kolanovic remains optimistic: “The stock markets are pricing in too much recession risk. According to our estimates, the stock markets in the US and the euro area are pricing in the risk of a short-term recession at around 70 percent . In addition, we are skeptical of the notion that the fund outflow from the stock market seen in April – the strongest since March 2020 – was really the beginning of a protracted period of outflows. That’s why we’re sticking to our risk-friendly stance.”
If there is no recession, then the stock markets are in for a recovery, Kolanovic believes. He therefore currently sees opportunities for investors willing to take risks.
ACV Auctions Stock
According to TipRanks, JPMorgan analysts have also identified three stocks that have plummeted recently but now have the potential to nearly double or even increase in price over the next 12 months.
ACV Auctions, for example, sees great potential. The Company provides a wholesale auction digital marketplace to facilitate the sale of used cars between sellers and dealers. The digital marketplace is accessible via multiple platforms, including mobile apps, the web and directly via integration of APIs (Application Programming Interface).
ACV Auctions went public at the end of March 2021 and has since lost around two-thirds of its market value, which is strongly related to the fact that the company’s net losses have widened in recent quarters. Despite this, JPMorgan is optimistic about ACV, both because the company has posted significant revenue gains and because the losses came only because ACV has made wise investments in technology and tools designed to improve service quality. ACV is working to gain market share, which should pay off when the market eventually recovers. JPMorgan analyst Rajat Gupta has therefore given the ACV share an overweight rating and an impressive target price of USD 15.00 (closing price on June 3, 2022: USD 8.52).
Boot Barn Holdings stock
JPMorgan also gives Boot Barn Holdings a thumbs up. The lifestyle retailer sells western and work shoes, clothing and accessories such as cowboy hats, belts and western jewelery both in its retail stores and via e-commerce.
The company has been able to achieve steady sales growth in recent quarters thanks to the lifting of corona restrictions. In the most recent quarter, for example, sales rose by 48 percent and net profit by as much as 81 percent. Despite these good figures, the generally bad mood on the stock market has pushed the share price down by around a third since the beginning of the year.
According to JPMorgan analyst Matthew Boss, this opens up entry opportunities for investors. Among other things, he sees the differentiated product range of Boot Barn Holdings in a niche market and the low fixed costs as positive. With this in mind, Boss assigned an Overweight rating and a target price of $171.00 (closing price on 06/03/2022: $85.12).
SpringWorks Therapeutics stock
JPMorgan also sees great upside potential in SpringWorks Therapeutics. The biopharmaceutical company acquires and develops medicines for patients suffering from rare diseases and cancer. The product candidates are still in the clinical phase, but analyst Anupam Rama is optimistic about some studies.
However, with SpringWorks Therapeutics stock down about two-thirds of its value year-to-date, Rama sees a bargain buying opportunity. He gave the stock an overweight rating and a target price of $98.00 (closing price on June 3, 2022: $21.59).
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