JPMorgan Makes Big Changes to US Analyst Focus List for January

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That sure didn’t take long. And it probably should come as no surprise that many of the top firms we cover here at 24/7 Wall St. are already tweaking their high conviction stock lists for 2017. They are trying to take into account macro changes that could make a difference this year, such as higher inflation, a stronger dollar and rising interest rates. They are also trying to factor in positives like lower nominal tax rates and less of the ever burdensome regulations that some feel have stifled business.

So JPMorgan has made changes to its U.S. Analyst Focus List for January, and some of the additions have solid upside potential. Each month, the firm asks its equity analysts for one to three of their best stock picks targeted to five different investment strategies: near term, growth, income, value and short ideas.

Some 16 companies are added this month, while 14 are removed. Here we focused on five that look to have outstanding upside potential. All are rated Overweight at JPMorgan.

Alexion Pharmaceuticals

Rumors have flown for some time that this may be a potential acquisition target. Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) develops and commercializes life-transforming therapeutic products.

It offers Soliris (eculizumab), a monoclonal antibody for the treatment of paroxysmal nocturnal hemoglobinuria (PNH), a genetic blood disorder, and atypical hemolytic uremic syndrome, a genetic disease. It also provides Strensiq (asfotase alfa), a targeted enzyme replacement therapy for patients with hypophosphatasia, and Kanuma (sebelipase alfa) for the treatment of patients with lysosomal acid lipase deficiency.

The company conducts Phase 4 clinical trials on Soliris for the treatment of PNH registry; Phase 3 clinical trials for the treatment of myasthenia gravis, neuromyelitis optica spectrum disorder, and delayed kidney transplant graft function; and Phase 2 clinical trials for antibody mediated rejection in presensitized renal transplant patients.

The JPMorgan price target for the stock is $170. The Wall Street consensus target is $169.41. Shares closed on Tuesday at $143.67.

Eli Lilly

This stock also has substantial upside potential. Eli Lilly and Co. (NYSE: LLY) is a global health care company with numerous core products in a number of primary-care pharmaceutical markets. The company generates revenues from its pharmaceutical product and animal health segments.

The product portfolio includes Zyprexa (for schizophrenia and bipolar disorder), Gemzar (pancreatic cancer), Evista (osteoporosis), Cymbalta (depression), Cialis (erectile dysfunction), Strattera (attention deficit hyperactivity disorder), Erbitux (cancer) and Alimta (chemotherapy). Eli Lilly also has a strong presence in the diabetes market.

The company posted third-quarter sales and earnings well below Wall Street’s expectations, prompting shares to plummet to a four-month low before rebounding. The stock is down almost 10% on the year and offering investors an outstanding entry point. Top analysts on Wall Street are still very focused on the company’s outstanding late-stage product pipeline, which they and others on Wall Street view as very undervalued.

Recently the company announced a disappointing Phase 3 trial for its Alzheimer’s drug solanezumab, which missed the primary and secondary endpoints. While the analysts are forced to remove potential earnings from their model due to the failure, most remain positive on the stock based on “Underappreciated growth, driven by the diabetes base business, baricitinib and abemaciclib.”

Shareholders receive a 2.75% dividend. JPMorgan has an $85 price objective, and the consensus target is $84.80. Shares closed Tuesday at $76.27.