Stifel Makes Big February Changes to Its Select List of Stocks to Buy

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We are now six weeks into a new trading year, and with the bulk of earnings reports over, some major changes are being made to high-conviction stocks lists by many companies we cover on Wall Street. It makes sense, because most analysts have had not only the earnings reports to digest, but forward commentary on how the first quarter looks and beyond.

The team is out with some major changes to Stifel’s Select List of stocks, and for February they have a slew of additions and deletions. The four new additions featured here are all rated Buy and make good sense for growth investors looking for new ideas.

Note that these stocks were removed from the Select List: Ambarella, Booz Allen Hamilton, Crown Castle, ICF International and Loxo Oncology.

Microchip Technology

Microchip Technology Inc. (NASDAQ: MCHP) not only is a huge Internet of Things benefactor, but a leading provider of microcontroller, mixed-signal, analog and flash-IP solutions, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide. The company offers microcontrollers, such as 8-bit, 16-bit and 32-bit microcontrollers under the PIC brand name and 16-bit dsPIC digital signal controllers, as well as provides microcontrollers for automotive networking, computing, lighting, power supplies, wireless communication and wireless audio applications.

The company announced last year that its MOST 50 Intelligent network Interface Controllers are powering the infotainment systems of the new Toyota Alphard executive-lounge hybrid vehicles. This is the latest deployment among a wide variety of the Toyota’s brands, which have used MOST50 in their infotainment systems for many years, including both volume and luxury vehicles. In the new Alphard implementation, Toyota is using MOST technology to ensure high-quality digital audio streaming throughout the vehicle.

Investors receive a 2.01% dividend. The Stifel price target for the stock is $77, and the Wall Street consensus price objective is $83.27. The stock closed Thursday at $71.71.

Xenon Pharmaceutical

A host of clinical data coming this year may really boost Xenon Pharmaceutical Inc. (NASDAQ: XENE) shares. This clinical-stage biopharmaceutical company discovers and develops a pipeline of differentiated therapeutics for orphan indications that it intends to commercialize on its own and for larger market indications that the company intends to partner with global pharmaceutical companies.

Xenon has built a core enabling discovery platform, referred to as Extreme Genetics, for the discovery of validated drug targets by studying rare human diseases with extreme traits, including diseases caused by mutations in ion channels, known as channelopathies. Xenon’s Extreme Genetics platform has yielded the first approved gene therapy product in the European Union and a broad development pipeline and multiple pharmaceutical partnerships, including with Teva and Genentech.

Its CEO, Dr. Simon Pimstone, recently talked about upcoming catalysts:

We are looking forward to a number of important inflection points for our company: we expect top-line data from our XEN801 Phase 2 clinical trial for moderate to severe acne; we anticipate our collaborator, Genentech, will advance its Nav1.7 pain program into Phase 2; and, we look forward to a top-line data read-out from the Phase 2b clinical trial of TV-45070 in post-herpetic neuralgia being conducted by our collaborator, Teva.

Stifel has a stunning $18 price target, and the consensus target is $16.30. Shares closed Thursday at $8.15.

Zayo

This stock may offer the best growth prospects of all of the Stifel ideas. Zayo Group Holdings Inc. (NYSE: ZAYO) provides comprehensive bandwidth infrastructure services in over 300 markets throughout the United States and Europe. It delivers a suite of dark fiber, mobile infrastructure and cloud and connectivity services to wireline and wireless customers, data centers, Internet content providers, high-bandwidth enterprises and government agencies across its robust 82,000 route-mile network.

Zayo also offers 45 carrier-neutral data center facilities across the United States and France. It was the first to offer bandwidth shopping and buying in under two minutes through Tranzact.

The stock had a big run last year but has backed up over the past eight weeks and is offering an outstanding entry point. Zayo was recently named a winner of an IBM Choice Award for North America Top Strategic Service Provider. Its Cloud Infrastructure group was recognized for the launch of its object-based storage offering, which leverages IBM’s Cleversafe technology to deliver a secure, reliable and scalable storage solution suitable for a broad set of workloads.

The $40 Stifel price target compares with the consensus target of $35.33. The stock closed at $30.99.

Zoetis

Rounding out the top four new additions to the Select List is Zoetis Inc. (NYSE: ZTS), which engages in the discovery, development, manufacture and commercialization of animal health medicines and vaccines for livestock and companion animals in the United States and internationally.

The company offers anti-infectives that prevent, kill or slow the growth of bacteria, fungi, or protozoa; vaccines, which are biological preparations to prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response; and parasiticides that prevent or eliminate external and internal parasites, such as fleas, ticks and worms.

It also provides medicated feed additives that offer medicines to livestock; veterinarian solutions for anesthesia, pain management and the diagnosis of diabetes; and other pharmaceutical products, including pain and sedation, oncology, antiemetic, allergy and dermatology, and reproductive products. In addition, it offers other product categories comprising nutritionals and agribusiness services, as well as products and services in complementary areas consisting of biodevices, diagnostics and genetics.

Shareholders receive a 0.8% dividend. Stifel set its price target at $65, and the consensus target is $58.07. Shares closed Thursday at $52.78.