Investing

Red-Hot Biotech and Tech Companies Highlight Jefferies Top Stocks to Buy

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More and more, the companies that we cover on Wall Street are starting to agree that while the future is still bright for the U.S. economy, the future may be one of stock market gains that are much lower than the norm over the past decade. When that is the case, then investing strategies often shift from passive indexing to a more disciplined stock picking routine, and that’s when investors need solid growth ideas.

Jefferies highlights the firm’s top growth stocks to buy each week, and this week is no exception. While these companies are better suited for accounts that have a higher risk tolerance, they all make good sense now and all have outstanding upside potential. We found four that look extremely good now.

Edwards Lifesciences

This company pioneered the artificial heart valve, and it could be poised for big growth. Edwards Lifesciences Corp. (NYSE: EW) provides products and technologies to treat structural heart disease and critically ill patients worldwide. The company offers transcatheter heart valve therapy products, comprising transcatheter aortic heart valves and their delivery systems for the nonsurgical replacement of heart valves.

The company also provides surgical heart valve therapy products, such as pericardial valves for aortic and mitral replacement, and minimally invasive aortic heart valve system, as well as tissue heart valves and repair products, which are used to replace or repair a patient’s diseased or defective heart valve.

Top Wall Street analysts feel that the company’s acquisition of privately held CardiAQ last year made good sense going forward. CardiAQ has human implants of transcatheter mitrial valves, and Edwards is focused on the mitrial valve opportunity after its very strong success in aortic valves.

The company has also had tremendous success with transcatherter valve replacement. These are rapidly gaining favor in the medical community for use in those patients who are deemed unsuited for open heart surgery, and they are a fast-growing revenue stream for the company.

Jefferies has remained bullish on the company and the report noted this:

Company reported last week and while the top and bottom line beat, the Street was focused on slowing transcatheter aortic valve replacement (TAVR) growth and modest share loss in the EU. Still, none of the first quarter headwinds appear structural or indicative of a change in market size. Also, new TAVR products, entry into the low risk market and mitral are yet to come. Our 2018 EPS of $4.62 remains ahead of consensus.

The Jefferies price target for the shares is $150, and the Wall Street consensus target is $146.37. Shares closed trading Monday at $127.36.

Facebook

The huge social media leader has been volatile recently after the disclosure of user data being compromised, but it absolutely blew out earnings last week. Facebook Inc. (NASDAQ: FB) operates the largest social network, with over 2.0 billion monthly active users and over 1.4 billion daily active users. The company generates revenue from advertising and from payments, with over 95% of revenue from advertising. It generates close to 50% of revenues in the United States and Canada and is expanding rapidly in international markets.

Its solutions also include Instagram, a mobile application that enables people to take photos or videos, customize them with filter effects, and share them with friends and followers in a photo feed or send them directly to friends; Messenger, a messaging application for mobile and web on various platforms and devices, which enable people to reach others instantly, as well as enable businesses to engage with customers; and WhatsApp Messenger, a mobile messaging application.

A stunning 88.7% of managers have the social media giant in their portfolios, and despite the recent issues, there is no reason to think many will be selling all their shares. Jefferies remains positive and noted this:

Company reported last week and revenue growth accelerated to 49% vs 47% in the second half of 2017. Operating expense growth was well below guidance, but looking ahead, management tightened Opex growth guidance to the high end of guide, with capex also at the high end. We raise EPS for both 2018nd 2019 and continue to believe this is a very compelling growth story despite the market’s concerns. Instagram has 2 million advertisers while Facebook has 6 million which speaks to growth ahead for Instagram.

Jefferies has a $215 price target and the consensus target is $217.85. Shares closed on Monday at $172.

Neurocrine Biosciences

This biopharma company has partnered with a top pharmaceutical company, and the data have been very solid. Neurocrine Biosciences Inc. (NASDAQ: NBIX) is focused on developing and commercializing therapies for neurological and endocrine disorders. Its lead asset is Ingrezza, approved for the treatment of tardive dyskinesia and in development for the treatment of Tourette syndrome.

The company partnered with AbbVie on elagolix, in development for the treatment of endometriosis and uterine fibroids, and it is developing opicapone as an adjunct therapy for Parkinson’s disease.

The Jefferies analysts said this:

We’re out with the results from our 5th survey on Tardive Dyskinesia (TD). The survey results reaffirm Ingrezza will likely lead Austedo in market share for both moderate-severe and mild TD. Survey suggests an Ingrezza number around $71 million for the quarter, while the Street looks for $65.4 million, which is flat quarter over quarter. We raise our fiscal year 2018 and 2019 estimates to reflect the robust quarter over quarter expansion of the addressable TD market, which we believe is due to better prescriber education around VMAT2i. Our first quarter 2018 and 2019 Ingrezza estimates are now well-above consensus forecasts.

The $105 Jefferies price target is in line with the $105.36 consensus target. Shares ended Monday at $81.08 apiece.

Vertex Pharmaceuticals

This has long been considered a buyout candidate and shares have traded sideways for almost a year. Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) engages in discovering, developing, manufacturing and commercializing small molecule drugs for patients with serious diseases in specialty markets. The company focuses on developing and commercializing therapies for the treatment of cystic fibrosis and hepatitis C.

Wall Street as a whole has long been very positive on the stock, and some have indicated that the company could have as much as $10 in potential earnings-per-share power. Jefferies agrees, is very positive and noted this:

The company reported first quarter earnings last week, and solid results were driven by a strong launch for new drug Symdeko and a beat on earnings per share. We believe that the bear case around competition is likely to fade over 12-18 months as the company is too far ahead of Galapagos NV in the triple pill for Cystic Fibrosis, especially based on what management said about FDA requirements for the company’s drug. Our bull case earnings scenario suggests long-term EPS power of $10-$15 for Vertex.

Jefferies has set its price target at $195. The consensus target is $192.21, and shares closed Monday at $153.16.

These four incredible companies with solid earnings and a clear path higher for the second quarter and perhaps the rest of 2018. All these stocks hold a higher risk potential, so they should be added to accounts with a commiserate risk tolerance.

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