Ticker Reports for July 25th
Viking Therapeutics: Pharma Stock Soars on Positive Earnings
Viking Therapeutics (NASDAQ: VKTX) is a clinical-stage biopharmaceutical company known for its focus on developing novel treatments for metabolic and endocrine disorders. Viking Therapeutics' earnings report for the second quarter of 2024 was impressive, capturing the attention of investors and the Viking Therapeutics’ analyst community. Following the release of its earnings report, Viking Therapeutics' stock price experienced a surge, climbing as much as 0%. This positive market response leaves some investors questioning if Viking Therapeutics’ financials and pipeline prospects justify this heightened investor confidence.
Q2 2024 Earnings: Demonstrating Financial Strength
Viking Therapeutics exceeded analyst forecasts for Q2 2024, reporting earnings per share (EPS) of -$0.20, an earnings beat compared to the consensus estimate of -$0.26. As a clinical-stage company primarily focused on research and development, Viking Therapeutics does not generate revenue from product sales. This is a common characteristic of companies in this phase, as their primary focus is advancing drug candidates through clinical trials toward regulatory approval.
A key indicator of Viking Therapeutics' financial health is its strong cash position. As of June 30, 2024, the company reported cash, cash equivalents, and short-term investments totaling $942 million, a significant increase from $362 million at the end of 2023. This cash runway provides Viking with the resources to fund its operations and advance its pipeline programs without the immediate need for additional financing, a significant advantage in the capital-intensive biotechnology sector.
Examining the company's key financial metrics reveals its strategic allocation of resources. Research and development (R&D) expenses, a crucial investment for clinical-stage biopharmaceutical companies, totaled $47.9 million for the first six months of 2024. This reflects Viking's commitment to advancing its drug candidates through clinical development. General and administrative expenses for the same period were $20.3 million. While Viking reported a net loss, as is typical for companies in the development stage, its solid cash position and strategic spending underscore its ability to execute its long-term growth strategy.
The analyst community reflects the positive sentiment surrounding Viking Therapeutics. Viking's current consensus price target is $111.56, suggesting a substantial potential upside from its current trading price. Most analysts covering the stock have issued buy or strong buy ratings, citing the company's promising clinical data, the market potential of its lead drug candidates, and its experienced leadership team.
A Diversified Pipeline Poised for Growth
Viking Therapeutics' pipeline is attracting significant attention for its potential to address high-impact therapeutic areas with substantial unmet needs:
VK2735: Competing in the Weight Loss Market
VK2735, a dual agonist of the GLP-1 and GIP receptors, is designed to mimic the effects of naturally occurring hormones that regulate appetite and food intake. The drug has garnered significant interest due to its impressive performance in Phase 2 clinical trials.
In the VENTURE trial, VK2735 demonstrated remarkable weight loss results, with patients achieving up to a 14.7% reduction in body weight. The drug's efficacy and favorable safety and tolerability profile prompted the FDA to provide feedback supporting the advancement of VK2735 directly into Phase 3 clinical trials.
This accelerated development timeline positions VK2735 to enter the rapidly growing GLP-1 market sooner than initially anticipated. Viking Therapeutics is also exploring the development of an oral formulation of VK2735, which could provide a significant competitive advantage by offering patients a more convenient treatment option than currently available injectable GLP-1 therapies.
VK2809: Addressing NASH and Fibrosis
VK2809, a selective thyroid hormone receptor beta agonist, targets non-alcoholic steatohepatitis (NASH), a severe liver disease characterized by fat accumulation, inflammation, and damage. NASH can lead to fibrosis (scarring) of the liver, cirrhosis, and liver failure. The VOYAGE Phase 2b clinical trial evaluating VK2809 in patients with biopsy-confirmed NASH demonstrated impressive results. VK2809 treatment led to statistically significant reductions in liver fat content, high rates of NASH resolution, and improved fibrosis. These findings position VK2809 as a potential best-in-class therapy for NASH, a market with a significant unmet need for effective treatment options.
Further Diversification and Prospects
Beyond its lead programs, Viking Therapeutics is exploring additional growth opportunities with its diversified pipeline. VK0214, a potential treatment for X-linked adrenoleukodystrophy (X-ALD), a rare genetic disorder, is currently being evaluated in a Phase 1b clinical trial.
The company is also conducting preclinical studies on a series of dual amylin and calcitonin receptor agonists (DACRAs) for obesity and other metabolic disorders, with plans to file an investigational new drug (IND) application in 2025. These pipeline candidates represent additional shots on goal for Viking Therapeutics, diversifying its portfolio and potentially creating value for investors.
Assessing the Risks: A Balanced Perspective
While Viking Therapeutics presents a compelling investment thesis, it is crucial to acknowledge the inherent risks associated with the biopharmaceutical industry. The company faces stiff competition from well-established pharmaceutical companies with substantial resources in the weight loss and liver disease markets. Although supported by promising clinical data, regulatory approval for Viking’s drug candidates is not guaranteed, and the process can be subject to delays or setbacks. Even with FDA approval, successfully commercializing new drugs requires effective marketing and sales strategies, favorable pricing, and market access.
Viking Therapeutics stands at the forefront of innovation in treating metabolic and endocrine disorders. The company’s recent financial performance and progress in advancing its pipeline, particularly its lead candidates, VK2735 and VK2809, has generated considerable excitement among investors. However, as with any biopharmaceutical investment, a balanced perspective is crucial. The potential rewards must be weighed against the drug development and commercialization risks. Thorough due diligence and understanding of Viking Therapeutics' opportunities and challenges will allow investors to make informed decisions aligned with their investment goals and risk tolerance.
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Top 3 Small Cap Stocks Emerging as Rotation Winners
Investors who remained heavily invested in the technology sector should start watching the broader market’s behavior today, as names in artificial intelligence like NVIDIA Co. (NASDAQ: NVDA) are potentially coming out of favor. A rotation into other areas and asset classes has started in the past couple of weeks, and riding the momentum could prove beneficial for most today.
At the helm of the new market preference are stocks that historically have benefitted from a lower interest rate environment, and that has been the theme to start the summer. As the Federal Reserve promises to cut interest rates before 2024 ends, markets have been readying their capital rotation to reflect what now seems to be a priced-in reality.
The newly favored corners of the financial markets would include bonds, as lower interest rates would cause their prices to go up, and small-cap stocks, as smaller businesses typically rely on cheaper and flexible financing to get their growth strategies underway. Knowing this, investors should watch out for Groupon Inc. (NASDAQ: GRPN), Lovesac Co. (NASDAQ: LOVE), and LendingClub Co. (NYSE: LC), as they each carry fundamental merit beyond today’s rotation.
Consumers Hit by Inflation Find Hope in Groupon Stock
Acting as a platform that connects consumers and merchants, with a discount coupon in between, sounds like the perfect business model considering the higher levels of inflation experienced in the U.S. Economy today. Because of this fundamental fact, the stock has done well in the past few months.
Now trading within 10% of its 52-week high, investors can safely assume that bullish momentum favors Groupon stock. However, the evidence doesn’t stop there. Other metrics show investors why taking a second look at this company might be worth it.
For starters, Wall Street analysts forecast up to 50% earnings per share (EPS) growth in the next 12 months, which is reason enough for the stock to be trading this close to a new 52-week high. More than that, analysts at Northland Capmk initiated coverage on Groupon stock with a “Strong Buy” rating and a price target of $22 a share.
Groupon stock would need to rally by 25.7% from where it trades today to prove these targets right. Staring at double-digit upside potential, Mirae Asset Global Investments increased its stake in Groupon stock by 10.4% as of June 2024, bringing its net investment up to $1.3 million.
Homebuyer Demand Could Drive Up Potential for Lovesac Stock
Lower interest rates come with lower mortgage rates, which is good news for would-be homebuyers currently waiting on the sidelines to finally lock in a more reasonable rate on their mortgage (which is more than double the pandemic lows).
Logically speaking, when a new home is bought, the next best thing to do is to furnish it, and that’s where Lovesac stock comes into play. Facing this upcoming demand in homebuyers has led Wall Street analysts to forecast up to 60.5% EPS growth this year.
As these projections became more realistic, others on Wall Street decided to make their optimistic views public as well. Those at the Maxim Group decided to slap a $38 a share valuation on Lovesac stock, daring it to rally by 37.6% from today’s prices, enough of a potential prize to draw in buyers.
Among the $52.2 million in institutional capital that made its way into Lovesac stock over the past 12 months, Granahan Investment Management (Lovesac’s largest shareholder) boosted their positions by 15% well before the rotation started, a position that translates to $39.8 million in capital.
Alternative Finance Demand Boosts LendingClub Stock
When the banking stocks of the United States reported their second quarter 2024 earnings results, they all quoted higher credit card delinquency rates. Given that consumers are cash-strapped due to inflation, it shouldn’t come as a surprise to see these figures go up.
LendingClub offers alternative financing solutions, such as personal loans, loans based on collateral, and even unsecured loans. Just like Groupon, this stock provides a beacon of hope for consumers looking to weather the inflation storm today. This fundamental trend was enough to justify Wall Street’s EPS growth forecasts of over 122% for the next 12 months.
As bold as these predictions may be, Jefferies Financial Group thought they made sense. They recently (as of July 2024) boosted their price targets on LendingClub stock to $12 a share, roughly a 13.2% upside from today’s price.
Considering the stock now trades within 10% of its 52-week high, other analysts could take advantage of the bullish momentum and rate it accordingly.
Finding LendingClub’s thesis sound, the Vanguard Group decided to allocate 1.6% more to the stock, bringing their net investment up to $100.6 million today, or 10.3% ownership of the entire company.
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Bargain Alert: 3 Stocks Worth Watching While The Market Cools
Since closing at a record high less than 10 days ago, the benchmark S&P 500 index has been on the back foot. For the moment, it's not looking like a whole lot more than a healthy mid-rally correction. After all, it had logged almost 40% of gains this year so far, and some questions were starting to be asked about the short-term health of the rally.
An increasing reliance on a few heavyweight tech stocks over recent months, sketchy earnings in the past few weeks, and a cyclical shift from large-cap to small-cap have all combined to test the bulls. Yesterday's 2.3% drop for the S&P 500 alone made it its worst day since 2022.
But this is an entry opportunity for those of us on the sidelines who remain bullish on equities through the rest of the year and into 2025. Here are three tech stocks in particular worth considering at a discount.
Toast's Impressive Run Despite Recent Dip
Toast (NYSE: TOST), the restaurant software company, has been on a solid run since markets turned north en masse last November. Though an 8% drop in Wednesday's session wouldn't have made for pleasant viewing, the stock is still up more than 75% in that timeframe.
It's worth noting that only last week, the team at Mizuho raised their rating on Toast stock from Neutral to Outperform. This was interesting timing, as the stock was right on the edge of breaking through the upper end of the range it's been stuck in since bottoming out from 2022's drop.
The team there obviously sees little reason to doubt Toast's ability to achieve this milestone and gave the stock a fresh $33 price target. Thanks to the selloff over the past week, that's pointing to an attractive upside of some 30% from where Toast closed last night.
The Trade Desk Continues to Attract Bullish Analyst Sentiment
Shares of AdTech giant The Trade Desk (NASDAQ: TTD)have been trending upward since the start of 2023. By the start of this week, they'd gained an impressive 150%, and while yesterday's 11.5% drop will have been hard to stomach, several analysts have been weighing in on the Buy side recently.
Morgan Stanley, for example, reiterated its Overweight rating on the stock on Tuesday of this week while boosting its price target to $110. This echoed the note from the Wedbush team on Monday, who did the same.
Last week, Wolfe Research and Oppenheimer reiterated their Outperform ratings, the latter giving The Trade Desk a street-high price target of $120. Considering the stock closed below $90 last night, that's an upside target of more than 30%.
Broadcom: An Attractive Alternative to NVIDIA
To round off the list, we have another computer and technology stock. Broadcom (NASDAQ: AVGO) is known for its semiconductor products and was only this week singled out by Citi as one of the increasingly attractive alternatives to NVIDIA (NASDAQ: NVDA).
This may shed light on Broadcom's multi-year surge, which saw gains exceeding 350% from 2022 through last month, and its recent 20% decline. For those observing from the sidelines, now might be the ideal moment to get involved.
Like with the others on this list, several analysts have been clamoring over each other to call it a screaming buy. This month alone, Oppenheimer, Cantor Fitzgerald, TD Cowen, and Rosenblatt Securities have all reiterated their Buy or Outperform ratings on Broadcom. When it comes to the potential upside, it doesn't get much better; all gave it a price target of $200 or higher, with Rosenblatt's $240 suggesting they're targeting near-term gains of around 60%.
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