A Trio of Q3 Winners With Room to Run
September 29, 2022 at 02:00 AM EDT
What do autumn leaves and recent stock prices have in common? Yep, both are falling.
Corny jokes aside, things seem to be getting worse for U.S. equities. The British pound just hit an all-time low against the dollar and companies are warning about weakening economic conditions.
With September living up to its reputation as historically one of the worst months in the market, the third quarter returns on the Dow, S&P, and Nasdaq won’t be pretty.
On the bright side, this may be a good thing if you’re a long term investor. With inflation hitting just about every corner of the economy, the stock market is one of the few places to find lower prices!
And besides, it hasn’t been a rough quarter for all. In fact, some stocks have ignored the summer swoon and posted big gains. If you’re a momentum investor, it's those rare bright spots in a dim market that can be the best places to hide. Here are three Q3 outperformers that still have good upside.
Why is Sarepta Therapeutics Stock Going Up?
Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is on pace to finish up around 45% in Q3. This is an emerging biotech company whose stock has returned to the triple digits and has twice made runs towards $200.
Much of the recent buying interest has stemmed from Sarepta’s Q2 update. Although the quarterly results themselves were mixed (revenue beat/EPS miss), management raised its full year revenue guidance to $905 million to $920 million. This followed better than expected sales of Exondys 51, Vyondys 53, and Amondys 45, a trio of RNA-based therapies targeting rare and infectious diseases.
After that, Sarepta shares got a boost when the FDA’s clinical hold was lifted on Part B of its trial of SRP-5051, a prospective treatment for Duchenne muscular dystrophy (DMD). The biotech’s ability to resume the crucial phase of its MOMENTUM study is a major positive given the market opportunity. Management noted that despite the setback, it is still on track to finish trial enrollment by the end of the year.
Still, the most promising catalyst going forward may be SRP-9001, an investigational gene therapy that is also targeting DMD. Management has repeatedly expressed enthusiasm around a pair of studies involving 45 total patients.
The bigger picture here is that Sarepta has over 40 programs related to various forms of muscular dystrophy and other rare diseases. This, along with the recent regulatory and clinical momentum, prompted Oppenheimer to reiterate its buy rating on Monday and give the stock a $150 target.
Has Plug Power Stock Bottomed?
Plug Power Inc. (NASDAQ: PLUG) has surged more than 30% over the last few months. The main jolt came in late-July when Congress was zeroing in on a historic climate bill that will devote $369 billion to climate and alternative energy projects.
One of the companies that could see a significant chunk of the funding is Plug Power, which develops hydrogen energy technologies. Its hydrogen fuel cell (HFC) systems power electric vehicle motors and have been deployed on more than 50,000 occasions for e-mobility. Amazon, BMW, and Walmart are among the early adopters of Plug Power technology.
Given the climate bill’s potential to bring a lot of money and attention to clean energy solutions, it’s unlikely that Plug Power revisits its lows from this summer. And as general market conditions improve, this high beta name could run fast as we saw in Q4 of 2020.
Despite the Q3 rally, the last five Wall Street opinions on Plug Power have been bullish. This includes H.C. Wainwright whose uber-bullish $78 target suggests the stock could even exceed its January 2021 peak. As the transportation industry migrates from gas to clean energy, hydrogen and Plug Power are positioned to play big roles.
Can Trade Desk Shares Keep Going Higher?
Trade Desk, Inc. (NASDAQ: TTD) is on track to finish up approximately 40% in Q3 following a breakout Q2 earnings report. The advertising technology provider has been a rare exception to the recent troubles in the digital ad market.
With digital ad spending in slowdown mode due to heightened economic uncertainty, The Trade Desk boasted 35% Q2 revenue growth that came from both new customers and expanded agreements with existing customers. The better than expected performance showed that the digital ad pause has yet to impact the business and helped The Trade Desk bolster its market leadership.
As Google, Facebook, Snap, and others struggle with a cautious ad spending backdrop, The Trade Desk keeps plowing ahead. The company’s relative immunity to macro pressures is a great sign for investors as it suggests the business will only strengthen as the digital advertising pool increases.
Historically, management has been on the conservative side when it comes to guidance. So while the company forecast $385 million in Q3 revenue, this will likely get surpassed as it did in the last several quarters. So with the stock pulling back to $60 after last month’s high volume gapper, an investment opportunity is forming ahead of the October 4th Investor Day event and Q3 earnings report.