As we head into 2024, momentum from last year’s market boom remains: the S&P 500 is already up 8.5% this year. Interestingly, the pace of growth among the mega-cap tech giants of the ‘Magnificent 7’ has slowed, offering investors the opportunity to diversify their portfolios while still reaping rewards.
Madison Faller, Global Investment Strategist at JPMorgan, shares her thoughts on the current market landscape: “We anticipate further upward movement in the markets. While Big Tech may continue its rise, we expect other sectors, such as consumer-related industries, healthcare, and small and mid-cap companies, to participate in the rally.”
Faller highlights a notable change from the previous year, noting: “In 2023, the Magnificent 7 accounted for 60% of the S&P 500’s total return, with the remaining 493 companies contributing just 40%. This year, however, the trend has reversed, with other sectors now driving nearly 60% of the S&P’s return.”
Following this assessment, JPMorgan analysts have identified two small-cap stocks poised for significant growth potential, with projections of an increase of up to 140% in the coming months. These stocks have earned ‘Strong Buy’ ratings by analyst consensus, according to TipRanks data. Let’s delve into the details.
Annex Biosciences (ANNX)
Topping JPMorgan’s list is Annexen Biosciences, a clinical-stage biopharmaceutical company dedicated to developing innovative treatments for complement pathway-mediated disorders affecting the brain, body and eyes. Annegen’s unique approach focuses on stopping C1q and all inflammatory aspects of the complement pathway before activation occurs, making it the only biopharmaceutical company that focuses solely on C1q. Its flagship programs target a variety of conditions, including Guillain-Barré syndrome (GBS), geographic atrophy, and other autoimmune disorders.
At the forefront of Nexuson’s project is ANX005, a potential treatment for GBS, an autoimmune disease characterized by sudden muscle weakness, which can be life-threatening in severe cases. ANX005 has earned Orphan Drug and Fast Track designations from the FDA, and results from pivotal Phase 3 clinical trials are expected in the second quarter of this year. The company also intends to submit the Biological Products License Application (BLA) in the second half of 2024.
Additionally, Annexen’s ANX007 program, targeting geographic atrophy, is scheduled to begin Phase 3 trials this year. The company’s strong product pipeline, particularly the advanced stage of its ANX005 program, has earned praise from JPMorgan biotech expert Anupam Rama, who predicts substantial success for Annexen.
Rama maintains an optimistic outlook, giving Annexen shares an Overweight (Buy) rating, accompanied by a $11 price target, indicating a potential upside of 140%. The consensus among analysts echoes this sentiment, with a Strong Buy rating based on unanimous analyst reviews and an average price target of $14.80, suggesting a notable 222% upside potential.
EverQuote (NEVER)
Next on the radar is EverQuote, an online insurance marketplace that connects insurance buyers with agents from various sectors, including life, auto, and home insurance. Founded in 2011, EverQuote leverages digital technology to simplify the insurance market and provide customized solutions to customers, ultimately driving cost savings through better risk management.
The company’s performance has been promising, with its shares seeing a 49% increase so far this year. In its latest quarter, EverQuote reported revenue of $55.7 million, beating expectations by nearly $6 million. Despite a GAAP EPS loss of 19 cents per share, which improved compared to the prior year, EverQuote delivered a solid performance, reflecting its resilience in the market.
JPMorgan analyst Cory Carpenter remains optimistic about EverQuote’s prospects, forecasting continued strong results driven by increased spending at auto carriers and structural improvements made during economic downturns. Carpenter maintains an Overweight (Buy) rating on EVER stock, setting a price target of $25, implying a potential upside of ~37%.
The analyst consensus on EVER stock is overwhelmingly positive, with 6 Buy ratings and 1 Hold rating. With the stock currently trading at $18.30, the average price target of $24.33 indicates a potential gain of ~33% over the next year.
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