Investing

5 Top SunTrust Stock Picks for 2020 With Massive Upside Potential

Lee Jackson

Published: December 11, 2019 6:55 am

Last Updated: January 30, 2020 12:20 pm

What a year 2019 was for investors. The major indexes are all up over 20%, and markets are hitting record highs. While it’s likely 2020 may not have quite the same gusto, with a strong economy generating jobs and the lowest unemployment in 50 years, we should at least be set for another positive year.

The major firms on Wall Street are generating lists of top picks for 2020 and posting estimates for market gains, and while so far nobody is calling for the double-digit gains we saw this year, most that we cover are generally positive, citing positive trade war results and the continued strength in the consumer. Toss in the possibility for some improvement overseas, and high single-digit gains look possible.

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A new SunTrust report reveals the firm’s 21 top small and mid-cap picks for 2020, all of which the analysts feel have 20% or more upside potential. The report noted this:

So after one of the best years in two decades, what’s next for 2020? We polled our experienced 34 research analysts and asked for their highest conviction SMID cap ideas with at least 20% upside for 2020, and the ideas we received are as diverse as the research department. To appeal to a wide swath of institutional investors, these high conviction ideas are diverse, with representation from value, growth, and momentum styles as well as several different industry verticals within our SMID cap universe: from Biotech to Consumer Products to Software to Energy.

We screened the SunTrust list and picked the five companies with the biggest upside to the firm’s price target. All are of course rated Buy.

eHealth

This is SunTrust’s top pick for small-cap portfolio managers. eHealth Inc. (NASDAQ: EHTH) engages in the provision of internet-based health insurance agency services for individuals, families and small businesses. It operates through the Medicare and the Individual, Family, and Small Business segments.

The Medicare segment consists primarily of commissions earned from the sale of Medicare-related health insurance plans. The other segment includes commissions earned from the sale of individual and family and small business health insurance plans and ancillary products sold to non-Medicare-eligible customers. eHealth (through its subsidiaries) is licensed to sell health insurance in all 50 states and the District of Columbia.

SunTrust has a massive $150 price target on the shares, while that Wall Street consensus target is $116.45. The stock last traded at $92.65 a share.

Momenta Pharmaceuticals

This off-the-radar biotech could be poised for a huge 2020. Momenta Pharmaceuticals Inc. (NASDAQ: MNTA) focuses on the discovery and development of novel biologic therapies for the treatment of rare immune-mediated diseases. Its products include the Glatiramer acetate injection and Enoxaparin Sodium injection.

One big positive for investors is that insiders have been buying shares of the company recently, and that could bode extremely well for 2020 and beyond, as insider buying is always a positive.

SunTrust noted:

We evaluated the FcRn landscape in a deep-dive and concluded that Momenta likely has the most potent FcRn therapy: it has the greatest reduction in IgG at lower doses and we believe this could translate into better efficacy and smaller volumes for IV and SC forms. We believe Momenta’s approach to developing molecules in the FcRn and IVIg space is unique. First, they create the molecule to have the characteristics they want, while others in-license their drugs. They also chose their indications by first looking at the biology.

The SunTrust price objective is a lofty $29, while the consensus target is $25. Tuesday’s last trade came in at $18.07.

This smaller cap energy name is somewhat off-the-radar but has tantalizing assets for a company looking to add growth potential. PDC Energy Inc. (NYSE: PDCE) is a diversified small-cap exploration and production company with assets in the Rockies, Permian and Utica Shale. The company’s core position is in the Wattenberg, with 100,000 net acres, alongside a recently acquired 55,000 net acre position in the Permian Basin.

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The company is targeting 10% to 15% production grow in 2020, and operating progress continues with operating expense improving and well cost declining in the Delaware with longer laterals and modified completion design.

The company made a very solid acquisition earlier this fall, and SunTrust noted this:

PDC Energy recently made what we believe to be the cleanest acquisition in the E&P space in recent memory, combining with SRC Energy. Importantly, in contrast to other mergers and acquisitions in the sector, the company’s acquisition was done entirely with equity, did not include a premium for shareholders of SRC (4% discount to the previous close), and created a nearly perfect proforma acreage position. As a result, the day of the announcement, the stock outperformed the XOP by 17% and was widely heralded by investors as the ideal model for M&A going forward.

The $50 SunTrust price target compares the $43.32 consensus target and the most recent close at $23.48 per share.

PTC Therapeutics

This is another biotech company offering aggressive accounts big-time upside potential. PTC Therapeutics Inc. (NASDAQ: PTCT) is focused on the discovery and development of orally administered, proprietary small molecule drugs that target post-transcriptional control processes. The company’s lead asset, Translarna (ataluren), is on the market outside the United States for treatment of subpopulations of patients with Duchenne muscular dystrophy caused by nonsense mutations.

SunTrust loves the setup for this company and said this:

PTC is unusual in that it is a <$3 billion market cap biotech stock with 2 marketed products, 4 product launches in the next 12 months, lots of model leverage, the possibility to break even in the next 2-3 years, and 2 major platforms that could deliver a pipeline over the next few years. We think investors are missing one big thing- leverage- if launches go better than expected, the stock can move a lot. We model sales ahead of consensus. We use conservative operating margins, which given the small sales forces needed and overlap with marketed products, there could be upside if margins are better than we model.

SunTrust has set a hefty $78 price target. The consensus target is $55.33, and the stock closed at $48.65.

Stitch Fix

This company had a hot 2017 initial public offering and has huge upside for investors. Stitch Fix Inc. (NASDAQ: SFIX) is an online personal styling service that delivers personalized Fixes of apparel and accessories for men, women and kids.

The company reported solid numbers earlier this week and announced that its active client roster rose 17%. In addition, The retailer also posted EBITDA of $5.1 million during the quarter, compared with a −$5.5 million consensus estimate. SunTrust applauded the solid results and noted this:

Stitch Fix is a first-of-its-kind, leading data-driven apparel disruptor. In addition to a strong execution to date (since IPO), our investment thesis for the company is underpinned by the following; 1) the secular trend of consumer purchasing habits moving online from offline; 2) the company’s data-driven and differentiated business model, which creates powerful network effects and a defensible moat on both the front-end (customer acquisition) and back-end (logistics); 3) scale in its core Women’s business, which allows it to successfully expand rapidly and with better unit economics into additional categories including Men’s, Plus, and Kids; and 4) private label strategy, which should help enhance customer satisfaction and customer loyalty, as well as prove accretive to operating margins over time.

The SunTrust price target is $36. The consensus target is $27.55, and shares were last seen trading at $26.22.

These five incredible stocks have gigantic upside to the SunTrust targets. They are potentially volatile, and are only suitable for accounts with a very high risk tolerance. With that noted, they offer good entry points and could be big 2020 winners.