Price target modifications come in all shapes and sizes. Some are modest and reflect a slight adjustment to a company’s growth trajectory or valuation. Others are more pronounced either because they were well underestimated, or a new growth catalyst has emerged.
Typically, the price targets that imply the most upside can be found at the lower end of the market capitalization scale. Whereas mature, higher-priced large caps may have around 10% to 20% upside, nascent, lower-priced small caps can have 30% to 40% return potential, if not more.
Many investors like to focus on the mid-cap space. This is because these companies often have an established market presence and good financials, but ample room for growth. Last week, some of the most ambitious price target increases occurred in the mid cap space. Here are three names that analysts say have at least 50% upside over the next 12 to 18 months.
Why are Analysts Raising Price Targets for CI Financial?
CI Financial (NYSE: CIXX) is a Canadian wealth manager that had a busy week. On November 10th, it announced a $7.5 billion acquisition of Gofen & Glossberg, a Chicago-based investment advisor focused on high-net-worth families. The same day, the company announced it is taking a minority stake in GLASfunds, a tech-enabled alternative investment platform out of Cleveland.
A day later, CI Financial was back in the press reporting its third quarter results. Adjusted EPS was up 27% to $0.80 as both its Canadian and U.S. operations saw strong demand for new ETF, ESG, and alternative offerings. Management also reported that assets under management (AUM) and wealth management assets together climbed to a record $332 billion last month, a 64% year-over-year increase.
Sell-side analysts liked the numbers and conference call. CI Financial has clearly become a more diversified business by geography and product type which reduces its risk profile. CIBC and Royal Bank of Canada raised their price targets to $37 and $34, respectively. CIBC’s target represents 57% upside from current levels making CI Financial an attractive cross-border play on the global capital markets.
How High Do Analysts Think Merus Stock Can Go?
Merus (NASDAQ: MRUS) is a Netherlands-based oncology company with U.S. operations in Massachusetts. It is developing antibody therapeutics known as Multiclonics for the treatment of multiple cancer types. It has four assets that have reached the clinical stage including zenocutuzumab (‘zeno’) for lung and pancreatic cancer. A clinical update on the drug candidate is expected in the first half of next year.
In the meantime, analysts are expecting Merus shares to move significantly higher. Last week H.C. Wainwright dramatically raised its price target from $30 to $45 which translates to 54% upside. The analyst there cited a recent Federal Drug Administration (FDA) meeting which helped define a clearer path to success for zeno. The $45 target matches that of Leernik Partners which also calls Merus a ‘buy’. RBC Capital is more cautious about Merus with a $33 price target.
Merus stock is up more than 70% this year and closing in on its March 2017 all-time high of $33.63. Earlier this month, the company announced a secondary public offering at $28.50 per share. This caused the stock to drop from its 52-week high but a three-day winning streak to close last week helped it recover.
Last month Merus gapped higher in heavy volume after announcing clinical and preclinical data at a conference on molecular targets and cancer therapeutics. On November 18th, management will be taking part in the Jeffries London Healthcare Conference which could be the next near-term catalyst for the stock.
What Do Analysts Think About Vermillion Energy Stock?
Vermillion Energy (NYSE: VET) is a Canadian oil and gas exploration company with assets across North America, Europe, and Australia. Last week it announced third-quarter performance and provided an updated outlook for 2021 and 2022.
Although production was down 2% mainly because of planned maintenance activities, free cash flow (FCF) more than doubled to $196 million. This was driven by the higher commodity price environment and lower capital outlays on exploration and development.
The market reacted negatively to the report despite management’s upwardly revised full-year production guidance to 85,000 barrels of oil equivalent (boe) per day. The new forecast was partly due to the recently completed acquisition of assets at the Powder River Basin in northeast Wyoming. Vermillion also said it expects 2022 production levels to be similar to this year but for FCF to improve of a strong 2021 result.
Analysts have taken a cautious stance on Vermillion this year despite much-improved energy prices. Muted production growth and capex levels have been among the concerns. Raymond James, however, has taken a contrarian position on Vermillion. It has given the stock its sole ‘buy’ rating over the last three months and is targeting a run to the $14 to $15 level over the long-term. Investors will want to be cautious on Vermillion, thought with most analysts expecting more modest upside as the company works to maximize the efficiency of its assets.
Companies in This Article:
