Say what you will about the recent market selloff. Some stocks had reached lofty valuations and were overdue for a correction. Others have been dragged down with the tide and appear to be oversold buy opportunities.
As we've seen in recent recoveries, if the market stages a rebound, it’s the more volatile names that will likely shoot up the fastest. Here we look at a few of the stocks that appear to have the support from buyers (and analysts) that could spark a rapid recovery.
Quidel (NASDAQ:QDEL), Nikola (NASDAQ:NKLA), Alnylam Pharmaceuticals (NASDAQ:ALNY) each pack their own punch that may lead to some big gains as the market pivots to rally mode.
Can Quidel Stock Make a Comeback?
After topping the $300 mark in early August medical diagnostics company Quidel saw its share price cut in half. The FDA's emergency use approval of competitor Abbott Labs' 15-minute, $5 COVID-19 test crushed Quidel and other COVID-19 test and equipment makers.
But whether Quidel's COVID-19 offering can still find a place in the market remains up in the air. Based on the stock's recent resurgence, many investors think it can.
Interestingly, Quidel has trended higher in September while the broader market has faltered. And with the stock reclaiming the $200 level, restored faith in the company's growth prospects could send it back towards $300 in quick order.
The more obvious catalyst is a second major wave of the coronavirus. This would lead to heightened demand for COVID-19 testing and put diagnostic makers back in the spotlight. We've already seen some signs of this following recent news of rising cases in Europe and parts of the U.S.
Despite the FDA's favorable treatment of the Abbott test, there will likely be multiple COVID-19 diagnostic winners especially if the pandemic stretches deep into 2021 and beyond.
Beyond the glaring COVID-19 catalyst Quidel has other opportunities for growth. Its point of care (POC) solutions help physicians, hospital, and clinical labs around the world diagnose a broad range of medical conditions. Between infectious disease, toxicology, cardiac, and other segments, Quidel's unique POC products should give it a significant share of a $3.3 billion global market opportunity.
Analysts on the Street seem to recognize the forest from the trees. The three most recent analyst recommendations on Quidel have all been reiterated buys—and the price targets are as high as $363.
Can Nikola Recharge its Batteries?
Nikola has no doubt become a polarizing stock amongst traders. The company's partnership with General Motors, an attack from a notorious short seller, and the CEO's departure have thrust Nikola onto center stage in recent weeks. Trading volume has run as high as investors' emotions.
With so much energy now built into the stock, another big move in one direction or the other seems likely. Will the bulls or bears win this tug of war?
If cooler heads prevail, Nikola should start trending back towards where it traded when the GM news broke. Although the SEC's investigation of the company still looms large, signs that Nikola performed no (or insignificant) wrongdoing could restore the market's confidence in the company.
The more important catalyst, however, is the fact that Nikola's long-range growth opportunity remains massive. With a leading position in the EV truck and infrastructure space, its hard not to see Nikola benefitting in a big way from the $600 billion commercial vehicle opportunity.
But until Nikola starts recording revenue, the stock will largely trade on headlines and hopes. The company's battery electric vehicle (BEV) will be rolled out first starting next year at which point it is expected to begin banking money. Nikola shares should start trading based more on fundamentals next year. When they do, the market should be reminded Nikola is in the very early stages of a multi-year growth ramp.
In the meantime, the bulls and bears will continue to wrestle. Another point of contention may center around GM's role in advancing or slowing Nikola's ambitions. One possibility, albeit highly speculative, is that GM takes a larger leadership position to stabilize the turbulent upstart EV maker. It could take a larger stake in Nikola or even buy it outright given its arguably cheap valuation. Bottom line, Nikola may be one positive headline away from re-charging to its level from early September.
Is Alnylam Pharmaceuticals Undervalued?
Another high volatility stock that could snap back fast is Alnylam Pharmaceuticals. Like Quidel, the stock has moved in the opposite direction of the market lately and appears to have the legs to keep running.
The biotech company develops RNA interference (RNAi) therapeutics for genetics medicines and a wide range of diseases. With a market cap of $15 billion, it is a high-risk play on a novel class of drugs that inhibit gene expression and translation. But it may be worth the risk considering the company's track record and growth potential.
Unlike many biopharmaceutical companies its size, Alnylam has made good progress with commercializing its products. Liver disease treatment Onpattro is seeing strong demand from U.S. doctors, has doubled its patient base over the past year, and brought in meaningful revenues. The drug has high growth potential in the U.S. and internationally. The recently launched Givlaari, a treatment for acute hepatic porphyria (AHP), is seeing strong early demand and stands to be a major growth contributor.
Alnylam also has one of the more attractive drug pipelines in its peer group with multiple phase three clinical studies underway. The company is targeting two to four investigational new drugs (INDs) per year across its four strategic therapeutic areas. Partnerships with global pharmaceutical giants Novartis and Sanofi also bode well for growth.
The near-term catalyst for Alnylam may be its October 29th earnings report. Coming off a second quarter report than beat on the top and bottom line, the company may have the momentum to surprise again.
A look at Alnylam's chart shows that the stock has regained its 200-day moving average after a September 18th rise in above average volume. It is not far from retaking its 50-day moving average—and if it does, it could be off to the races again as investors bid Alnylam up ahead of earnings.
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist
7 Boring Stocks That Are Winners
Some stocks just don’t get much attention during bull markets. They can be too boring for a growth portfolio. But when the market is going through a period of volatility and uncertainty, these tried-and-true performers have a way of making their way back to popularity.
And there are good reasons for this. First, many of these boring stocks pay dividends. This simply means that the company will reward shareholders simply for holding on to its stock. Dividend stocks aren’t designed to make you rich quickly. However they are designed to offer investors an amount of predictability. And we could all use a little bit of that right now.
And predictable stocks can also help investors manage risk. It can be fun to invest in speculative stocks. But they include a risk premium. When these stocks go up (as they sometimes do) they usually have a return that exceeds the broader market. But when they go down (and they usually do) they usually go down more than the broader market.
But “boring” stocks tend to move closer to the broader market. If you want an analogy from current events, these stocks flatten the curve. They won’t soar as high as riskier stocks, but they won’t sink as low either. And right now, preserving capital should be the number one item on every investor’s checklist.
With that in mind, we’ve created this special presentation to highlight 7 conservative stocks that can help investors win this moment in time. Many of them pay dividends; some do not. But they all have solid fundamental reasons to own them now.
View the "7 Boring Stocks That Are Winners".