This year artificial intelligence (AI) boom has benefited many industries, but especially the technology sector. While tech stocks are riding the AI wave, some overlooked, undervalued stocks in other sectors also have the potential to grow exponentially over the long term.
Here we will look at two such growth stocks that, in my opinion, have not yet reached their full potential. My first pick is Xencor (XNCR), a clinical stage biotech company that works diligently to defeat life-threatening diseases. Investing in biotechnology companies has its advantages, because health products constantly remain in demand, regardless of the state of the economy.
My second choice is a multi-state cannabis operator Trulieve Cannabis (TCNNF). Hemp stocks have had a bumpy ride, going from a high in 2021 to a low now. However, TD Cowen analyst believe”lhemp equalization is inevitable,” although it may take several years. This implies that cannabis companies with strong fundamentals, such as Trulieve Cannabis, would be a good stock to buy for long-term investors.
So far in 2023, Xencor shares have fallen 22%, while Trulieve shares are down 24%, undercutting the S&P 500 Index ($SPX)’s 19% gain. However, Wall Street believes these two growth stocks have 90% to 100% upside potential by the end of 2024.
The Case For Xencor
California-based clinical-stage biotech company Xencor has made significant strides in the development of new antibody therapies to treat difficult-to-treat life-threatening health conditions. With its innovative XmAb technology platform, Xencor has emerged as a key player in the biotechnology industry.
Its cutting-edge XmAb platform enables the modification of antibodies to improve their stability, potency and half-life, thus improving their effectiveness in treating a wide range of diseases.
that of Xencor total income in Q3 jumped 117% year over year to $59.2 million, beating analysts’ estimates by $29.1 million. The a net loss of $0.40 per share beating the consensus estimate by $0.31.
The company continues to invest heavily in research and development to strengthen its product pipeline, with those expenditures totaling $65 million in Q3. In addition, Xencor’s strategic partnerships with larger biotech firms such as Amgen ( AMGN ), Janssen Biotech, Gilead Sciences ( GILD ) and Omeros Corporation ( OMER ) to develop antibodies may help the company profit in the near term.
In addition, Xencor’s sale of Ultomiris and Monjuvi OMERS Life Sciences royalty interests resulted in a cash inflow of $215 million to its balance sheet. Xencor also wisely halted the development of the bispecific antibody XmAb104 based on efficacy data and redirecting resources to more important projects.
The company had a cash balance of $541.4 million at the end of the quarter. According to management, the “cash runway now extends into 2027.”
Xencor’s engineered antibodies hold enormous promise in the treatment of various cancers, autoimmune diseases and infectious diseases, increasing the likelihood of more strategic partnerships, thus adding to the company’s revenue in the future. Analysts expect Xencor’s full-year revenue in 2023 to increase 18.6% to $195 million.
Overall, Wall Street remains bullish on Xencor’s long-term prospects, rating it a “strong buy”. Of the 12 analysts covering XNCR, 10 have a “strong buy” recommendation, one has a “moderate buy” rating and one suggests a “strong sell.”
The the average price target of analysts of $ 39.67 represents a potential of about 97% of current levels.
The Case For Trulieve Cannabis
Investor interest in cannabis stocks may have waned due to the lack of progress toward federal legalization. The industry as a whole, on the other hand, is experiencing explosive growth. According to Statista, the global cannabis market could grow at a compound annual growth rate of 15% to be valuable $102.9 billion through 2028. This may be part of the reason why Wall Street is so bullish on multi-state operators like Trulieve Cannabis.
Founded in 2016, Trulieve has quickly transitioned from a small medical cannabis retailer in Florida to a leader in the US cannabis industry. Initially, the company only focused on its home state of Florida, where it established a dominant position with approximately 130 stores.
Trulieve has now spread its roots to other states, with 190 stores nationwide offering the best range of medical and recreational cannabis. In addition, Trulieve’s acquisition of fellow cannabis company Harvest Health in 2021 gave it a stronghold in the hemp markets of the northeast, southeast and southwest.
Due to the oversaturation of the American cannabis market, Trulieve’s total revenue fell 7% to $275 million in the third quarter Although Trulieve is not yet profitable, it has managed to be profitable from an operating point of view in recent years., thanks to its focus not going in expansion debauchery. Its adjusted EBITDA in the quarter came in at $78 million, compared to $100 million in the year-ago period.
Trulieve ended the quarter with about $200 million in cash and cash equivalents. It also generated free cash flow of $87 million. Trulieve’s debt-to-equity ratio stands at 0.62. A higher ratio could imply a company’s heavy reliance on debt to carry out its operations.
Overall, Wall Street rates Trulieve Cannabis stock as a “buy” with an average target price from $11.22. Valued at a market cap of $1.1 billion, analysts predict Trulieve shares will rise getting up by 89% in the next 12 months.
Analysts predict a 0.29% increase in total revenue to $1.12 billion in 2024. Trading at 1 times forward 2024 projected sales, Trulieve is ridiculously cheap for a growth stock in a profitable industry that has high growth potential.
As of the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see Barchart’s Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.