JP Morgan analysts see up to 50% growth potential for these 2 stocks
Stock markets have fallen quite a bit in the past year. And while we are already experiencing growth in some stocks, there are still stocks that analysts believe offer decent upside potential. Today, we're going to take a look at JP Morgan's picks.
The U.S. economy has been struggling with inflationary pressures in recent months, which has investors and policymakers worried. Headline inflation hit 6% in February, but eased slightly to 5% in March.
Hugh Gimber of JPMorgan Asset Management sees this drop in inflation as a promising sign that the Federal Reserve's (Fed) efforts to raise interest rates are bearing fruit.
The message is that the Fed is winning its battle against inflation. The demand for a pause is growing stronger, although I still think they might be tempted by one more hike.
In that context, analysts at JP Morgan see a pretty decent opportunity in these two stocks.
LendingClub Corporation $LC-2.1%
LendingClub Corporation is a major player in the digital banking market, focused on creating unsecured personal loans. Founded in 2006, the company is the second largest personal loan originator in the US. With its innovative approach and rapid growth, LendingClub has built a strong position in the market. It uses technology and algorithms to assess the credit risk of clients, ensuring an efficient and transparent lending process.
LendingClub's main products and services include personal loans, debt consolidation loans, home improvement loans, and small business loans. The company also offers a platform for investors who want to invest in loans to diversify their investment portfolios.
LendingClub's strengths include its innovative approach to lending, rapid growth and strong market position. On the other hand, the company has to deal with regulation, competition and the risks associated with the credit cycle.
Despite the impact of high interest rates, which have cooled demand for credit, JP Morgan analyst Reginald Smith sees the company's future as relatively positive.
LendingClub's digital marketplace and bank model provides unique financial advantages. These include a more stable income stream, relatively stable, low-cost financing, and a more robust product offering: including loans, savings and banking products that adds to the customer's lifetime value. In addition, LendingClub is one of the few consumer-facing fintechs that is profitable on a GAAP basis, earns 1.7 times revenue per employee, and has one of the lowest operating cost bases among its fintech peers.
Smith expressed his optimism with an Overweight rating and set a price target of $11, representing upside potential of more than 50%.
Afya Limited $AFYA+4.4%
Afya Limited
AFYAAfya Limited is a Brazilian company that offers educational products and services in the healthcare industry. Its portfolio includes medical schools, pre-medical residency courses, various training programs and other healthcare services. Afya Limited was founded in 1999 and has since become one of the largest providers of medical education in Brazil and Latin America.
Afya Limited operates in two main segments: the educational segment and the medical segment. The education segment includes medical schools, postgraduate programs, and medical exam preparation courses. The healthcare segment offers services such as digital health solutions, telemedicine and healthcare facility management solutions.
Afya Limited's strengths include a strong market position, rapid growth, and a wide range of educational and healthcare services. The company is also able to respond quickly to changing market needs and leverage technological innovations to develop its products and services.
However, Afya Limited faces some challenges such as dependence on the Brazilian market, regulatory risks and competition from other educational and healthcare institutions.
JP Morgan analyst Marcelo Santos is quite bullish on the stock, as evidenced by his commentary, and the target he set. Why did Santos pick this particular stock?
Afya is the only player in higher education under our coverage that has reported positive FCF generation after net interest payments, helped by lower leverage and good EBITDA conversion, and it currently trades close to mass peers in terms of P/E'24E at 5.7x. We expect its results to be resilient to another uncertain year for higher education.
His comments also supported the price target he set at $20, which should also represent an upside of more than 50%.
Conclusion
In the current economic environment where the US economy is struggling with inflationary pressures and the Fed is raising interest rates, these 2 companies may present an interesting opportunity for investors who are expecting interest rates to fall, or alternatively are not afraid to look beyond the US.
However, it is important that investors carefully consider their investment objectives and risk tolerance before deciding to invest in these companies. For there are, as everywhere, plenty of risks, whether regulatory, political, or otherwise.
WARNING: I am not a financial advisor, and this material does not serve as a financial or investment recommendation. The content of this material is purely informational.
