With the second half of the year underway, Oppenheimer is highlighting what it calls its top small- and midcap seasonal standout investment ideas. Smallcap stocks have underperformed the S & P 500 this year, with the Russell 2000 virtually unchanged, up a scant 0.12% through Tuesday. The broad market index, however, has advanced around 17%. Midcaps haven’t done much better, with the S & P 400 MidCap higher by only 3.8% in 2024. On the basis of price charts alone, Oppenheimer tapped midcap growth stocks as its top rotation idea from a technical perspective. Oppenheimer’s 25 “smidcap” stock picks all have a market capitzalization between $1 billion and $10 billion, and are rated outperform by the investment bank. The stocks are drawn from a universe of high-growth themes, including artificial intelligence, obesity drugs, online sports betting and pet humanization, among others. Here are some of Oppenheimer’s smidcap standouts: Of the five AI-related stocks on Oppenheimer screen, Zeta Global Holdings leads in year-to-date returns, soaring 92%. Oppenheimer sees even more upside ahead for the stock, which has a market value of $3.9 billion. Oppenheimer has a $20 price target on Zeta, implying 18% upside from Tuesday’s close. Zeta, a marketing technology software maker, is positioned to benefit from the next generation of marketing automation and has positive secular trends on its side due to increased customer data regulations and the AI investment cycle, Oppenheimer said. “We remain optimistic about Zeta’s potential to be a good growth compounder and long term enterprise market share gainer,” analyst Brian Schwartz said in the report. In a note last month, RBC Capital Markets also rated Zeta outperform with a price target of $20. The bank believes Zeta is poised to benefit from a revolution in consumer data. Fighting obesity is the “next wave for healthcare investors,” and Oppenheimer believes there’s room for improvement that adds to advances already seen from Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound. In this area, Oppenheimer likes Viking Therapeutics , reiterating the stock as one of its best ideas. Oppenheimer’s price target for Viking is set at $138, which implies about 155% upside from Tuesday’s close. Viking has nearly tripled this year, climbing 191%. The stock has a market cap of $6 billion. VKTX YTD mountain Viking Therapeutics, year-to-date Oppenheimer’s bullish view of Viking rests on a possible “best-in-class profile” for both the oral dosage and subcutaneous injection of the company’s GLP-1 and GIP dual agonists VK2735. “Bottom-line, we think VK2735 offers a highly competitive profile with both oral and subQ formulations that could gain meaningful market share in the highly dynamic and rapidly evolving obesity market,” analyst Jay Olson wrote in the 90-page report. To take advantage of what it calls “pet humanization,” Oppenheimer names Freshpet its best idea. The maker of high-quality, high priced pet food and pet treats has a market cap of $7.6 billion and is up more than 49% year to date. Oppenheimer sees Freshpet as a long-term growth story among consumer packaged smallcaps. Believing Freshpet to have a “unique assortment” of fresh pet food, Oppenheimer has a price target of $155 on the stock, implying roughly 20% upside from Tuesday’s close.
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