Worries of a second-wave of COVID-19 contamination in China, Japan, India and a number of US states were swept aside this week with the US Federal Reserve’s announcement of corporate bond relief and a solid rebound in US retail sales in May.
Despite cautious words from the Federal Reserve chair Jerome Powell, investors returned to the equity markets at the prospect of Trump’s potential $1 trillion infrastructure spending plan, with a sharp rebound in US retail sales a welcome boost. Reports of a ‘major breakthrough’ regarding the use of cheap steroid dexamethasone in reducing covid-19 mortality only served to continue market optimism.
In line with the wider market performance, our King of 34 Recovery Stock Competition picks this week have clawed back last weeks losses with just eight stocks posting fall in share price. Our top 5 stocks after week 5 are unchanged with ITM Power (+75.5%), Zoom (+66.8) Square (+47.3%), Huya (+32.5%) and Rio Tinto (+24.4) topping our leaderboard.
This week, we are focusing on five stocks that have seen big moves: Netflix, Shopify, Huya, Hikma Pharmaceuticals and Eli Lilly
Netflix [NASDAQ: NFLX] reported a best quarter with 182 million subs worldwide in April 21st, 2020 and is trading near all time highs at $449,87 at the time of writing. We expect the real subscription numbers will leap above the 192m estimate in the second quarter and the stock continues to outperform. Netflix is part of our lives and you can take it with you anywhere and watch it when you want it without commercials. The highest analyst price target is $580, which we think is achievable this year.
E-commerce platform Shopify [NYSE:SHOP] shares have seen a big move this week after RBC Capital Markets Analyst Mark Maheney raised its price target on the stock from $825 to $1,000. The analyst wrote, “Shopify has a number of catalysts that we expect to help accelerate revenue growth and expand the company’s long-term total addressable market, including the Shopify Fulfillment Network (SFN), Shopify Capital, next-generation Point-of-Sale (POS), and international expansion, among others.”
Huya [NYSE:HUYA] shares are trading up this week, up alomost 25% in hte last 10 days. Of most interest to shareholders recently was the extension of a deal with Team Liquid which has already seen the successful creation of a number of marquee online gaming events on the Huya platform. Huya is adding to its portfolio of western e-gaming teams and competitions, including a deal with Europe’s Team Secret in May and a broadcasting deal with Riot Games. Huya has reported a 47% increase in net revenues for Q1 2020 versus the same quarter next year. We will be interested to see if it can prove its potential and generate further growth during the COVID-19 lockdown.
Hikma Pharmaceuticals [LON:HIK] and a subsidiary of Sun Pharma signed an exclusive licensing and distribution agreement this week for plaque psoriasis medicine, Ilumya, for the Middle East and North Africa region (MENA). Hikma will be responsible for the registration and commercialisation of the product in all MENA markets and Sun Pharma will be responsible for product supply. Having endured a slump in share price at the end of last month following early investor optimism that the stock may be a coronavirus beneficiary, Hikma seems to be back on track. A consensus of Outperform from 14 brokers* suggests there is more to come.
US pharmaceutical company Eli Lilly [NYSE:LLY] announced this week that its breast cancer drug Verzenio in combination with endocrine therapy was successful in preventing the recurrence of breast cancer for patients in an open-label Phase 3 trial. The news was the catalyst for a share price surge that has prompted broker Goldman Sachs to reiterate its buy rating with a $186 price target and commenting “the company has a favorable growth profile relative to peers, has limited exposure to near-term loss of exclusivity, significant pipeline optionality, and a 2% dividend yield, which is deserving of a premium multiple”.
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Our King of the 34 performance table to 18 June 2020
|Reckett & Benckiser||+9.4|
|Just Eat Takeaway||-3.9|
|Pets at Home||-8.5|
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- How did our stock picks get on in May?
*Data sourced from SharePad. The UK’s no.1 investment data & analysis software for Private Investors as voted for by FT/Investors Chronicle readers. Discover the advantage at www.sharescope.co.uk/sharepad.