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The tech-heavy Nasdaq represents a collection of riskier stocks than other major indices, and this is reflected in worse performance in bear markets and better display during bull runs.
But the risks associated with the Nasdaq are just child’s play compared to edgy funds like Cathie Wood’s Ark Innovation ETF. Now that has really hit the skids during last year’s bear, but the fund is also up 37% year-to-date, overshadowing the Nasdaq’s 15% gain.
Indeed, throwing more shade on the Nasdaq’s path after January was its best monthly performance ever, Wood recently said the ARKK ETF is “the new Nasdaq” and gives investors much better exposure to stocks. disruptive it supports.
So, let’s go down this road and dig up the details on a couple of the disruptive, high-risk, high-return names the Ark CEO has been loading up on as of late. Using the TipRanks database, we can see if Street analysts also support Wood’s picks. Here are the details.
Verve Therapeutics, Inc. (VERV)
Cathie Wood’s top pick we’re looking at is Verve Therapeutics, a biotech company with one mission: to offer protection against cardiovascular disease. He intends to do this by developing medicines using cutting-edge techniques – human genetic analysis, gene editing, messenger RNA (mRNA)-based therapies, and lipid nanoparticle (LNP) delivery – to realize his vision and disrupt the current model of care whereby cardiovascular diseases is treated.
The Verve pipeline has two programs still in the early stages of development. Leading the way is VERVE-101, designed as a single-cycle in vivo liver gene modification therapy and initially intended to treat heterozygous familial hypercholesterolemia (HeFH), an autosomal dominant disorder defined by markedly increased plasma concentrations of lipoproteins low-density (LDL) cholesterol (LDL-C).
The program, however, ran into some problems. In November, the FDA clinically suspended the company’s Investigational New Drug (IND) application for the candidate, citing a need for more clinical and preclinical data in addition to a change to a US study.
However, a Phase 1 study for VERVE-101 titled heart-1 is currently underway in New Zealand and the UK.
Cathie Wood is evidently not too concerned about the clinical grip; she bought 691,589 shares through ARKK in the past two months. The ETF now holds a total of 1,534,882 VERV shares, for more than $35 million at the current share price.
Mirroring Wood’s confidence and reflecting his high-risk/high-reward status, Stifel analyst Dae Gon Ha calls Verve a “wild card,” but still considers the stock a “better pick.”
“We believe VERVE-101 (heterozygous familial hypercholesterolaemia [HeFH]) clinical hold can be resolved (timing TBD) – which can increase shares – but regardless, Ph.1 heart-1 (2H23) data has a high probability of generating positive data – which can also increase shares. With potential equity support at ~$19/shr, we think 2023 could recoup some of 2022’s losses. We expect investor pushback on VERVE-101’s commercial viability to continue, but we don’t see it as a major headwind to stock performance.” Ha said.
Overall, Ha thinks the stock still has a long way to go, and by some measure, we mean 140% up. These are the returns investors are eyeing, should the stock come up to Ha’s $56 price target. Needless to add, the analyst rating is a buy. (To see Ha’s track record, click here)
Most agree with Ha’s bullish stance. Based on 6 buys and 1 hold and sell each, VERV has a moderate buy consensus rating. Overall, analysts expect shares to appreciate 69%, as indicated by the $39.43 average price target. (See VERV share forecast)
Intellia Therapeutics, Inc. (NTLA)
We’ll stay in the biotech space for the next Wood-backed title. Using CRISPR-based technologies, Intellia Therapeutics’ goal is to develop genome-editing treatments for people suffering from serious disease. In fact, one of the co-founders of Intellia, Jennifer Doudna, was part of the team that invented the CRISPR gene editing system – a genetic engineering method in molecular biology by which the genomes of living organisms can be altered – and together with Emmanuelle Charpentier, was awarded the 2020 Nobel Prize in Chemistry for the groundbreaking work CRISPER.
Last year, Intellia reported positive interim data from two ongoing clinical trials evaluating the company’s in vivo CRISPR/Cas9 gene-editing treatments; one is from the study of NTLA-2001, indicated for the treatment of patients with ATTR (transthyretin amyloidosis) – a collaboration with Regeneron Pharmaceuticals – and the other for NTLA-2002 in hereditary angioedema (HAE).
For the former, the company plans to release more clinical data from the ongoing Phase 1 study of NTLA-2001 in 2023 and intends to file an IND application around mid-year to allow US sites to be included in a pivotal candidate study.
For NTLA-2002, the company expects to commence the Phase 2 segment of the ongoing Phase 1/2 study during the first half of the year. An IND to include US sites in the Phase 2 study of NTLA-2002 is also expected to be submitted during 1H.
Despite a recent rally, the stock has strongly underperformed over the past year, losing 54% of its value. Wood evidently thinks now is the time to pounce; in the last two months, through ARKK, he has purchased 181,295 shares, bringing the ETF’s total holdings to 6,744,252 shares. These are currently worth more than $291 million.
Sharing Wood’s enthusiasm, Wells Fargo’s Yanan Zhu likes the way stocks look right now and allays investors’ fears on specific issues.
“We see NTLA stock as attractively valued at its current price and note that concerns about the US IND filing and approval, as well as the safety of the company’s in vivo gene-editing programs, while understandable, are greatly exaggerated.” wrote the analyst. “In 2023, we see a high probability that the FDA will authorize INDs for in vivo gene editing studies by NTLA and other companies. Our confidence is based on prior FDA clearance of zinc finger nuclease (ZFN)-based gene-editing INDs. We also note that the accumulation of safety data from former US studies of in vivo CRISPR gene-editing studies could also facilitate the FDA’s decision.
Backing this stance, Zhu rates NTLA shares an overweight (aka Buy) to go along with a $120 price target. This target brings the upside potential to a staggering 177%. (To look at Zhu’s track record, Click here)
Looking at the consensus breakdown, based on 7 Buy vs. 4 Hold ratings, this stock claims a moderate Buy consensus rating. Analysts see the stock delivering returns of about 98% over the next year as the average target sits at $85.80. (See Intellia share forecasts)
To find good ideas for trading stocks at attractive valuations, visit TipRanks’ best stocks to buy, a recently launched tool that brings together all of TipRanks’ stock information.
Disclaimer: The views expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
