Goldman Sachs raises S&P 500 price target; Here are 2 stocks with high upside that can help you take advantage of the upside

Year-to-date, the S&P 500 has returned an impressive 14%. However, these gains are a bit deceptive as most of the upside comes from just a select few stocks, namely the tech mega-caps (AAPL, MSFT, NVDA, META, AMZN). If we exclude those five stocks, the index is up just 5%.

While it could be argued that the market is in for a cooldown after such a rally, David Kostin, chief US equity strategist at Goldman Sachs, disagrees, citing past insights. “Previous episodes of sharp width narrowing have been followed by a ‘catch-up' of a broader reassessment of the rating,” explained Kostin.

As such, Kostin not only increased Goldman's year-end price target for the S&P 500 to 4,500 from 4,000 to 4,500 (a 12.5% ​​raise), but there's also the prospect that stocks are yet to benefit from the recovery and will narrow the gap over time of the year will close .

With that in mind, analysts at Goldman Sachs have been eyeing these stocks, focusing on two stocks that they calculate have significant upside potential — in the region of 90% or more. Scanning the tickers through the TipRanks database, it's clear that Goldman isn't the only one who thinks these stocks have a lot to offer investors; Both are also rated as Strong Buys by the analyst consensus.

Rent the runway (TO RENT)

Our first Goldman-backed stock is a revolution in the fashion industry. Rent the Runway lives up to its name by detailing its activities, which revolve around offering its customers the opportunity to rent quality fashion items. This temporary ownership concept allows customers to browse a variety of styles, sizes and brands on the Rent the Runway website or mobile app. They can then select objects that they would like to rent for specific occasions or periods. The platform offers options for both one-time rentals and subscriptions. In line with 2023 trends, the company uses AI algorithms and machine learning techniques to improve various aspects of its business, including inventory management and personalization.

It's a formula that helped the company deliver strong results in its most recent release — for the first fiscal quarter of 2023 (April quarter). Revenue rose 10.6% year over year to $74.2 million, beating Street expectations by $0.99 million. Likewise, earnings per share of -$0.46 came in better than the -$0.49 forecasters were expecting. However, concerns about the outlook hurt performance. The company expects second quarter revenue to be between $77 million and $79 million. The consensus reckoned with 81 million.

As a result, stocks fell and have generally lagged the market this year — down 24% so far. For Goldman Sachs analyst Eric Sheridan, however, the current valuation represents an opportunity for investors.

“In our view, RENT shares (at current levels) are not pricing in the multi-year scenario of 25% revenue growth and associated scale margins. set out last quarter,” said the 5-star analyst. “Longer term, we still see RENT as a leader in subscription-based efforts to drive adoption of the sharing economy theme in the apparel sector. In particular, we would like to highlight RENT mgmt's comments on AI as potentially positive for their platform and as a broader disruptive force for the industry that warrants further attention in the coming quarters.”

Those comments bolster Sheridan's buy rating on RENT, while his $6 price target suggests the stock is poised to climb a whopping 150% over the coming year. (To see Sheridan's track record, Click here)

Sheridan's optimistic thesis finds support on the street. The stock's ‘Buy Strong' consensus rating is based on 6 Buy vs 1 Hold. Additionally, the average target of $4.93 leaves room for a 105% one-year gain. (See RENT stock forecast)

Arrowhead Pharmaceuticals (ARWR)

On our next Goldman-backed name, we'll switch gears and move into biotech. Arrowhead Pharmaceuticals is at the forefront of RNA interference (RNAi) therapeutics, developing innovative drugs that target and silence specific disease-causing genes. The company's cutting-edge technology, known as the Targeted RNAi Molecule (TRiM) platform, enables the precise delivery of RNAi drugs to specific tissues and organs, opening up new possibilities for the treatment of various diseases.

The company has a long and diverse clinical pipeline and some notable industry collaborations, including Takeda, Amgen, and Horizon Therapeutics. Looking ahead, Arrowhead expects to have 18 drug candidates in clinical trials by the end of 2023, covering a broad spectrum of cell types including liver, solid tumors, lung, CNS, and skeletal muscle. There are already candidates in phase 3 studies.

Further back in development, but with some promising advances, the company is also developing ARO-RAGE, which is currently in a Phase 1/2 study for the treatment of asthmatic patients. This drug has shown some positive results. At Arrowhead's recent R&D day, the company presented data showing that a single inhaled dose of 184 mg degraded the RAGE protein – which is linked to lung diseases such as asthma – by an average of 90% and up to a maximum of 95%. .

The potential of this drug has caught the attention of Goldman Sachs analyst Madhu Kumar, who makes the positive case for the therapy.

“There is significant market opportunity for ARO-RAGE in the broader asthma therapy landscape,” said the 5-star analyst. “Specifically, we estimate that the eosinophilic asthma biologics market will reach over $4 billion in 2023 and grow to approximately $7 billion over the next five years. This estimate incorporates sales estimates for AMGN and JNJ's Tezspire, GSK's Nucala, AZN's Fasenra, and REGN and SNY's Dupixent.”

“While many of these biologics follow the same dosing schedule as ARO-RAGE every four weeks (although ARO-RAGE could potentially be administered less frequently), we see potential for differentiation in terms of efficacy, including exacerbation rate and forced expiratory volume in.” 1 second (FEV1) and fractional exhaled nitric oxide (FeNO),” added Kumar.

How does all of this translate to investors? Kumar has a Buy rating on the shares, backed by a $68 price target. Should that number be reached, investors will reap a 92% return in one year. (To see Kumar's track record, Click here)

Elsewhere down the street, ARWR receives another 8 “buy” and 3 “hold” all of which result in a consensus rating of “Strong Buy”. Based on the median target of $61.45, shares will rise about 74% over the 12-month period. (See ARWR stock forecast)

For great stock trading ideas at attractive valuations, visit TipRanks' Best Stocks to Buy, a newly launched tool that brings together all of TipRanks' stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.

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