2 ‘Strong-Buy’-Rated Stocks With Around 50% Upside

Investing in the stock market can yield profitable returns with careful consideration and analysis. However, contrary to popular belief, you do not need a large sum of money to begin investing in the stock market. Even a $100 investment in outstanding growth stocks may generate positive long-term returns.

Following last year's rapid artificial intelligence (AI)-driven rally, markets are off to a slow start in 2024. In 2023, the broad-based S&P 500 Index ($SPX) and the tech-heavy NASDAQ Composite ($NASX) increased by about 25% and 45%, respectively.

While the markets attempt to pick up pace, here are two “strong buy"-rated growth stocks trading for around $20 a share for investors just starting in the stock market. Wall Street believes energy company Cenovus Energy (CVE) could surge by as much as 57%, while biopharma stock Amicus Therapeutics (FOLD) has a potential upside of 48.4% in the next 12 months. Let’s find out more.

Cenovus Energy Stock

Canadian energy company Cenovus Energy boasts a diversified portfolio that spans conventional oil (CLG24), oil sands, and natural gas (NGG24) assets. This diversity positions the company strategically, allowing it to weather fluctuations in commodity prices.

Cenovus Energy has strategically positioned itself for growth through targeted acquisitions and partnerships. The company's acquisition of Husky Energy in 2021 expanded its scale and capabilities. Following the acquisition, it is now the second-largest Canada-based refiner and upgrader. 

Cenovus’s financial stability is reflected in its consistent revenue growth, solid profit margins, and efficient cost management strategies. For context, Cenovus’ revenue has increased from C$16 billion in 2018 to C$51.4 billion in 2022. 

More recently, net earnings in the third quarter jumped a massive 120% to C$0.97 per share. Furthermore, Cenovus generated C$2.7 billion in cash from operating activities, C$3.4 billion in adjusted funds flow, and an impressive free funds flow of C$2.4 billion. On top of that, the company used the excess free fund flow to pay down its long-term debt by C$1 billion, leaving it with a net debt of C$6 billion at the end of the quarter.

Lastly, Cenovus is also a dividend stock with a forward yield of 2.7%. Its payout ratio of 16% indicates ample room for dividend growth. Strong operating performance in the third quarter allowed it to return C$1.2 billion to shareholders through share buybacks and dividends, signaling a positive outlook for long-term investors.

Furthermore, as part of its shareholder returns target, the company intends to return 50% of excess free funds flow  in the quarters when its ending net debt remains between C$4 billion and C$9 billion.

While commodity prices are hard to predict and influenced by macroeconomic conditions, Cenovus’ diversified business should give it a strategic advantage in adapting to changing market dynamics.

Looking ahead to 2024, analysts predict Cenovus’s revenue will surge 12.1% to $48.7 billion, accompanied by earnings growth of 29%. Priced at six times forward 2024 earnings, CVE is relatively inexpensive.

Turning to Wall Street, on average, the stock gets a “strong buy” rating. Out of the 13 analysts covering Cenovus, 10 recommend a “strong buy,” two recommend a “moderate buy,” and one recommends a "hold.” The average target price for CVE is $23.30, implying about 57% expected upside in the next 12 months. 

Amicus Therapeutics Stock

My second pick is the biopharma company Amicus Therapeutics, which specializes in the development of therapies for rare and orphan diseases where treatment options are limited. Amicus has a strong pipeline of innovative therapies in various stages of development, demonstrating its commitment to advancing science and bringing new treatments to market. 

Galafold, the company's flagship product, is an oral precision medicine approved to treat specific types of Fabry disease. Recently, the company announced preliminary results for 2023 revenue, and also provided a glimpse into what 2024 might look like. Amicus generated around $115.1 million in revenue during the fourth quarter, bringing the total for the year to ~$399.4 million, up 21% from 2022. The company expects to report an adjusted net profit in Q4.

Double-digit growth of  18% to ~$387.8 million for Galafold contributed to the overall revenue increase in 2023. Additionally, Amicus is actively involved in developing therapies for Pompe disease and other lysosomal storage disorders, demonstrating its dedication to addressing a range of rare diseases with high unmet medical needs.

In September 2023, the company secured approvals for Pombiliti in combination with Opfolda for the treatment of late-onset Pompe disease, which contributed around $11.6 million during the year.

Looking ahead, management expects old and new products to contribute to a full year of adjusted net profits in 2024. Analysts also expect Amicus to report a profit in 2024, accompanied by revenue growth of 33.8%. Priced at seven times forward sales, Amicus is cheap for a rapidly growing biotech stock.

Out of the 10 analysts covering Amicus, eight recommend “strong buy,” and two recommend "hold.” The average target price for FOLD stock is $18.89, which is 48% higher than current prices. 

The Bottom Line

Cenovus Energy’s strong financial performance, diversified asset portfolio, emphasis on sustainable practices, strategic acquisitions, and commitment to shareholder value make it a standout choice for investors looking for stability and growth in the energy sector.

Elsewhere, Amicus, with a strong pipeline of innovative therapies, collaborative partnerships, and a dedication to patient-centric values, is well-positioned for success in the biotech industry.

I agree with Wall Street's bullish outlook for both stocks this year, and believe they will reach their average target prices within the next 12 months.