3 IPO stocks to watch in September

Let’s talk about IPOs, the most common route for companies to enter public markets. Last year, and the year before, saw record breaking and record numbers, in total number of public offerings and capital raised, but that breakneck pace has slowed this year.

In the first half of 2022, just 92 IPOs raised some $9 billion, and analysts predict that this year a total of 184 companies will go public through initial offerings. By comparison, the first quarter of 2021 alone saw 395 IPOs raising a total of $140 billion. The dropout is clean.

The slowdown in IPO activity can be attributed to the 6-month bear market we went through in 1H22, increased market uncertainty and the general economic slowdown. In such an environment, start-ups are more reluctant to enter public markets and investors are more cautious about where they put their money. On both sides, we are more likely to find a “wait-and-see” attitude, as companies and investors watch to see how the markets will shake out.

From an investor’s perspective, what all of this really means is that homework is now more important than ever. Knowing the details of the IPO before the event and finding companies with strong underwriting for the offering are good first steps. They can be tracked by checking with analysts on the high street – these are the objective professionals who regularly post research notes on the stock markets, and their research can point the way to hidden gems.

We’ve opened up the TipRanks database to find 3 recent IPO stocks that analysts think are on the hunt. These are all companies that went public in May this year, but have since gained some street love. Here are the details, along with analyst commentary.

Pep Gen, Inc. (PEPG)

We will start in the biotechnology sector, where PepGen is a clinical-stage company working on therapeutic oligonucleotides, a new generation of drug candidates that promise to transform the way we treat serious neuromuscular and neurological diseases. The Company uses a proprietary development platform, based on Enhanced Release Oligonucleotides (EDO), to create a range of drug candidates; these are now entering clinical trials.

The lead candidate, PGN-EDO51, is being studied as a treatment for Duchenne muscular dystrophy (DMD), and the company began dosing patients in a Phase 1 study last April. The current trial is focused on normal healthy volunteers, testing safety, tolerability and pharmacokinetics. The company plans to release data by the end of this year.

The company’s second drug candidate is PGN-EDODM1, a potential treatment for myotonic dystrophy type 1 (DM1). It has shown promise in preclinical testing, and the company expects an IND submission in 1H23, before initiating a phase 1/2 clinical trial.

PepGen has three other drug candidates in discovery and preclinical stages – but moving to human clinical trials is expensive. To raise the necessary capital, the company staged its IPO in May this year. The event saw the PEPG ticker begin trading on May 6, with an initial price of $12 per share and a first-day close of $12.89. The IPO managed to raise the expected $108 million, although shares have fallen 24% since then.

SVB analyst Joseph Schwartz covers this relatively new stock, and he considers the lead drug candidates to be superior to competitors’ assets, writing: risky based on SRPT’s SRP-5051 clinical data…. Ph.1 reading of healthy volunteers of PGN-EDO51 is guided to occur by the end of the year and will include safety, PK and exon 51 skipping data. We see this as a catalyst under -estimated that will set baseline expectations for patients and also has the potential to demonstrate the best capabilities of PGN-EDO51 over the HV study results of SRP-5051…. We note that DM1 represents a large market opportunity – we are currently modeling peak gross WW sales (2035E) of approximately $730 million for PGN-EDO51 and approximately $2.5 billion for PGN-EDODM1.

Schwartz gives PEPG stocks an outperform (buy) rating, along with a $40 price target that implies year-over-year upside potential of a whopping 3o9%. (To see Schwartz’s track record, Click here.)

Over the past 3 months, 3 analysts have weighed in on this stock, and they are all positive, giving it a unanimous Strong Buy consensus rating. The shares are selling for $9.78 and their average target of $27 indicates a strong 176% upside for the year ahead. (See PepGen’s stock forecast on TipRanks.)

ProFrac holding company (PFHC)

Next on our list, ProFrac, is a holding company whose subsidiaries provide a range of services and solutions to the North American hydrocarbon industry. ProFrac’s offerings include services and products enabling hydraulic fracturing and well completion services in the oil and gas exploration and production industries.

In May, the PFHC ticker hit the markets through an IPO which opened on the 13th of the month. The stock closed that day at $18.11, a shade above the opening price of $18. The company managed to raise $441.6 million through the IPO, and since the first day’s close, shares are up 9%.

Last month, ProFrac released its second quarterly financial report as a public entity – and the first to show results since the company went public. The 2Q22 report showed a 40% gain in revenue quarter over quarter, with revenue of $589.8 million. Net income was reported at $70.1 million and the company reported a cash position of $73.7 million as of June 30. Overall, the company reported total cash of $88 million at the end of the second quarter.

Stephen Gengaro, 5-star analyst at Stifel, was duly impressed with the performance of this “out of the gate” company, and notes the quarterly results as key points in his review of the stock: “Supported by strong fundamentals pumping pressure, solid execution, and the positive benefits of its vertical integration, ProFrac delivered its second consecutive bullish surprise since its IPO…. We continue to expect strong fundamentals pumping under pressure to drive increased profitability at least through 2023, and likely longer.

Gengaro rates these stocks as a buy and gives a target price of $29, implying 46% upside potential over the one-year horizon. (To see Gengaro’s track record, Click here.)

This energy/industrial stock has captured the attention of 7 Wall Street analysts, and their reviews include 6 buy and 1 hold, for a strong buy consensus rating. The current trading price of $19.79 and the average price target of $26.93 combine to give a 36% upside over the next 12 months. (See ProFrac’s stock forecast on TipRanks.)

Hanover Bancorp, Inc. (HNVR)

For our last action, we will focus again, this time on the financial world. Hanover Bancorp was recently established in 2009 as a one-bank holding company; that is, its sole subsidiary is Hanover Community Bank, a small bank with some $1.6 billion in assets and operations in New York/New Jersey. Hanover Bank has 8 physical branches, in Metropolitan New York, Long Island and Freehold, New Jersey.

Like many local banks, Hannover provides comprehensive services to small customers, including individuals and small businesses. Services include checking and savings accounts, debit cards, money markets and CDs, banking advisory services, personal and business loans, mortgages, and online and mobile banking.

Hanover Bancorp held its IPO May 11-13, with the stock opening May 11 at $21; since then, the shares have fallen slightly – by around 5%.

On June 30, the company closed its third quarter of fiscal 2022, with net income of $5.3 million, or 80 cents per diluted share. That compares to a result a year ago of just $221,000 and 5 cents per diluted share; the a/a jump is substantial. Revenue also increased significantly, by 50% over the same period last year, to $16.65 million. The company’s assets of $1.6 billion are up from $1.54 billion at the end of the year-ago quarter. These assets included $133 million in cash.

Banks and bank holding companies typically pay regular dividends, and Hanover Bancorp paid out three common shares in February, June and August of this year. The payouts, of 10 cents per common share, annualize to 40 cents and yield a 2% yield, almost exactly the average dividend found among comparable companies.

Covering this stock for Piper Sandler, analyst Mark Fitzgibbon sees that bank’s loan performance as a differentiator. Following the FQ3 print, he wrote: “Total loan balances increased 10% Q/Q, while balance sheet totals increased 9% from the linked quarter. Loan growth over the related quarter was seen in each of their three major lending segments: multifamily (+23% Q/Q), commercial real estate (+11% Q/Q) and residential mortgages (+2% T/T). Each of these loan categories represents >25% of their calendar 2Q22 loan portfolio composition. Our conversations with management lead us to believe that Hannover will benefit from a strong pipeline in 3Q22. We think residential mortgages could see better growth than other lending categories as they seek to further diversify the balance sheet.

In Fitzgibbon’s view, this warrants an overweight (buy) rating, and his price target, set at $26, suggests a 30% margin of appreciation in the stock over the coming year. (To see Fitzgibbon’s track record, Click here.)

Although there are only 2 recent reviews of this new bank holding company, they both agree that this is a buy, making the moderate buy rating unanimous. HNVR shares are priced at $20.01 while the mid price target of $25.75 is almost identical to Fitzgibbon’s target. (See Hanover Bancorp’s stock forecast on TipRanks.)

To find great stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.

Disclaimer: The opinions expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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