Needham makes its top stock picks to beat the market the next 6 months

Published Wed, Aug 16 202312:29 PM EDTUpdated Wed, Aug 16 20233:15 PM EDT

Several companies, ranging from under-the-radar biotech names to major software providers, could still rake in major gains this year, according to analysts from Needham. Each quarter, Needham releases its "conviction list" comprising each of the firm's favorite stocks. Analysts behind these picks expect stocks to outperform the average total return of the broader market, as well as the other securities in the analyst's coverage universe over the next six to 12 months. Investors can look to these names for some potential returns after witnessing a series of market losses this month. All three of the major indexes are down in August. The S & P 500 and Dow Jones Industrial Average have lost 3.5% and 1.8%, respectively, while the Nasdaq Composite has dipped more than 5%. On Tuesday, the S & P 500 closed below its 50-day moving average for the first time since March. For some of Needham's favorites, check out the list below: Day One Biopharmaceuticals made the cut. The clinical-stage biotech is expected to rally more than 146% by Needham. The company reported a loss of 61 cents per share for the second quarter, which was on par with analysts' expectations, according to FactSet. Analyst Ami Fadia noted that Day One's rolling submission of its pediatric brain cancer drug tovorafenib is ongoing and said she anticipates it to be completed by October. Shares are down more than 37% this year but have added about 1% in August. Database software maker MongoDB was another Needham favorite. Analysts at the firm forecast 17% upside to the stock based on Tuesday's closing price. Analyst Mike Cikos noted that during a June event, the company made several product announcements and offered insight into consumption trends of its Atlas suite of cloud-based data services. "We view Atlas Stream Processing as an incremental positive to the platform," Cikos said. "While margins were reiterated (which we expected), management highlighted (1) it has greater confidence in achieving its long-term targets; and (2) noted a focus on the 'plus' (i.e. delivering upside to stated 70%+ Non-GAAP Gross Margin and 20%+ Operating Margin)." The stock is down about 14% this month but is still up more than 80% in 2023. Analysts also highlighted telecommunications name Calix as a top play for the year, expecting more than 114% upside. The company reported a beat on second-quarter earnings in July amid negative sentiment on the sector, analyst Ryan Koontz noted. "Management acknowledged the company has successfully navigated some inventory headwinds at a few of its larger customers, which is driving slower sequential growth in 2H23," he said. Still, the analyst expects continued upside on revenue and earnings per share, driven by a strong rural fiber access market. The stock is down more than 8% in August, bringing its year-to-date decline to around 40%. Education technology company Udemy and online pet food retailer Chewy are among other names on Needham's list. — CNBC's Michael Bloom contributed reporting.