Just when it looked like the market might get a much–needed bump, stocks delivered an upset. On April 2, U.S. stock futures indicated the market was set to kick off the day’s trading session in the green, but everything changed when new U.S. unemployment data was released, with stocks ending the week back in the red.
According to the Labor Department report, more than six million people filed for unemployment benefits the week of March 27, notching a dubious new record. Based on estimates from economists, an additional four to five million people filed jobless claims thanks to COVID-19 driven business shutdowns.
Given this tumultuous economic climate, it’s no wonder some investors are fearful. That said, to those Wall Street observers with a higher risk tolerance, there’s a silver lining to the coronavirus-induced sell-off. Citing penny stocks in particular, they would argue that the recent weakness presents exciting opportunities for a fraction of what they’re worth.
There could be a very legitimate reason these tickers are trading for under $5 apiece, but should these names experience even minor share price appreciation, the percentage gains could be monstrous.
Bearing this in mind, we turned to TipRanks’ database to find seven penny stocks the analyst community believes are undervalued:
- Geron Corporation (NASDAQ:GERN)
- Rockwell Medical, Inc. (NASDAQ:RMTI)
- Orbcomm, Inc. (NASDAQ:ORBC)
- Selecta Biosciences, Inc. (NASDAQ:SELB)
- Everi Holdings Inc. (NYSE:EVRI)
- Menlo Therapeutics Inc. (NASDAQ:MNLO)
- Plug Power Inc. (NASDAQ:PLUG)
The cherry on top? Each of these names could see huge gains in the next twelve months.
Committed to developing its first-in-class telomerase inhibitor, imetelstat, hematologic myeloid malignancies, Geron believes this compound might be able to spur disease-modifying activity through the suppression of malignant progenitor cell clone proliferation, which allows potential recovery of normal hematopoiesis. While shares have taken a hit year-to-date, at $1.07, several analysts believe the price tag represents a unique buying opportunity.
Part of the excitement surrounding this name is related to IMerge, its Phase 3 clinical trial to evaluate imetelstat in lower-risk myelodysplastic syndrome (LR-MDS). Unlike the broader market, COVID-19 has had a minimal impact on GERN, with the trial remaining on track.
Expounding on this, H.C. Wainwright analyst Vernon Bernardino commented, “With 63% of study sites open for enrollment as of the end of February 2020, we believe any potential slowdown in IMerge enrollment related to COVID-19 is manageable and likely temporary, as hematologists have high interest in participating in the study.”
On top of this, Bernardino points out imetelstat has already received FDA Fast Track Designation for use in patients with intermediate-2 or high-risk myelofibrosis (MF) whose disease has relapsed after, or is refractory to, Janus kinase (JAK) inhibitor treatment. As there aren’t any available treatments for relapsed/refractory MF, there is a significant opportunity for GERN.
With GERN set to expand imetelstat’s clinical development program by the end of the calendar year, the deal is sealed for Bernardino. To this end, the four-star analyst reiterated a “Buy” recommendation and $4 price target, implying 267% upside potential.
Turning now to the rest of the Street, other analysts are on the same page. Based on 100% Street support, the message is clear: GERN is a “Strong Buy.”
Rockwell Medical (RMTI)
Rockwell Medical manufactures pharmaceutical products and high-quality hemodialysis concentrates and dialysates to help improve the outcomes of patients with anemia, specifically focusing on end-stage renal disease (ESRD). While it’s true that shares have seen better days, the share price lands at $1.90 currently, one analyst remains confident in its long-term growth prospects.
Writing for Piper Sandler, analyst Christopher Raymond points out that in line with his expectations, the FDA gave RMTI’s Triferic AVNU, the intravenously-administered formulation of Triferic, the go ahead.
Even though it could take some time before sales from IV contribute to overall revenue, Raymond thinks Triferic IV will eventually account for more than 70% of U.S. Triferic revenue by 2025. To this end, this approval from the FDA was a key component of his bullish thesis.
In accordance with this reasoning, Raymond left an “Overweight” call on the stock. However, while the five-star analyst remains bullish, he declined to set a specific price target.
What does the rest of the Street think about RMTI’s long-term growth prospects? All of the other analysts that have thrown an opinion into the mix recently see the stock as a “Buy,” making the consensus rating a “Strong Buy.” Based on the $11 average price target, the upside potential lands at a monstrous 470%.
No matter how remote, Orbcomm offers industrial Internet of Things (IoT) and machine to machine (M2M) solutions that remotely track, monitor as well as control fixed and mobile assets. Like the broader market, 2020 has not been this tech company’s year, but at $2.16 apiece, several analysts warn investors not to miss out on this exciting opportunity.
After a recent call with ORBC management, this is the opinion of Northland Securities analyst Michael Latimore. The four-star analyst writes that the company expects to see stable services revenue based on the fact that its products and services track refrigerated trucks and containers that carry 60% of the world’s food supply. Amid the worsening COVID-19 pandemic, there’s clearly a high demand from grocery stores.
Expounding on this, Latimore stated, “This doesn’t lead to incremental revenue immediately, but further reinforces the value of the customer activity and recurring nature of that business. ORBC’s customers are likely to be healthier coming out of this period too. ORBC sees Carrier and Kroger continuing to roll out, and the 3G retrofit opportunity is visible.”
It should be noted that COVID-19 could take a toll on new business, but Latimore already factored this possibility into the equation. Additionally, ORBC’s current inventory should last four months and the current macro climate hasn’t hampered its hardware segment.
It follows, then, that Latimore reiterated a “Buy” recommendation and $6 price target. Should this target be met, a twelve-month gain of 175% could be in the cards.
All in all, other analysts mirror Latimore’s sentiment. With 100% Street support, or three “Buy” ratings to be exact, the consensus is unanimous: ORBC is a “Strong Buy.
At $7.17, the average price target puts the upside potential at 229%.
Selecta Biosciences (SELB)
With its ImmTOR technology making the full potential of biologic therapies accessible, Selecta Biosciences is breaking down barriers when it comes to immunogenicity. Even though its share price has fallen to $2, this could be the ideal time to get in on the action before this name takes off.
Weighing in on the healthcare company for Cantor Fitzgerald, analyst Elaina Merle has high hopes, specifically when it comes to the COMPARE study outcome. To back up this assumption, the analyst highlights the fact that SEL-212 is well positioned to show superiority when compared to Horizon Therapeutics’ Krystexxa. Should there be statistical significance superiority, a 50-100% bounce could be in store.
Add to this additional optionality from gene therapy, which management thinks will enter the clinic this year in collaboration with AskBio, and the long-term growth narrative appears strong.
Given all that SELB has going for it, it should come as no surprise that Merle stayed with the bulls. Along with an “Overweight” rating, the analyst left a $10 price target on the stock, indicating 400% upside potential.
Meanwhile, the rest of the Street also likes what it’s seeing. Out of six analysts who published recent reviews, 100% were bullish. As a result, the consensus rating is a “Strong Buy.”
In addition, the $7.80 average price target implies that shares could skyrocket 290% in the next twelve months.
Everi Holdings (EVRI)
Born out of the merger of two casino industry heavyweights, Global Cash Access and Multimedia Games, Everi Holdings serves the gaming industry by providing financial technology solutions, games and intelligence solutions.
Amid the ongoing public health crisis, the gaming space has already been put through the ringer as global lockdowns commence. Having said that, one analyst believes that at $2.99, the recent weakness makes this stock a compelling move for risk-minded investors.
Macquarie’s Chad Beynon argues that EVRI’s recent fall from grace isn’t related to poor fundamentals, with the downward move being “widely disconnected”. He points out that there are multiple positives to this story including steady momentum in its gaming segment as well as its strong product pipeline and backlog.
Taking all of the above into consideration, Beynon thinks 2020 EBITDA growth will come in at 9% and free cash flow will increase by a whopping 126%. This seals the deal for the analyst. In addition to putting an “Outperform” rating on EVRI, he set the price target at $15. Given this target, shares could climb 401% higher in the coming twelve months.
EVRI’s “Strong Buy” consensus rating breaks down into four “Buys” and no “Holds” or “Sells.” Not to mention the $15.25 average price target implies a possible twelve-month gain in the shape of 403%.
Menlo Therapeutics (MNLO)
After merging with Foamix Pharmaceuticals, Menlo Therapeutics has become one of the top biopharma players serving patients in the dermatology space. Since the start of 2020, shares are trading 44% lower. Having said that, now going for $1.37 apiece, some members of the Street see the recent opportunity that risk-tolerant investors should capitalize on.
H.C. Wainwright’s Oren Livnat is one such Wall Street pro. After the company reported full year 2019 Foamix results, the analyst sees several near-term catalysts in store. These include crucial serlopitant Phase 3 data in prurigo nodularis (PN), a continued prescription ramp for AMZEEQ, June 2 approval of FMX103, its topical minocycline for rosacea and Phase 2 acne data for FCD105, its topical minocycline adapalene combination.
That being said, there is somewhat of a dark cloud hanging over MNLO. Livnat thinks investor skepticism around selopitant’s probability of success after the Phase 2 failure in chronic pruritus of unknown origin (CPUO) has been built into the low share price.
Expounding on this, Livnat commented, “While the CPUO failure gave us pause, we remain optimistic for serlo Phase 3 success given: (1) a prior Phase 2 specifically in PN already worked, which should be more relevant than the Phase 2 failure in a less-characterized CPUO population; (2) the CPUO Phase 2 had similar drug-arm efficacy as prior positive serlo studies, and it was an outlier placebo response that undid it. We believe PN patient’s persistent itch and lesion-related itch-scratch feedback loop make them less susceptible to placebo response; and (3) the PN Phase 2 efficacy was still widening at week-8 and Phase 3 is 10 weeks and powered for a smaller effect-size.”
In line with his optimistic take, Livnat stayed with the bulls. Along with a “Buy” recommendation, he did, however, reduce the price target by $1.
At $8, the new target still brings the upside potential to 484%.
Plug Power (PLUG)
Last but not least we have Plug Power, which designs and manufactures hydrogen fuel cell systems that replace conventional batteries in equipment and vehicles powered by electricity. In stark contrast to the rest of the market, this stock is in the green year-to-date, up 6% since the start of 2020, but still offers an affordable entry point at $3.60 per share.
That said, Oppenheimer analyst Colin Rusch believes that the company still has plenty of fuel left in the tank. He notes that PLUG has made significant strides in its efforts to achieve its 5-year target model.
As a result, Rusch said, “… we now take a longer-term view of the business given its sturdier balance sheet and visibility to growth. Given material handling demand expanding, last and middle mile delivery vehicle projects underway, and potential leverage of hydrogen infrastructure, we believe PLUG will begin to enjoy increasingly attractive cost of capital as lenders better understand its financial strength and growth prospects.”
On top of this, its shift to next-generation stack technology along with scale benefit should lead to significant margin expansion. With the company also pushing hydrogen fuel costs even lower, margins are in especially good shape.
It makes sense, then, that Rusch not only kept an “Outperform” rating on the stock, but also bumped up the price target from $3 to $6. This implies shares could climb 67% higher in the next year.
Out of seven analysts that have published a recent review, six see PLUG as a “Buy”, making the consensus rating a “Strong Buy”.
TipRanks offers investors the latest insight into eight different sectors by tracking the activity of over 5,000 Wall Street analysts. As of this writing, Maya Sasson did not hold a position in any of the aforementioned securities.