Since June 8, stocks have been moving, but they’ve been going in a sideways direction. While this movement combined with low expectations for Q2 earnings is concerning, one Wall Street pro believes this stock-market action will get “resolved to the upside.” What’s behind his bullish thesis? Unprecedented levels of credit and liquidity.
Canaccord chief market strategist Tony Dwyer wrote, “Over the past week, the economic data continued to surpass expectations at a historic rate, there was further indication of a broad recovery in the global economy, and excess liquidity that has supported financial assets surged to an even more historic level.” All of this comes as the rate of new COVID-19 cases spikes and Democratic presidential nominee Joe Biden leads in the polls, which has “kept the markets in a consolidation pattern.”
Further supporting his optimism, Dwyer cites the recent positive economic data, evidence that “real liquidity” has notched an all-time high as well as signs that the global economy is bouncing back.
To this end, risk-tolerant investors are looking for compelling names that won’t break the bank, namely penny stocks. These tickers going for less than $5 apiece have earned a reputation for their risky nature, so we narrowed our search to include only those scoring Wall Street’s stamp of approval.
Using TipRanks’ database, we pulled three penny stocks that have earned a “Strong Buy” consensus rating from the analyst community. Not to mention each offers up massive upside potential and could climb to $10, or even more.
Checkpoint Therapeutics (CKPT)
Founded by Fortress Biotech, Checkpoint Therapeutics focuses on the development of cutting-edge therapies to improve the lives of patients battling solid tumor cancers. After a recent regulatory win for its peer, several members of the Street believe that its $1.65 share price presents investors with an opportunity to get in on the action.
On June 24, it was announced that Merck’s Keytruda product had been approved for the treatment of patients with recurrent or metastatic cutaneous squamous cell carcinoma (cSCC) that is not curable through surgery or radiation.
What does all of this mean for CKPT’s asset, Cosibelimab? According to 5-star Ladenburg analyst Wangzhi Li, two positives come from this regulatory win. The first is that it validates “the regulatory path of Cosibelimab's ongoing single arm pivotal trial in cSCC with similar design to those of Libtayo and Keytruda.” As for the second, the development reduces the ORR bar for approval in cSCC and the clinical risk for Cosibelimab’s pivotal trial given that the therapy has produced an interim ORR of 50% from its ongoing Phase 1 trial.
If that wasn’t enough, so far, Cosibelimab has shown a more robust safety profile. To this end, Li tells clients he is optimistic ahead of the company’s data update later this summer from the ongoing pivotal trial and the completion of enrollment for the pivotal trial around YE2020.
“Thus, we see low regulatory and clinical risks now for potential approval of Cosibelimab in cSCC in 1H2022... With an estimated 7,000 deaths per year in the U.S., mCSCC presents a significant $1 billion-plus market opportunity. CKPT plans to grab market share for Cosibelimab through substantially lower pricing, for which big biopharma companies could be difficult and unwilling to match such competitive pricing in a small indication like cSCC which could lead to substantial loss for their big franchise revenue in many other larger indications such as NSCLC,” Li commented.
To this end, Li rates CKPT a Buy rating along with a $20 price target. This puts the upside potential at a massive 1,115%. (To watch Li’s track record, click here)
Judging by the consensus breakdown, other analysts also like what they’re seeing. 3 Buys and no Holds or Sells add up to a Strong Buy consensus rating. Based on the $14.33 average price target, the upside potential comes in at 773%. (See CKPT stock analysis on TipRanks)
Optinose Inc. (OPTN)
Moving right along, we come across Optinose, which wants to provide better treatments for ear, nose and throat (ENT) diseases and allergies. Based on its strong growth prospects and $4.60 share price, Wall Street focus has locked in on this healthcare name.
Representing Cowen, analyst Ken Cacciatore tells clients that OPTN has “regained its footing.” It has done this through its impressive virtual marketing program, which has led to a “nice reacceleration of Xhance Rxs," and a co-promotion deal with kaléo.
As per the terms of the agreement, kaléo will use its 100-person salesforce that is primarily focused on allergy specialists to promote Xhance to approximately 6,000 clinicians, half of which are outside of Optinose's current prescriber base, increasing the reach by 30%.
At the moment, the company’s salesforce targets nearly 10,000 prescribers, split evenly between ENT and allergy specialists, with the goal of eventually targeting about 15,000 ENT/allergy specialists that treat 85% of the 3.5 million chronic rhinosinusitis patients who seek care. “We believe this partnership will efficiently expand Optinose's promotional reach for what we understand to be relatively inexpensive economics,” Cacciatore said.
Going back to the Q2 Xhance prescription rates, momentum is ramping up, with the total estimated Rxs increasing by 15%-plus quarter-over-quarter. Cacciatore added, “With what should be improving pricing/discounting from the seasonally low Q1, we anticipate that Optinose will likely meet, or modestly beat, our (and the Street's) $10 million Q2 sales estimate.”
Offering additional explanation for his bullish stance, Cacciatore commented, “[With] managed care coverage now at 75-80%, as well as a still steady increase in clinician adoption, we believe that management might soon be in a position to get more aggressive and initiate a broader DTC program... We believe this agreement with kaléo will further accelerate the progress we have been observing, and although we clearly still anticipate sales for the balance of the year to be below our original expectations pre-COVID-19, we do expect a nice reacceleration in 2021. If our expectations prove anywhere near accurate, at the current valuation, we believe the risk/reward remains compelling.”
With everything that OPTN has going for it, it makes sense why Cacciatore left an Outperform rating and $20 price target on the stock. Should the target be met, a twelve-month gain in the shape of a whopping 335% could be in store. (To watch Cacciatore’s track record, click here)
Do other analysts agree with Cacciatore? They do. Only Buy ratings, 4, in fact, have been issued in the last three months, so the consensus rating is a Strong Buy. At $18.50, the average price target implies shares could climb 302% higher in the next year. (See Optinose stock analysis on TipRanks)
Allena Pharmaceuticals (ALNA)
Hoping to address the unmet needs of patients with rare and severe metabolic disorders that affect the kidney, Allena Pharmaceuticals develops innovative, oral enzyme therapeutics. Combine its positioning for success with its $1.42 share price, and you get a thumbs up from the analyst community.
Writing for H.C. Wainwright, five-star analyst Edward White cites its reloxaliase therapy as a major component of his bullish thesis. The candidate is an orally administered enzyme designed for the treatment of enteric hyperoxaluria (EH), with it currently being evaluated in the Phase 3 URIROX-2 study, which followed up the Phase 3 URIROX-1 trial.
“We are unaware of any other companies that trade at a market cap of under $50 million that are in the second of two Phase 3 studies that could lead to an FDA filing in 2022,” White commented.
Speaking to the market opportunity, the size of the EH population in the U.S. lands at about 250,000 people. In addition, during the URIROX-1 trial, reloxaliase was able to generate a statistically significant reduction in urate oxalate (UOx), with it also shown to be well-tolerated.
As a result, White has high hopes ahead of the URIROX-2 trial. The trial will feature an identical primary endpoint to URIROX-1, with it also using common enrollment criteria. He expects the product to launch at the end of 2023, with sales landing at $18 million in 2023 and $350 million in 2028.
To this end, White rates ALNA a Buy along with a $10 price target. Shares could appreciate by 604%, should the analyst’s thesis play out in the coming months. (To watch White’s track record, click here)
Overall, the bulls have it on this one. Out of 5 total reviews published in the last three months, all 5 analysts rated the stock a Buy. Given the $11.80 average price target, shares could soar 731% in the next twelve months. (See ALNA stock analysis on TipRanks)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.