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All Contents © 2020The Kiplinger Washington Editors
By Maya Sasson, Contributing Writer
| March 3, 2020
Cheap stocks – that is, really cheap stocks that trade for single-digit prices – are among the most divisive stocks on Wall Street.
Some investors tend to avoid these names entirely. While nominal prices typically don't matter (there's little difference between a $50 stock and a $500 stock), stocks under $10 are different. They often face some sort of difficulty, such as weak fundamentals or overwhelming headwinds. Also, institutional buyers such as pensions and hedge funds often won't buy stocks that are cheaper than $10, and they really become sparse under the $5 mark. Thus, these companies miss out on the steadiness that accompanies institutional ownership.
But other investors love cheap stocks. In many cases, they see opportunity in these often battered shares, and some people simply prefer to buy their stocks in "lots" (typically 100 shares at a time) – something that's a little more difficult to do with the triple- and quadruple-digit crowd.
The reality is, low-priced stocks are a mix of high-return opportunity but also high risk. The crazy volatility introduced by the coronavirus outbreak certainly doesn't help. Further complicating things is that many of them are largely ignored by the media, making information difficult to come by. So if you are going to take a moonshot, take a cue from the pros that routinely cover these companies.
Here are seven of the best cheap stocks under $7. Using TipRanks' Stock Screener tool, we identified seven low-priced stocks that still have decent Wall Street analyst coverage and extremely bullish sentiment. Note that every one of these stocks still comes with colossal risk. But if you're looking to get aggressive and buy cheap on dips, the pros think each of these can offer some promise.
Data is as of March 2. Stocks listed in order of potential 52-week upside based on analysts\' price targets.
Market value: $254.2 million
TipRanks consensus price target: $9.13 (55% upside potential)
TipRanks consensus rating: Strong Buy
Sportsman's Warehouse (SPWH, $5.88) is an outdoor sporting goods retailer that offers a range of products from hunting equipment to outdoor cooking essentials. It operates more than 100 stores across 25 states, mostly concentrated in the western U.S.
The market has knocked SPWH into the ranks of the truly cheap stocks in 2020, with shares off roughly 27%. Most of that came after the company released preliminary fourth-quarter results in January. Management stated that the competitive holiday shopping season and the fact that some competitors lowered prices on firearm and ammunition as they exited the space hampered sales and store traffic. That forced the company to reduce its Q4 profit guidance.
Analysts are nonetheless in the Buy camp, with three Buys versus one Hold, and a price target that implies at least 50% upside potential in the year ahead. One analyst in particular thinks the post-report selling in Sportsman's Warehouse is overdone.
Piper Sandler analyst Peter Keith believes that the weakness is indicative of a temporary issue limited to the month of December. Additionally, he argues that its long-term growth narrative, specifically related to earnings, "has potential to be quite strong" over the next couple of years. Better buying power, SPWH's omnichannel initiative and increased demand for firearms (thanks to the election) are all potential drivers, Keith writes.
Keith reiterated his Overweight rating and $11 price target following SPWH's weak guidance, implying 87% potential price upside over the next 52 weeks. See what other pros have to say about SPWH.
Market value: $445.0 million
TipRanks consensus price target: $9.43 (115% upside potential)
Inovio Pharmaceuticals (INO, $4.39) is a clinical-stage biotechnology company whose treatments target cancer and infectious diseases. The latter has thrust Inovio into the spotlight, with the company announcing on March 3 that it has an "accelerated timeline for developing its DNA vaccine INO-4800 to address COVID-19."
Inovio is familiar with coronaviruses, as the company currently is developing a vaccine, INO-4700, for Middle East Respiratory Syndrome (MERS). Inovio is now working on a preventative product to battle COVID-19, and Piper Sandler analyst Christopher Raymond (Overweight) noted in late January that the Coalition for Epidemic Preparedness Innovations had granted the company a $9 million grant to fight this new coronavirus.
At the time, while maintaining an $8 price target (82% upside from current levels), Raymond wrote that approval and stockpile order is "likely years out." However, in Inovio's March 3 statement, CEO J. Joseph Kim said, "We plan on delivering one million doses by year end with existing resources and capacity. However, we will need additional resources to scale up to make enough doses to help protect Americans from COVID-19 as well as to lead global efforts to curtail this virus."
Unlike many of the cheap stocks on this list, Inovio is doing quite well in 2020, up 33% for the year-to-date, not including additional gains from the March 3 announcement. The pros see even more upside too. Seven of seven covering analysts have issued Buy ratings on the stock over the past three months, including H.C. Wainwright's Ram Selvaraju, who on March 3 set a price target of $13 per share that would see the stock nearly triple from current levels. Discover how other analysts rate INO.
Market value: $335.9 million
TipRanks consensus price target: $9.00 (131% upside potential)
Using its ImmTOR immune tolerance platform, Selecta Biosciences (SELB, $3.89) wants to improve the lives of patients with rare diseases by preventing the body's own immune response from battling biologic therapies. Shares have roared ahead by 160% over the past three months alone, and Wall Street is looking for more gains from this biotech company.
SELB has attracted a significant amount of positive sentiment following an update on one of its clinical trials. On Dec. 19, the company announced that it had completed patient enrollment for its Phase 2 COMPARE clinical trial evaluating its lead candidate, SEL-212, for chronic refractory gout. The candidate was designed as a once-monthly dose of ImmTOR and pegadricase, which SELB believes is more effective than a bi-weekly pegloticase (the currently available uricase therapy for chronic refractory gout). Management told investors that top-line data is slated for release in mid-2020.
Mizuho Securities analyst Difei Yang writes that the reduction of financial overhang is "encouraging," and she believes current trial data points toward a greater likelihood of SEL-212's success. As a result, the analyst believes that there's a greater likelihood of SEL-212's success. She maintained a Buy rating on SELB and bumped up her price target from $4 to $7, indicating upside potential of 80%.
Cantor Fitzgerald's Elaina Merle (Overweight, equivalent of Buy) also is bullish on SEL-212's prospects of showing superiority against competitor Horizon Therapeutics' (HZNP) Krystexxa in the mid-year data readout. She writes that shares could rally 50% to 100%, though her price target of $10 represents 157% upside from SELB's price target.
Five of the five analysts that have written about Selecta over the past three months have Buy ratings on this cheap stock. On average, they see Selecta more than doubling over the next year or so. Get the full analyst consensus and price target breakdown on TipRanks.
Market value: $177.3 million
TipRanks consensus price target: $8.20 (165% upside potential)
Agile Therapeutics (AGRX, $2.54) is dedicated to meeting the medical needs of women throughout the world. On the heels of a recent FDA approval, Wall Street thinks big things are in store for the biotech.
On Feb. 14, investors got a dose of good news after the company announced that the FDA had approved its Twirla contraception patch. Twirla is a transdermal treatment designed to be worn once-a-week, and features a combined hormonal approach using 30 mcg of ethinyl estradiol (a type of estrogen) and a 120 mcg dose of levonorgestrel (a well-known progestin).
H.C. Wainwright analyst Oren Livnat views the approval as a major inflection point for AGRX shares. Even though the analyst acknowledges that the patch's "Black Box" warning (the sternest level of warning that an FDA-approved product can carry) and its contraindication for obese women has been a cause for concern among some, he remains unphased. Livnat writes that women with a BMI of over 30 were not expected to be the patch's target market, and argues that even if their total addressable market isn't included, his estimates aren't affected.
Despite the potential upside of Twirla, Agile Therapeutics has plunged even further into cheap stocks territory since approval. AGRX shares are off some 43%. Part of that is the uncertainty of Agile's ability to market and sell the product, but some of that came amid a broad selloff in biotech stocks.
But the analyst community is firmly bullish, holding five Buy ratings among five analyst notes written over the past three months – all of them coming after Twirla's approval. And several of those included price-target hikes. You can learn more about the pros' views on AGRX via TipRanks' consensus breakdown.
Market value: $110.4 million
TipRanks consensus price target: $6.65 (205% upside potential)
IMV (IMV, $2.18) is developing treatments for various types of solid tumors and hematologic cancers using DPX, an innovative delivery platform. Its lead candidate, DPX-Survivac, functions by attacking survivin, one of the most well-known tumor-associated antigens (TAAs).
BTIG analyst Thomas Shrader initiated this low-priced stock at Buy after the company presented biomarker data for DPX-Survivac at ASCO-SITC immune-oncology symposium. "These studies support IMV's hypothesis that DPX-Survivac has the potential to generate durable surviving-specific T-cell response, which subsequently leads to tumor-infiltration and anti-tumor activity in cancer patients," he writes.
Shrader is excited about the technology, which he believes is "unique in modern immunology."
"This response is as powerful as anything we have seen to date in humans and rivals the current data from neo-antigen vaccines from the GRANITE program at Gritstone that is showing clinical responses in early dosing cohorts," he writes.
A couple analysts did temper their expectations, however, following a data update from a DECIDE1 Phase 2 study of DPX-Survivac's use in patients with advanced recurrent ovarian cancer that cut shares in half.
While the treatment met its primary endpoints, Raymond James analyst David Novak (Outperform, equivalent of Buy) is worried that time to market might be longer than anticipated. "We believe the level of activity has fallen short of both our and market expectation. … There is risk to a further regression in response as the company rolls forward to a larger cohort in a potential pivotal trial," he writes.
Despite those price adjustments, IMV remains popular among analysts' cheap stocks to buy. Seven of eight analysts weighing in over the past three months deem IMV stock a Buy, and their consensus price target implies shares still will triple over the next year. Check out other analysts' price targets at TipRanks.
Market value: $116.5 million
TipRanks consensus price target: $17.00 (383% upside potential)
Aquestive Therapeutics' (AQST, $3.52) patented PharmFilm technology offers an effective drug delivery method that can be customized to meet the specific absorption, bioavailability and onset of action requirements. And following the company's preliminary fourth-quarter earnings release, in which it provided its first-time 2020 outlook, analysts remain with two feet on board.
Writing for RBC Capital, Randall Stanicky notes that while the guidance came in lower than he expected, he believes management is being conservative. Specifically, he points out that the company excluded contributions from Libervant, which will most likely go up for approval in late September, and said Parkinson's Disease treatment APL-130277 will only contribute a Q4 milestone payment.
Based on this development, Stanicky writes, "Our new estimates reflect these revisions though we see potential for numbers to move higher pending further visibility on Libervant launch timing and expectations."
"Overall, while our numbers have been revised modestly lower, our fundamental view of the story is unchanged; 2020 is set to be an inflection year with several updates that can drive the stock higher including anticipated approval of key value driver Libervant," continues Stanicky, who has an Outperform rating and $9 price target on AQST shares.
Stanicky's price target is the most conservative among analysts who have sounded off on this low-priced stock during the past three months. Three other Buy calls have included $10, $13 and even $36 targets, averaging out to a consensus PT of $17, or more than 380% upside over the next 52 weeks. Investors interested in learning more can see AQST analysis on TipRanks.
Market value: $120.0 million
TipRanks consensus price target: $21.50 (416% upside potential)
PhaseBio Pharmaceuticals (PHAS, $4.17), which develops treatments for orphan diseases (a rare disease that affects fewer than 200,000 people), has received significant attention thanks to its novel approach. Its lead candidate, PB2452, is meant to treat patients on ticagrelor (a blood thinner) that currently are experiencing bleeding or that need urgent surgery.
While shares have taken a 17% hit over the past month, some members of the Wall Street analyst community think a turnaround is on the horizon.
Stifel Nicolaus analyst Adam Walsh (Buy) is bullish on the stock, but his most recent note focused on another PhaseBio product, PB6440. Back in January, the company made a deal with Viamet Pharmaceuticals to purchase its aldosterone synthase inhibitors for treatment-resistant hypertension, including the lead candidate, which it's calling PB6440. Walsh believes the addition is an "excellent strategic fit." He points out that the FDA recently stated that there's an unmet need in treatment-resistant hypertension, and that there's a pathway to approval that doesn't need large-outcomes studies.
Like Selecta, PhaseBio has received five Buy recommendations and no Holds or Sells over the past three months, giving it a Strong Buy consensus rating. Lower prices amid the coronavirus-sparked market plunge have raised the potential upside of analysts' consensus price target to more than 400%, which is tops on this list of cheap stocks. Investors interested in learning more about PHAS can do so on TipRanks.
Maya Sasson is a content writer at TipRanks, a comprehensive investing platform that tracks more than 5,000 Wall Street analysts as well as hedge funds and insiders. You can find more of their stock insights here.