2 “strong buy” stocks that are too cheap to ignore

By | September 19, 2023

The stock market is regularly influenced by broader macroeconomic developments, but that only paints part of the picture. While overall market conditions can push any stock lower, when you zoom in, you’ll find that each stock writes its own story, with its own reasons for the ups and downs, and savvy investors will make sure to do the basic research, learning about it. idiosyncratic reasons, before buying.

Recognizing this, we turned to some recommendations from Wall Street analysts for guidance on two stocks that are down, but not down. Each has posted steep losses this year, for one reason or another, but it appears that some analysts believe these stocks are now too cheap to ignore, as they see them offering investors triple-digit upside potential compared to their current trading price.

Furthermore, there is a widespread opinion on Wall Street that these values ​​are worth leaning on; according to the TipRanks database, both are also rated Strong Buys by analyst consensus with many bullish forecasts. Here are the details.

Aerovatic therapy (AVTE)

First on our list is Aerovate, a clinical-stage biopharmaceutical company focused on improving treatments for rare cardiopulmonary diseases. The company is currently working with existing cancer drug imatinib as a treatment for pulmonary arterial hypertension (PAH), which is severely elevated blood pressure in the lungs caused by blockages of small arteries. The drug has been used in patients as an orally administered treatment; as an innovation, Aerovate is working with imatinib as a dry powder inhalant. Although PAH is a rare condition, there is a significant patient base, with more than 70,000 people affected by the disease in the United States and Europe.

The company’s approach offers two key advantages over standard oral formulations for treating lung conditions. First, imatinib is known to have systemic side effects and even potential toxicity. The inhalation approach, sending the drug directly into the lung’s area of ​​action, minimizes these potential problems. Second, using the inhalant dosing approach, Aerovate gets a higher dose to the affected areas of the lung much faster than a pill could manage. As a result, the patient can start on a lower dose, which goes back to the first issue, which is to minimize adverse side effects.

AV-101, Aerovate’s lead product, is a self-administered dry powder inhalant currently being investigated in the IMPAHCT study, a global Phase 2b/3 study in the treatment of PAH. The company reports continued progress in the study, which has more than 110 clinical sites in more than 20 countries, with the activation of additional clinical sites planned. Aerovate expects to release topline data from the Phase 2b component of the IMPAHCT study during 2Q24.

We should note that Aerovate is a pre-revenue, research-focused company with high overhead and steady quarterly losses. Such biotech stocks without short-term catalysts can be volatile, and AVTE stock, for example, is down 54% this year.

The company also uses the sale of ATM shares (at the market) as a way of raising funds. In the second quarter of 2023, the company sold $45 million worth of shares. As of June 30 of this year, Aerovate reported having $150.1 million in cash and other liquid assets on hand and claims sufficient liquidity to maintain operations through 2026.

For Guggenheim analyst Vamil Divan, the key point here is the high commercialization potential of the AV-101. He writes about Aerovate and its lead product: “We remain optimistic about the clinical and commercial potential of AV-101, as the company works to leverage the efficacy of oral imatinib with a more targeted delivery approach directly to the lungs that should reduce systemic toxicities to a minimum. We believe that AV-101 has a significant role as an adjunct to current PAH treatment options and believe that the mechanism of action of AV-101 should allow its use in combination with MRK’s sotatercept or in patients who progress or do not tolerate sotatercept .”

Looking ahead, Divan gives AVTE shares a Buy rating and his $36 price target implies a high one-year upside potential of 168%. (To see Divan’s track record, Click here.)

Guggenheim’s view on this stock is not anomalous, as demonstrated by the unanimous Strong Buy consensus rating, based on 5 positive analyst reviews on file. The shares are trading at $13.45 and their average price target of $33.25 points towards a 12-month gain of 147%. (See Aerovate stock forecasts.)

Biotechnology Vir (VIR)

Next up is Vir Biotechnology, an immunology-focused pharmaceutical researcher working on ways to treat and prevent infectious diseases. The company’s vision is based on “a world without infectious diseases” and its development program is wide-ranging, targeting viral infections such as hepatitis, influenza and HIV. Vir has several hepatitis B candidates in the clinic, at the Phase 2 level, and is preparing to initiate a Phase 1 study for an HIV vax candidate.

The biggest news about Vir, however, concerns a failure. This is not at all unusual for a biotech researcher; There are many more pipeline programs that fail than succeed and move on to approval. In this case, Vir’s drug candidate, VIR-2482, a potential influenza vaccine, failed to meet its Phase 2 clinical trial goals. The study, called PENINSULA, was testing the drug as a preventative against influenza. ‘flu and in a July 20 data release the company announced that the drug had not met its primary or secondary efficacy endpoints. VIR shares fell 45% on the news. Since the beginning of the year, the stock has fallen 62%.

While the -2482 program suffered a major setback, the company’s hepatitis and HIV programs remain on track. VIR has two hepatitis B drug candidates in multiple ongoing clinical trials. The goal is to develop a functional cure for chronic hepatitis B. Data readouts from these studies are expected in 4Q23 and 1H24.

In the HIV program, Vir’s Phase 1 study of VIR-1388, a new T-cell vaccine intended as a preventative against HIV, will begin dosing during this third quarter of ’23.

These upcoming catalysts underlie Leerink Partners’ Roanna Ruiz’s optimistic view on the stock. The analyst writes: “With multiple programs in the clinic (HBV, HDV and HIV), Vir could become a leading infectious disease biopharmaceutical company with a management team experienced in infectious diseases, drug development and commercialization; Additionally, their liquidity of approximately $1.9 billion provides ample support for Vir’s multiple clinical development efforts without the need for near-term capital raises.”

Ruiz continues to rate this stock an Outperform (to Buy), with a $24 price target that implies a robust upside of 149% over the next 12 months. (To see Ruiz’s resume, Click here.)

This company has garnered 8 recent analyst reviews, including 6 Buys versus 2 Holds, supporting its Strong Buy analyst consensus rating. The average price target of $36 suggests a powerful 274% gain over the next year, from the current trading price of $9.63. (See Vir Biotechnology stock forecasts.)

To find good ideas for stocks trading at attractive valuations, visit TipRanks Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ stock insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. 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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