Let’s take a moment to talk about opportunities, stock price, and risk/return considerations. These are some of the factors investors need to consider when investing in penny stocks – and we haven’t even touched on the fundamental strength of the company or its business model.
Penny stocks – as the name suggests, once traded for just a penny a share, but are now considered stocks trading for less than $5 – are a challenging market niche. Penny stock critics make valid points when defending their position. Sure, the price may seem like a bargain, but the fact that the shares are trading at such low levels could reflect strong headwinds or weak fundamentals.
That said, fans also offer a solid argument. Not only does the low price mean you get more stock for your money, but high returns are also on the table. Even seemingly insignificant stock price appreciation can result in colossal percentage gains that other, better-known or expensive names aren’t as likely to offer.
The nature of these investments presents a certain dilemma. How should investors separate penny stocks poised to take off on an upward trajectory from those poised to stay down?
To help with the due diligence process, we used TipRanks’ database to focus only on penny stocks that have received bullish support from the analyst community. We found two supported by enough analysts to earn a “Strong Buy” consensus rating. Not to mention, each of them offers huge upside potential and could go up to $17 or even higher.
AlloVir, Inc. (ALVR)
We’ll start with AlloVir, a clinical-stage biopharmaceutical company working on novel allogeneic virus-specific T-cell therapies (VSTs) to target a range of dangerous viral diseases with high unmet medical need. The Company’s drug candidates are developed on a proprietary platform and are designed as standard VSTs to restore patients’ immunity and act as preventive treatments or therapies.
The most advanced of AlloVir’s drug candidates has successfully completed its proof-of-concept studies and is now undergoing crucial late-stage testing against multiple viruses. The candidate, posoleucel, targets six pathogens: adenovirus (AdV), BK virus (BKV), cytomegalovirus (CMV), Epstein-Barr virus (EBV), human herpesvirus 6 (HHV-6), and JC virus (JCV) . Posoleucel is showing promise in its clinical trials and has the potential to radically transform the standard of care for organ transplant patients.
The company released positive data from the drug’s Phase 2 study in the treatment of BK disease in kidney transplant patients. This development has been complemented by continued enrollment in no fewer than three global pivotal Phase 3 studies of posoleucel, for which data is expected to be released within 2 hours. These include treatment of AdV infection, treatment of vHC (virus-associated hemorrhagic cystitis), and prevention of clinically significant AdV, BK, CMV, EBV, HHV-6, and JCV infections or disease.
Apparently, one of the company’s largest shareholders, Gilead Sciences, likes what it sees. The pharmaceutical giant made a large purchase, totaling about 2.93 million shares at the end of the second quarter. This brings Gilead’s total stake in ALVR to approximately 16.63 million shares, valued at more than $41 million at current prices.
With ALVR shares trading at $2.50, some analysts also think it’s time to pull the trigger.
Among the bulls is Jason Zemansky of Bank of America who sees several reasons to support this name. The analyst writes: “Supported by robust Phase 2 proof-of-concept data and given high unmet need, we believe lead asset posoleucel has compelling and undervalued upside potential (2030e BofA $1.5B vs. against $1.3 billion) – with three crucial studies underway that could drive a near-term revaluation (data expected mid-24)… With limited downside risk at current levels in concert with a rich catalyst of 18 months that could see AlloVir transition to a commercial stage company, we see positive risk/reward for the stock.”
In line with his bullish stance, Zemansky rates ALVR a Buy, and his $17 price target implies room for a stunning 577% upside potential over the next 12 months. (To see Zemansky’s CV, click here)
While highly bullish, this is not an outlier among analysts’ opinions on AlloVir. The stock has 4 recent positive reviews, for a unanimous Strong Buy consensus rating. The stock has an average price target of $19.75, suggesting an impressive upside potential of approximately 687% from the current share price. (See ALVR Stock Forecast)
Delcath Systems (DCTH)
The second stock we’re looking at here is Delcath Systems, a biotech company focused on interventional oncology. The company specializes in developing minimally invasive surgical treatments designed to improve the effectiveness of chemotherapies.
Delcath has developed two main products, both proprietary. The first is HEPZATO kit, designed for melphalan hydrochloride injection/hepatic delivery system. The second is CHEMOSAT, a hepatic delivery system for percutaneous hepatic perfusion of melphalan, or PHP. Both products are optimized to deliver a high dose of chemotherapy drugs directly to the liver, while controlling overall systemic exposure and side effects that may accompany a PHP procedure.
For cutting-edge biotech companies, the “Holy Grail” is regulatory approval or a positive step in that direction. Delcath has already achieved this goal, receiving FDA approval on August 15 for use of the Hepzato kit in the treatment of metastatic uveal melanoma, an eye cancer known to have metastatic involvement of the liver. This regulatory approval makes the Delcath product the only FDA-approved liver-directed therapy for this cancer.
The regulatory approval caught the attention of BTIG analyst Marie Thibault, who wrote of Delcath: “We believe the company’s percutaneous liver perfusion system offers a safe and effective treatment option for metastatic uveal melanoma ( mUM). With FDA approval in hand, we view DCTH as an attractive investment dependent on commercial execution and treatment adoption. We believe the strong clinical data from the FOCUS study can support the gradual adoption of the treatment and believe that peak annual sales in the United States could exceed $250 million. Additionally, DCTH has multiple indications in the pipeline that could offer significantly broader market opportunities in the long term.”
Quantifying his bullish stance, Thibault gives the stock a Buy rating along with a $20 price target, implying a robust upside potential of 328% on the one-year horizon. (To see Thibault’s track record, click here)
Once again, we are looking at a stock with a unanimously positive Strong Buy analyst consensus rating, based on 4 recent analyst reviews. DCTH is selling for $4.67 and its average price target of $17.75 points towards a one-year gain of 285%. (See DCTH Stock Forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity 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.