24/7 Wall St.

Stocks seem to be migrating from a tired bull market phase into a phase of volatility. It is also a phase where broad-based upside might not be an automatic assumption going forward. Many companies have seen shares rise or fall handily around earnings and other key events  of late. This brings up a climate where many investors are looking for new stock ideas, and the stocks that trade under $10 often have some incredible calls for upside when analysts get behind them.

24/7 Wall St. reviews literally hundreds of Wall Street research reports each week. We see endless calls on stocks to buy and stocks to sell, but it is in the small cap stocks and lower priced stocks where the analysts are often the most aggressive — sometimes with calls for shares to rise 50%, 100% or even exponentially.

Some caveats and common sense reminders absolutely have to be considered by investors here. These caveats and risks are far higher than in large cap stocks and S&P 500 or DJIA stocks. You almost never hear of an analyst report calling for Dow or S&P 500 stocks to rise 50% or 100%, yet you frequently do in the very speculative sector. Another consideration with small-cap stocks or those under $10 is that they would almost never pass a “widows and orphans” suitability test for investors.

These are this past week’s analyst stock picks trading under $10 with massive upside potential.

Advanced Micro Devices Inc. (NYSE: AMD) ran into trouble after earnings with a major change in sentiment, and most of what we saw in the last couple of weeks was analyst downgrades of a sort. Not Canaccord Genuity – with a Thursday note maintaining its Buy rating and its $4.50 price target. The firm had investor relations meetings and discussed near-term challenges and long-term opportunities, and they feel that the diversification strategy continues to progress.

Alcatel-Lucent SA (NYSE: ALU) was raised to Overweight from Equal Weight at Morgan Stanley back on Monday. What was interesting here about this upgrade is that it was in the week after earnings knocked the ADSs down to under $3.40 from above $3.80. These ADSs were trading at $3.31 late on Friday.

Alpha Natural Resources, Inc. (NYSE: ANR) had earnings that were far less bad than expected, and the coal stock was raised to Neutral from Sell at UBS on Thursday. While a Neutral rating is far from a Buy rating, this was a $3.37 stock a week ago and the stock was up at $3.71 on late Friday after seeing much stronger share volume this last week. The coal sector has been in the cat box for so long that any upgrade of any sort can feel like a subliminal ‘strong buy’ rating.

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Groupon Inc. (NASDAQ: GRPN) had a dismal earnings report, and we did see many analysts lower their ratings or price targets. What was interesting was that Sterne Agee maintained its Buy rating, and its $12 price target after the report. With Groupon shares down under $6, this implies that Sterne Agee still somehow thinks Groupon can double. Sterne Agee said, “While the optics of near-term results may seem mediocre to slightly disappointing, we think the progress we were hoping for in the second quarter was mostly there.”

Other key analyst calls in the stocks under $10 have been included below.

Himax Technologies, Inc. (NASDAQ: HIMX) was raised to Buy from Neutral at BofA Merrill Lynch on Tuesday. The price target was raised to $7.60 from $7.00 in the call. Earnings drove this stock higher later in the week, up to $7.25 at one point on Friday. What we would point out here is that Himax shares were at $6.41 prior to the upgrade — and Merrill Lynch even lowered earnings estimates, but said the core business is in recovery.

inContact, Inc. (NASDAQ: SAAS) received an upgrade from Oppenheimer on Thursday. The firm raised its rating to Outperform from Perform and the price target was set at $12. Shares had been at $7.68 at the prior close, but the company handily beat earnings. In fact, it closed at $9.00 on that day, and shares were up at $9.08 late in Friday’s trading session.

La Jolla Pharmaceutical Co. (NASDAQ: LJPC) is only about two weeks past a share sale, yet this last Monday brought a new call where it was started with a Buy rating at Jefferies. Shares were at $9.40 before the call, and rose to $9.85 after the call. Then shares went to a close of $10.06, but drifted lower on Wednesday and Thursday. By Friday’s trading session the stock was up over 25 at $10.20 in mid-day trading. We will leave this one up to you to decide based upon that $10 threshold violation, but this stock has literally gone all over the place in 2014.

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Merrimack Pharmaceuticals Inc. (NASDAQ: MACK) was recently featured in our own 4 Biotech Analyst Picks With 100% Upside (or More!) based upon multiple analyst views. The top bill here is the pancreatic cancer targeting. Some of the calls may not be breaking calls, but here were some of the targets cited: Brean says Buy with a $16 target; Guggenheim says Buy with a $15 target; and J.P. Morgan says Buy with a $14 target – and the consensus price target is $13.25. We had also previously disclosed that Merrimack had seen key insider buying of late.

Mueller Water Products, Inc. (NYSE: MWA) was raised on Tuesday to Buy from Hold at Brean Capital after the water infrastructure player showed improved quarterly earnings. Shares had been at $7.81 prior to the news, but the stock was up at $8.59 in Friday afternoon trading. Brean’s $10 target is even short of the $10.46 consensus price target.

POZEN Inc. (NASDAQ: POZN) was raised to Buy from Hold at Ascendiant Capital Markets on Friday morning. This pain related biotech outfit was raised after beating earnings expectations with actual earnings on Thursday. This upgrade had POZEN’s stock up over 7% at $8.05 late in Friday’s trading session.

Sypris Solutions Inc. (NASDAQ: SYPR) was raised to Buy from Hold at Needham & Co. on Wednesday. This upgrade was after earnings, and the firm assigned a $6 target. That was versus a $3.91 prior close — indicating 50% upside before the call — but Sypris shares were up at $4.30 in Friday’s trading session.

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In case you did not see Friday’s top analyst upgrades and downgrades, they included shares of Zynga, Barrick, Allergan, BioCryst, Mylan, NVIDIA and more.