The bull market is now more than nine years old. Many investors have begun looking for new ideas and new strategies to generate income and gains, and the old strategy of buying every major market selling day has become less rewarding in 2018 versus the prior few years. It turns out that Wall Street brokerages and research shops still have many stock picks for big upside.
24/7 Wall St. reviews dozens of analyst upgrades, downgrades, and initiations each day of the week. This ends up being hundreds of analyst calls each week. Most Dow or S&P 500 stocks getting traditional analyst coverage are assigned total upside of 8% to 10% on average at this stage of the bull market.
It turns out that the biotech and biohealth sector within health care are receiving analyst coverage where the analyst is calling for upside of 50%, 100%, 200% and some even come with 300% upside price targets. There are of course zero assurances that these upside targets will ever be reached. Some of the companies are even likely to flop and hurt investors due to not living up to expectations.
Investors need to understand that biotech and biohealth stocks are almost always riskier than traditional Dow and S&P 500 stocks. After all, one bit of news on one drug candidate can make or break a company. That means the outcome is likely to lead to a boom or bust for speculators and investors. And it also means that conservative investors, retirees, funds for widows and orphans and risk-averse investors need to look elsewhere besides speculative biotech and biohealth analyst stock picks. Some of these companies even have the risk that they might not exist if circumstances don’t go their way.
Here are six biotech and biohealth stocks where one or more analyst has called for upside of 50% to 300% in speculative stocks during the middle of July.
Eidos Therapeutics Inc. (NASDAQ: EIDX) was started with an Overweight rating and a $32 price target at Barclays on July 16. JPMorgan also started the company at Overweight with a $36 target. The company had an IPO in late June, and shares have traded between $18.10 and $24.75 since pricing. The stock closed Friday at $20.77. Despite a 1% drop on Friday, it closed at $21.28 for a higher price later in the week. Eidos Therapeutics is focused on developing drugs to treat diseases caused by transthyretin (TTR) amyloidosis (ATTR), and its AG10 is an orally-administered small molecule designed to stabilize tetrameric TTR.
Innovative BioPharma Inc. (NASDAQ: INNT) was started with a Buy rating and assigned a $35 price target (versus an $8.08 close) at H.C. Wainwright on July 17. That represents some 300%-plus upside, but this stock was battered this last week. Innovate Bio develops medicines for autoimmune and inflammatory diseases. Its lead product candidate is INN-202, which has completed Phase 2b clinical trials and is targeting the treatment of celiac disease. Innovate Bio is worth only about $160 million and closed down at $6.08 on Friday due to pressure from a capital raise.
Galmed Pharmaceuticals Ltd. (NASDAQ: GLMD) was started as Outperform with a $26 price target at Raymond James on July 20, and that was versus a previous $15.02 closing price. A week earlier, on June 13, Stifel Nicolaus initiated Galmed with a Buy rating and issued a $35 price target that would imply more than 100% upside. Galmed has been quite volatile as its 52-week range is listed at $3.61 to $27.06. It had a $322 million market cap as of Friday. Galmed, which focuses on diseases and issues targeting the liver, closed at $15.00 on Friday. Its lead product candidate is RA101495, an injection into the tissue under the skin that has completed Phase II clinical trial for the treatment of paroxysmal nocturnal hemoglobinuria.
Magenta Therapeutics, Inc. (NASDAQ: MGTA) started as Outperform at Wedbush Securities on July 16, and the $22 target price implied upside of 64% at the time. Magenta Pharma shares closed up almost 6% at $15.00 on Friday and Wedbush is calling for a win here based upon a rosier picture for stem cell transplants. The firm sees Magenta’s wholly owned pipeline as having multiple shots on goal in an area largely overlooked by drug developers.
Ra Pharmaceuticals, Inc. (NASDAQ: RARX) was given a relook by BMO Capital Markets. Ra was started at Outperform and was assigned a $20 price target at BMO Capital Markets. Back in March, BMO Capital Markets had a $31 target, so investors need to consider this in the mix. Ra closed up 2% at $11.17 on Friday, versus a 52-week range of $4.78 to $17.90. Its market cap is $360 million.
Syndax Pharmaceuticals Inc. (NASDAQ: SNDX) was started with a Buy rating and assigned a $30 price target at H.C. Wainwright on July 12. This is a small $175 million market cap company at the time of the call, but the price target in this call was about 300% higher than the $7.10 closing price. Syndax has a 52-week range of $6.61 to $15.20, and its most recent closing price was $7.49. The cancer pipeline has been the focus for such large upside here, and at one point one analyst was pointing to Syndax rallying to as high as $40.