With stocks finally showing that they can drift lower again, investors and traders have been looking for opportunities to get in now that stocks have backed off all-time highs. 24/7 Wall St. reviews dozens of Wall Street analyst reports and boutique research reports each day of the week, or hundreds each week. The goal is to find new trading and investment ideas for our readers, some of which cover stocks to buy and others that cover stocks to sell.
Wall Street research reports generally call for 10%, 20% or even 30% from traditional “Buy” recommendations, but that is not necessarily true when it comes to small-cap stocks trading under $10. This sub-$10 sector gets less analyst coverage, but that coverage often calls for shares to rise by 50%, 100% or much more.
Investors looking at analyst reports in small cap and low-priced shares should take heed: These are rarely S&P 500 or DJIA equivalent calls, and the companies are generally loaded with more implied risks than are traditional DJIA and S&P 500 stocks. Calling for upside of 40%, 75% or exponential upside is far from normal expectations and is not the typical risk-reward scenario for most stocks.
A key issue to consider is that almost none of these low-priced stocks would pass the old “widows and orphans” suitability tests by almost all counts. Also, a key note should made in speculative stocks of this sort — many speculative analyst stocks do not live up to expectations, and many of them can crash and burn.
We have included a research summary of each analyst call of these top stocks under $10. Also included is a note tied to the price, value or trading range, and some color has been added on each. These were the top analyst stocks to buy under $10 seen in research calls issued this past week.
Aerohive Networks Inc. (NYSE: HIVE) has not taken off handily since its IPO, despite its cloud-managed mobile networking platform that enables enterprises to deploy a mobile-centric network-infrastructure for a mobile and remote workforces. Macquarie sees big upside, starting coverage with an Outperform rating and assigning a $10 price target. Morgan Stanley was more cautious this week with an Equal Weight rating, but that is what makes a ball game.
Callon Petroleum Co, (NYSE: CPE) was raised to Buy from Neutral at SunTrust Robinson Humphrey last Wednesday. The price target of $12.00 implied upside of 31%, but Callon was up at $9.42 mid-Friday. What was interesting about this was that Callon sold 12 million shares at $9.00 per share in a secondary offering this week as well — and SunTrust wasn’t in the offering group. Canaccord Genuity had Callon on this same list last week as well.
Good Times Restaurants Inc. (NASDAQ: GTIM) is a tiny, micro-cap restaurant chain with only 36 locations. Roth Capital Partners initiated coverage with a Buy rating this week and it assigned a $7.50 price target. This was trading at $4.00 earlier in the week and was up over 2% at $5.08 mid-Friday. This leaves almost 50% upside, and the market cap was only $38 million.