The bull market is back in full swing and the Dow Jones Industrial Average (DJIA) and S&P 500 are effectively right at all-time highs again. Even during the October panic pullback, investors proved over and over that they would buy quality stocks that went on sale or that were overlooked. This has driven investors to look for value in stocks and sectors that they may have overlooked. 24/7 Wall St. reviews dozens of analyst calls each morning of the week, which comes to hundreds of analyst reports each week, and it turns out that some of these analyst calls for big upside are in small-cap or low-priced shares trading under $10.
Now that earnings season has started to dwindle, investors are trying to find stocks they overlooked for value and upside. We tracked seven analyst stock calls with big implied upside in the past week. There were other calls in the sub-$10 category, but some calls were simply too speculative or the companies were having other trouble.
Investors should take extra precaution when looking at small-cap and low-priced stocks to buy. These are almost invariably far less covered by key analysts than DJIA and S&P 500 stocks. These almost unilaterally have far more risk as well, to the extent that some of these companies could even fail. These stocks under $10 almost never pass the classic “widows and orphans” suitability test.
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All warnings and caveats considered, investors often love to flock to stocks under $10 because they think there is more potential upside in low-priced and small-cap stocks than in established companies worth billions and with high share prices. This belief is often mistaken or seriously misguided, but that is still how some investors treat stocks.
These are this past week’s top seven analyst calls with share prices under $10.
Zynga Inc. (NASDAQ: ZNGA) was raised to Buy from Hold and the price target was set at $4.50 at Jefferies on Tuesday. This compared to a prior closing price of $2.48, but the stock was up at $2.77 on Friday after a late-day recovery. Zynga’s consensus analyst price target is $3.32 and its 52-week trading range is $2.20 to $5.89.
Groupon Inc. (NASDAQ: GRPN) was reiterated Buy and with a $12 price target at Sterne Agee on Wednesday after the deals site’s first investor day showed slightly higher guidance. Investors should know other “far less bullish” and cautious calls were made this week by analysts. The closing price before this Sterne Agee call was $7.88, and Groupon shares ended the week at $7.85. The consensus analyst target for Groupon is only $8.10.
Genworth Financial Inc. (NYSE: GNW) was raised to Outperform from Market Perform at Raymond James on Thursday, but this is also after shares were cut in half from their 52-week high, and downgrades had been seen this week as well. Raymond James assigned a $12.50 price target, versus a prior closing price of $8.80, and shares were slightly higher at $9.23 on Friday, despite Friday being a soft day for the stock. Genworth’s consensus analyst price target is just over $13.
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Boulder Brands Inc. (NASDAQ: BDBD) saw its rating raised to Overweight from Neutral by Piper Jaffray this past Monday. The price target was lifted to $13 from $11 in the call, and the stock had settled at $8.76 on the previous close. Still, shares were up another $1 this week, and the mid-Friday share price was $9.70. This is the key stock at the middle of the gluten-free food debate, which makes it a cult stock galore. Boulder Brands has a 52-week trading range of $7.77 to $18.46.
GSV Capital Corp. (NASDAQ: GSVC) was reiterated as a Buy at Barrington Research late in the week. This stock was at $9.75 on Friday, but that leaves a whopping 100% upside and then some change on top of that to the $20.00 price target the firm gave on the stock. The consensus analyst target price is $16.60. As a reminder, GSV is the firm that owns so many pre-IPO and public shares stakes from private investments, such as Bloom Energy, Chegg, Dropbox, Gilt, Spotify, TrueCar, Twitter and many more.
Neostem Inc. (NASDAQ: NBS) is one that we would be cautious about as shares could accelerate up or get crushed because the company has data presentations on drug studies this coming week. With that caveat and risks disclosed, Maxim Group started coverage with a Buy rating and $15 price target — some 150% higher than the $6.17 Friday price. This stock also traded almost 1.1 million shares for a five-times volume spike, and the stock has a 52-week range of $4.56 to $8.29.
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Yamana Gold Inc. (NYSE: AUY) was raised to Overweight from Neutral at HSBC on Tuesday. That being said, CIBC downgraded Yamana on Friday and RBC Capital markets downgraded Yamana on Wednesday, so not all analysts share the enthusiasm. A late week pop in gold had Yamana shares up 6% at $3.87 by Friday’s close, against a 52-week range of $3.45 to $10.72. Yamana has a consensus price target of $7.61 and this stock enjoyed a period when it traded above $15 for parts of 2011 to 2013.
In case you missed Friday’s top analyst upgrades, downgrades and initiations from 24/7 Wall St., they included Harley-Davidson, Lululemon Athletica, Nike, SunPower, Walmart and about a dozen more.
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