Many investors are looking for where to put their money now that the Dow Jones Industrial Average has hit 18,000. What has been proven time and again in 2014 is that investors will buy value stocks and overlooked stocks on any serious pullback. That sets a climate ripe for stock pickers, and many investors just love to look at small cap or low-priced stocks trading at or under the $10 mark.
24/7 Wall St. reviews dozens of analyst research reports each morning of the week to find new investing and trading ideas for its readers. It turns out that some of the so-called stocks to buy in the ratings reviews have low share prices, near or under the $10 price handle. With last week being a Christmas shortened one, we should have expected very few analyst reports. It was more than surprising that we tracked 13 analyst calls with huge implied upside in stocks under or just above the $10 mark.
Investors must take extra precautions with low-priced stocks, particularly if they are small-cap or micro-cap stocks. Many of the companies do not have stock options that allow investors to hedge their positions, and that makes them generally in the highly speculative class of stocks. Some could even fail if the analysts are wrong — and we often see that analysts are very wrong. These low-priced stocks almost never pass the classic “widows and orphans” suitability test.
Some investors believe that there is more potential upside in low-priced and small cap stocks than in established companies worth billions of dollars that have much higher share prices. That belief is often very misguided, but that is still how some investors view stocks. These are the 13 analyst calls in stocks trading around $10 with big analyst calls this past week.
BlackBerry Ltd. (NASDAQ: BBRY) may be above $10 currently, but TD Securities raised its rating to Buy from Hold with a $13 price target. The closing price based on the call was $9.99. BlackBerry’s earnings report showed that this remains a battleground stock. Still, it is hard to find many BlackBerry bulls on Wall Street.
Groupon Inc. (NASDAQ: GRPN) may have a slightly lowered price target, from $11 down to $10 at Brean Capital, but the firm did maintain its Buy rating. That price target also implied more than 20% upside in the stock. With a 52-week range of $5.18 to $12.42, and a share price north of $8, we will let readers decide if 20% is enough upside to offset risk in what has been a very disappointing stock.
ImmunoGen Inc. (NASDAQ: IMGN) has had a very hard 2014, but a call from RBC Capital Markets leaves a bit of controversy. The firm maintained its Outperform rating, but it cut the price target sharply — to $11 from $18. This still represents close to a double-your-money call if the firm is right based, on a $5.65 trading price ahead of Christmas. Here is why: ImmunoGen appointed Richard Gregory as its chief scientific officer, and he was most recently head of research for the Sanofi Genzyme Research & Development Center.
Key Energy Services Inc. (NYSE: KEG) is a very speculative rig-based contractor, and lower oil prices have mauled shares. Still, Iberia Capital was reported as having raised the rating to Outperform from Market Perform on Monday. The stock had previously traded down at $1.74, and the $3.50 price target would imply a double-your-money call if it proves to be correct. One thing to note here is that the company is losing money, and analysts expect it to lose more money for at least this year and next.
Rite Aid Corp. (NYSE: RAD) delivered a serious victory on earnings recently. Cowen took notice that the turnaround may be regaining steam. The firm raised Rite Aid to Outperform from Neutral, simultaneously raising its price target to $8.50 from $6. Rite Aid shares were at $6.77 prior to the call, but the stock was at $7.41 by the end of the week.