Stocks went out on a positive note again this past week, will within striking distance of all-time highs. The Nasdaq even managed to hold above 5,000 again, closing above the old resistance level for 10 of the past 13 sessions. With Wall Street analysts and strategists calling for even more upside from stocks after a six-year bull market, investors are looking for value or companies that have been undiscovered or overlooked by the rest of the pack.
24/7 Wall St. reviews dozens of analyst reports each day to find new trading and investing ideas for its readers. While many of the analyst calls cover stocks to buy, the weekend review of all analyst calls leaves many stocks under $10 in which analysts are calling for massive upside to their price targets.
Investors and traders alike need to keep in mind that low-priced and small-cap stocks almost always come with more implied risks than well-established Dow Jones Industrial Average and S&P 500 stocks. To prove the risks are great, many of the stocks under $10 have analyst targets calling for 50% or even 100% upside — and many of these companies may have all-or-none scenarios playing out. Analyst calls in Dow stocks project upside of just 10% or 20%. The higher the risk, the higher the potential reward. Again: potential.
Keep in mind that many analyst calls simply do not live up to expectations, or often the bullish side of the bull-bear case suddenly evaporates into thin air. If readers need a further reminder about the risks in small-cap and low-priced stocks: many companies in this category just fade into stagnation, some get delisted, and many even implode.
Investors should note that only four members of the S&P 500, less than 1% of the companies, have a share price that is less than $10. Of those four, only one now has a price under $9.
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These are this week’s 12 analyst stock picks trading under $10 with massive upside to the respective price targets, and one runner-up.
Cinedigm Corp. (NASDAQ: CIDM) was raised to Outperform from Neutral at Macquarie late in the week. The film distribution management company was given a $2.50 price target, with would represent nearly 200% upside if the firm is proven correct here. Keep in mind that this market cap is a mere $78 million, it recently has had a small capital raise via convertible senior notes that could greatly increase the share count, and its 52-week range is $0.77 to $3.05.
DURECT Corp. (NASDAQ: DRRX) was reiterated as Buy and the price target was raised to $3 at Cantor Fitzgerald. This was versus a $1.97 prior close, which would have meant 50% upside, but at the late-Friday price of $2.20 the implied upside for new lookers was 36%, if Cantor Fitzgerald turns out to be right. This call cited solid results and multiple catalysts ahead.
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Office Depot Inc. (NASDAQ: ODP) is now more likely to get its acquisition by Staples approved, assuming that Jefferies is accurate. The office supplies retailer was raised to Buy from Hold on Thursday at Jefferies, with an $11.50 price target. That compares to a $9.15 prior close, but shares went out at $9.32 on Friday’s closing bell. Staples was also raised to Buy from Hold with a $20 price target in the call.
Sirius XM Holdings Inc. (NASDAQ: SIRI) has now released earnings, and Merrill Lynch gave the first post-earnings call by reiterating its Buy rating and its $5.00 price objective. This compared to a $3.95 close before, and shares were at $3.92 late on Friday. Merrill Lynch analysts talked up Sirius XM’s fast growth, and several other issues: more than 70% contribution margin, a sizable capital return capacity, high EBITDA/FCF conversion, rising new car penetration, large used car market potential, and the connected car and Telematics opportunities.
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