This week just brought more uncertainty with late-week selling pressure due to the Federal Reserve not having confidence to raise interest rates above zero. That being said, the markets still have largely stabilized after the panic from August, and investors have resumed their hunt for value and opportunity in the market.
24/7 Wall St. reviews dozens of analyst research reports each morning to find new trading and investing ideas for its readers. Some of these analyst calls are on stocks to buy, and some of these are in the low-priced stocks of $10.00 and under.
Investors need to understand that stocks under $10 or with a small-cap share price generally tend to have more risk than most Dow or S&P 500 stocks. Traditional “Buy” and equivalent ratings come with 8% to 15% implied upside, but in small-cap and low-priced stocks that can be far more. In some cases, the implied upside can be 25%, 35% and even over 50% to 100%.
Along with more potential rewards, there is also an automatic implied higher risk profile. Another issue to consider is that analysts sometimes live under the same assumptions as traditional investors, and they often have no more insight about a company and the developments around its peers than savvy institutional investors. And sometimes analysts are just wrong in their assumptions, or they can even have a conflict of interest due to client interests or due to investment banking relationships.
These are the nine analyst calls from this past week in stocks under $10.00 with high upside projections.
Alcoa Inc. (NYSE: AA) barely skated under the $10.00 mark, closing at $9.97 on Friday. A midweek call from Morgan Stanley reiterated an Overweight rating and a $14.00 price target. The driving force was positive views on its risk-reward profile. More specifically, recent moves by the company, its underappreciated downstream portfolio, an enhanced auto-frame move, growing aerospace revenues, a move away from being price-dependent and other factors were cited for the call. Alcoa has a $7.97 to $17.75 trading range in the past 52-weeks and a consensus price target of $13.33.
Earthlink Holdings Corp. (NASDAQ: ELNK) was started as Outperform at Northland Securities on Tuesday. The price target was set at $10.00, versus a prior closing price of $8.77. Due to the market sell-off, EarthLink shares closed at $8.08 on Friday. Its 2% dividend yield leaves close to 25% total return upside. EarthLink has a consensus price target of $9.20 and a 52-week range of $2.95 to $9.38. Here is some history and trivia for you: When was the last time EarthLink had a nominal share price of $10.00? It was only in one month of 2008 — June of 2008 to be exact — and you have to go back to 2006 before that.
Nokia Corp. (NYSE: NOK) was given a special thumbs-up rating this past Monday. Goldman Sachs already had a Buy rating, but the firm added Nokia to its prized Conviction Buy List. Nokia closed at $6.51 ahead of the call, but despite a sell-off it closed out the week at $6.60. The Finnish tech giant has a 52-week range of $5.71 to $8.73 and a consensus analyst price target of $8.94. The driving force here is the combined Alcatel-Lucent merger benefits.