7 Analyst Stocks Under $10 for Massive Upside Projections

November 6, 2016 by Jon C. Ogg

Source: Thinkstock
The week of November 4 was dominated by investors selling stocks. Despite high valuations, a Federal Reserve that wants to raise interest rates, election uncertainty and even declining earnings, the bull market still seems far from dead. Investors have found a reason to buy every major market pullback for over five years, and the bull market is now closer to being eight years old than seven, since that V-bottom in 2009.

What still stands out to 24/7 Wall St. is that investors are looking for new ideas to generate gains or income ahead. Even with the selling of late, and a nine-day losing streak, the Dow and S&P indexes are still close to their all-time highs. Small cap stocks have not held up as well, but they are where investors can still find some potentially uncovered gems and extreme value. This brings us to stocks trading under $10.

Before blindly following any analyst calls, particularly in small-cap or low-priced stocks, investors need to be very honest with themselves here. Traditional analyst upside projection of 8% to 15% in Dow and S&P 500 stocks may not sound very exciting these days. If the upside projection is too low, then it might even come with less implied upside than there is downside.

These small-cap and low-priced stocks come with many more obvious risks than large cap stocks. Unfortunately, they also come with hidden risks that investors might not think of in well-heeled stocks.

What should stand out the most is that there may even be existential risk for many small companies. Biotechs and small tech stocks can literally implode with nothing left but a goose-egg. These stocks often come with very few analysts following them, and if they are covered it may be by brokerage firms and research outfits that are far from being household names.

If you see upside projections of 35% or 50%, you might as well assume there is more risk than usual. If you see upside of 75%, 100% or even 200% ahead, then you have to know there could be an all-or-none risk profile.

Now that you have been warned about the risks, and have considered that this stock market strength is in a sell-mode, here are seven analyst picks with massive upside calls from the week ending November 4 with share prices under $10.

Array BioPharma Inc. (NASDAQ: ARRY) was started with an Outperform rating and assigned a $10 price target at Cowen on November 4. It closed down 7.7% at $5.38 close ahead of this call, but  closed up 8.9% at $5.86 on Friday. Cowen is looking past drug price rhetoric and past that the company’s 20-cent loss missed expectations. Array BioPharma has a 52-week trading range of $2.38 to $7.27 and a consensus analyst target price of $9.43.

Avon Products Inc. (NYSE: AVP) earnings missed expectations, and shares were down 4.8% at $5.94 on Friday’s close. Ahead of that call, Jefferies had reiterated its Buy and raised its price target to $8 from $7. Maybe that stays the same next week and maybe not, but Avon remains handily above its old lows. The 52-week range is $2.21 to $6.96, and the consensus target price is $5.94.

Callaway Golf Co. (NYSE: ELY) was trading at $11.03 on Friday’s close, but its prior closing price was $9.87, and it has been floating around that $10 mark of late. That means it is a $10 stock only on pullbacks in the technical sense. Jefferies reiterated its Buy rating, but a new golf club and ongoing hope for extra value is giving a conviction to raise Callaway’s target price to $16 from $14. A smaller firm called Compass Point raised its rating on Callaway to Buy from Neutral as well, but with a more conservative $11.50 target. The shares have a 52-week range of $9.77 to $11.90 and a consensus target price of $13.55.

Enphase Energy, Inc. (NASDAQ: ENPH) has experienced a slow, long bleed from its peak in recent years, but two analysts are calling for massive upside for what is barely a $1 stock price now. Enphase was raised to Outperform from Perform with a $2 price target at Oppenheimer after earnings, and Cowen had a $3 price target ahead of earnings, noting many of the same positives. The upside was almost 100% at Oppenheimer and almost 200% at Cowen, and they were covered in great detail. Shares closed at $1.17 on Friday, but its $70 million market cap and being an inverter solutions maker for solar means that only a few analysts have an opinion here. Its 52-week range is $0.98 to $4.50.

Kinross Gold Corp. (NYSE: KGC) was one of four top gold stocks to buy this week in a Merrill Lynch report. This internationally focused company also produces and sells silver and operates in some countries other gold miners might shy away from due to political risk and turmoil. The stock could see severe upside if the company gets back on track. Merrill Lynch’s $6.50 price objective at the time was against a consensus target of $5.78, and the prior pre-call close of $3.90 compared to a share price of $4.11 (down 2.4%) on Friday’s close. Investors might want to know that Kinross was a $10 stock as recently as 2012, and gold being back at $1,300 per ounce is making investors reconsider some of the gold names that have pulled back from their highs.

Sunrun Inc. (NASDAQ: RUN) was started as Outperform at Credit Suisse on October 3. What stood out here was that the firm’s target was calling for exponential upside with a $18 projection. Sunrun closed down 4.7% at $4.63 on Wednesday but was indicated up almost 8% at $5.00 on Thursday after the call. Unfortunately, even a 1.3% gain on Friday gave only a $4.71 closing price.

Sunrun has a 52-week range of $4.59 to $7.34 and consensus analyst price target from Thomson Reuters that is now closer to $11.00 after this call. Sunrun’s market cap is $485 million.

Two Harbors Investment (NYSE: TWO) beat earnings expectations last week, and it is one of the mortgage REITs with a whopping 11% current dividend yield. It was raised to Outperform from Market Perform at Wells Fargo on October 4. More importantly, the firm’s valuation range rose to $9.00 to $9.50 from a prior range of $8.50 to $9.00. The firm pointed out expected dividend coverage and saw that book value per share rose to $10.01 from $9.83 from the prior quarter. Two Harbors shares were up 1% at $8.38 late on Friday, in a 52-week range of $6.91 to $9.18. Its market cap is $2.9 billion, and the consensus analyst target is $9.40.

Here is a look at last weekend’s six analyst picks under $10 with 30% to 200% implied upside.

I'm interested in the Newsletter

24/7 Wall St. wanted to offer an update in the analyst stocks under $10 the week of November 4. There have been many things that need to be considered by investors, and that goes far beyond the election and an expected interest rate hike in December.

Brocade Communications Systems Inc. (NASDAQ: BRCD) has made many appearances in the under-$10 reports, but now it is being acquired by Broadcom. Analysts downgraded the stock to reflect the buyout ending their upside theses.

Ladenburg Thalmann started Kindred Biosciencs Inc. (NASDAQ: KIN) as Buy on November 1, and the firm’s $7.50 price target compared with a prior $5.40 close. Shares were trading at $5.00 late on Friday afternoon, and it has a mere $99 million market cap.

Since announcing the acquisition of Alcatel-Lucent, Nokia Corp. (NYSE: NOK) has been a dismally performing stock. It hit a 52-week low on Friday, but Nokia said that it can now formally pursue the much deeper integrations of its facilities and workforces spread out in Finland, France and elsewhere. Nokia’s $4.31 American depositary share price is in a 52-week range of $4.30 to $7.55.

While Rite Aid Corp. (NYSE: RAD) is still in the pending merger by Walgreen Boots Alliance, the deal is officially delayed. Frankly, this deal has been so delayed that 24/7 Wall St. refuses to even consider that the old buyout price is relevant. That can change of course, but the regulatory climate is rough for mergers now, and there are reports that the stores being divested are becoming of less and less interest to the buyer. Rite Aid closed up two cents at $6.45 on Friday, but it hit a 52-week low of $6.41. It seems very possible that Rite Aid will remain an independent company, or that what may get acquired is smaller company at a lower price. Just remember, in M&A and the markets anything can happen.