Investors have seen the markets rise and rise in 2017, with new all-time highs almost weekly, and this bull market is now nearing nine years old. The Dow has now run above 23,500, and the S&P 500 is now well over 2,500. Even the Nasdaq is nearing 7,000 for the first time. The business climate is firm, and there are some positive growth developments driving the continued excitement for stocks. Many investors are still looking for new ideas to generate gains or income ahead.
24/7 Wall St. covers many analyst reports each day of the week, and this becomes hundreds of analyst calls each week. With the traditional Dow and S&P 500 stocks given 8% to 10% upside to the price targets at this stage in the bull market, those investors looking for new ideas might be considering some less-crowded areas than the traditional stocks that make up the major indexes and are owned by most mutual funds and exchange traded funds. This is where the highly speculative stocks come into play.
In small cap or highly speculative stocks, some analysts issue upside targets of 30%, 50% or even well over 100% above the current share price. Conservative investors need to be more than just careful here. They should probably run away and hide from most speculative stocks. If the S&P or Dow and their top dividend payers were to fall 10% from these lofty market levels, imagine how bad speculative stocks might fall if investors flee.
Many speculative stocks have core fundamental risks that are just not present in big established companies with decades of operating history. These companies rarely have dividends, some have true existential risks for the years ahead, and these would almost never qualify under the suitability tests for widows and orphans. Sectors such as biotech and cleantech, and companies with market values of less than $1 billion, are obviously more risky than traditional stocks.
Just to show how these perform from time to time: the prior weekend review of top speculative analyst calls had seven calls with massive upside in that 50% to 100% or more range. One of those seven was up 20% this past week, but there were four losers during the week, with shares that fell by 3% to 12%.
Investors and traders should only use positive analyst research reports as a starting point, rather than as a final decision. After all, we wouldn’t want you thinking we blindly trust all analyst calls just because they offer big upside predictions. Again, some have true existential risks.
Trading data and color have been included on some of the top speculative calls seen during the week of November 3, 2017. Consensus analyst price targets, if available, are from the Thomson Reuters sell-side universe.
Here are nine very speculative outside analyst calls looking for huge upside from the week of November 3, 2017.
Adamas Pharmaceuticals Inc. (NASDAQ: ADMS) had a massive week, with shares rising from $22 to above $28 over the course of the week. Adamas posted earnings that may have been short of some expectations, but the stock kept chugging along, for a market cap of about $630 million at the end of the week. The firm Evercore ISI issued a new Outperform rating on the stock with a monster price target of $85 — roughly 200% higher than the current price. For some balance here, JMP Securities is more conservative in its Outperform rating with just a $33 price target.
The company’s lead asset is GOCOVRI (ADS-5102), a wholly owned extended-release formulation of amantadine, which was approved by the FDA in August 2017 to treat Parkinson’s disease patients experiencing levodopa-induced dyskinesia. Adamas completed its IPO back in April of 2014 at $16 per share.
Aduro BioTech Inc. (NASDAQ: ADRO) was started as Outperform with a $15 price target (versus an $8.25 prior close) at Oppenheimer on November 1. The firm sees multiple early clinical readouts that are expected in the fourth quarter. Its shares were actually lower after the report, with its stock down at $7.95 on Friday’s close. If Oppenheimer is right, this could be a double. Still, its $614 million market cap is highly speculative, even if the consensus analyst target price is $17.60. Aduro’s 52-week trading range is $6.01 to $15.52.
Capstone Turbine Corp. (NASDAQ: CPST) remains highly speculative, and its performance has been very mixed over time. After reporting more or less in-line numbers on EBITDA and EPS, there may have been a feeling of slow bookings. Still, several orders were announced that came in after the end of September that suggest a material pickup.
Oppenheimer believes the company is nearly breakeven on a cash flow basis, and the firm maintained its Outperform rating and $2 price target. Capstone Turbine shares were last seen trading at $1.00 on Friday, but they were up at $1.04 earlier in the morning. Its 52-week range is $0.58 to $1.35, and the consensus target price was $1.70.