Buying a single share of tech giant Google will set you back a not inconsiderable $1386.32. Accordingly, you get to own a piece of one of the world’s most successful companies, with a proven business model and the likely scenario of further gains in the long run. But how much gains, really? With a market cap of almost $1 trillion, the search engine behemoth can grow further but the incredible returns are probably over by now.
On the opposite end of the scale are the puny, unloved penny stocks (anything going for less than 3 bucks). The potential for multiple gains becomes more likely, but let’s not forget that along with the higher chance of mercurial returns, comes the significant risk of losing all your hard-earned cash on a very risky investment. It’s not for nothing, that some on Wall Street believe backing penny stocks is more akin to gambling than proper investing.
For those still set on following the risk tolerant path, the next step is to identify the right names to provide those sky-scraping returns. This is where the pros come in handy.
With the help of TipRanks’ Stock Screener tool, we identified three penny stocks which some on the Street see potential for upside of at least 200%. In addition, all currently have a Strong Buy consensus rating attached to their names. Let’s take a look at why analysts find these stocks such compelling buys right now.
Palatin Technologies (PTN)
Let’s start off with the “penniest” of the lot. Palatin’s stock is trading at $0.48 each, following a decline of nearly 40% year-to-date. Some on the Street, though, believe now is the time to snap up shares of the Cranbury, New Jersey based microcap.
Palatin develops peptide therapeutics for diseases with significant unmet medical needs. The company’s varied pipeline includes candidates for the treatment of heart failure, diabetes and inflammatory diseases.
Taking most of the headlines is Palatin’s lead product Vyleesi (Bremelanotide), a treatment for hypoactive sexual desire disorder (HSDD). Vyleesi was approved by the FDA in June 2019, and its North American rights are currently exclusively licensed to AMAG Pharmaceuticals. However, due to an internal shake up, AMAG decided recently to divest Vylessi and is currently in the search for a new US home for the drug. Palatin management believes that a new partnership should be in place in the next few months.
Cannacord’s John Newman is backing the company to find a new suitable US partner for the drug while also increasing its international presence. The 5-star analyst said, “Palatin expects to announce additional executed partnerships for Vyleesi in all worldwide geographic areas outside North America by the end of 2020. We continue to expect a robust new partner for Vyleesi near-term and await details in March on the AMAG call. We believe Vyleesi will be competitively differentiated vs. Addyi, which must be given chronically and has potentially dangerous interaction with alcohol.”
Newman, therefore, keeps his Buy rating as is, but the analyst’s price target is reduced from $4 to $3. Nevertheless, the upside potential still comes in at a moon landing 512%. (To watch Newman’s track record, click here)
Out on the Street, two other analysts are currently backing Newman’s arguments in Palatin’s favor. The additional Buy ratings add up to a Strong Buy consensus rating, along with an average price target of $2.17. The intrepid investor could be pocketing a 339% gain should the analysts’ thesis play out. (See Palatin price targets and analyst ratings on TipRanks)
Further up the market cap ladder we find TherapeuticsMD, a pharmaceutical company exclusively committed to advancing women’s health. The small-cap’s stock, which is going for $1.63 per share, has suffered so far in 2020, losing 33% of its value.
The company has several products on the market; these include BIJUVA, which is used for the relief of moderate to severe hot flashes due to menopause, and IMVEXXY, a vaginal estrogen therapy used to treat moderate to severe vaginal pain associated with sexual activity.
Cowen’s Ken Cacciatore, though, reserves the bulk of his positive summery of TXMD, for Annovera, a birth control vaginal ring. The drug is a combined hormonal contraceptive and is the first vaginal ring contraceptive that can be used for an entire year. Annovera was approved by the FDA in August 2018 and notched sales of $5.8 million in 4Q19.
Cacciatore argues the contraceptive “is the most underappreciated component of the story, as it is unique & differentiated.”
The analyst noted, “Q4 rev reached $16MM, allowing access to another $50MM under its credit agreement. And encouragingly, given Annovera’s early trends, management guided 2020 revenue to $90-110MM. This is increasingly becoming an Annovera story, and given our consultants views, we believe the Street might not yet appreciate its potential. As Annovera gains traction, we believe that the operational turn is nearing.”
Accordingly, Cacciatore reiterated an Outperform rating on TXMD, along with a $9 price target. This implies upside of a massive 445%. (To watch Cacciatore’s track record, click here)
While the last three months have seen only two further analysts throwing the hat in with a view on TherapeuticsMD’s prospects, both are even more bullish than the Cowen analyst. A Strong Buy consensus rating comes with an average price target of $10.67, indicating the analysts’ belief that an extra 549% will be added to the share price in the next 12 months. (See TXMD stock analysis on TipRanks)
The final cheap stock on our list is Rigel, a pharma company developing novel small molecule drugs. Shares of Rigel are selling for $2.16 a piece, and at least one Wall Street pro sees this as a buying opportunity.
Apart from ongoing development for a number of candidates, Rigl has one FDA approved product out on the shelves — Tavalisse (fostamatinib disodium hexahydrate). Tavalisse is a tablet which is used for the treatment of adult patients with chronic immune thrombocytopenia (ITP) who have had an insufficient response to a previous treatment. Currently, the drug is the only oral spleen tyrosine kinase (SYK) inhibitor used to treat the disease.
Sales of Tavalisse have been growing. Rigel’s latest quarterly report showed that US Tavalisse sales increased quarter-over-quarter by 18% to $13.8 million.
With that said, Piper Sandler’s Christopher Raymond remains Overweight on RIGL. The 5-star analyst’s rating is accompanied by an $8 price target, which implies potential upside of an impressive 270% from current levels. (To watch Raymond’s track record, click here)
The analyst notes that in the last quarter, Tavalisse’s 4-month refill rate was 54%. This indicates that physicians are increasingly comfortable with the treatment. Raymond added further, “We believe this will continue to serve as a nice touchpoint with physicians and will watch for additional adoption in earlier lines of therapy throughout 2020, with supportive data expected from ongoing case series and investigator-sponsored research in addition to initiation of an observational study in 2L ITP patients this year. As for Europe, following EU approval announced in January, partner Grifols plans to launch product in Q220, with incremental revenue from EU sales expected in 2H20.”
All in all, 4 unanimous Buy ratings for Rigel coalesce into a Strong Buy consensus rating. the average price target comes in at $7.25 and implies possible upside of 234%. (See Rigel stock analysis on TipRanks)