Buckle up, we’re in for a bumpy ride. The number of new coronavirus (COVID-19) cases continues to surge, and as such, the market’s volatility has persisted. Following up the drop on March 27, stocks started off the week by gaining on the lockdown extension in the U.S. While the movements in yesterday’s session were less extreme than we’ve become accustomed to seeing, it remains unclear when the market will hit bottom.
Against this backdrop, it’s easy to understand why some investors have been sent running for the hills. However, thrill-seeking Wall Street observers see exciting opportunities as the market whipsaws. To find names that can deliver solid returns and now come with a bargain price tag, these investors will often turn to penny stocks, or those trading for less than $5 per share.
Sure, there could be a very good reason these tickers are so affordable, but should there be even minor share price appreciation, massive percentage gains could materialize, along with hefty profits for investors.
Bearing this in mind, we pulled up the database from TipRanks to find three penny stocks the analysts believe look compelling despite the risk involved. Not to mention the platform revealed that each of these Buy-rated names could see upside growth landing in the triple digits.
MannKind Corporation (MNKD)
Over the past three decades, MannKind has been developing therapeutic products and technologies to improve the lives of patients all over the world. Like the broader market, 2020 has not been kind to this company, but at $1.04, several analysts argue that now is the time to snap up shares.
Part of the excitement surrounding this healthcare name came after it announced on March 17 that it’s taking on COVID-19. According to management, the company will shift the focus of its R&D pipeline to new compounds that could reduce the morbidity and mortality caused by respiratory viral infections like COVID-19. In a collaboration with Immix Biopharma, MNKD will design a dry powder formulation of a compound to treat one of the complications of COVID-19, acute respiratory distress syndrome. Right now, the priority is to develop a proof of concept, and after, it will be evaluated to see if it’s an effective treatment.
On top of this, Cantor Fitzgerald’s Brandon Folkes notes, “MNKD continues to have excess manufacturing capacity which it can leverage to assist other companies in meeting any increased demand due to the outbreak.”
As a result, the analyst maintained both his Overweight call and $3 price target. Should the target be met, shares stand to soar 178% in the next year. (To watch Folkes’ track record, click here)
As for its currently available products, Afrezza has generated impressive sales. During the fourth quarter, net sales grew 36% quarter-over-quarter to reach $7.8 million. Adding to the good news, the company guided for stable or even improved gross-to-nets in 2020. Weighing in for H.C. Wainwright, analyst Oren Livnat states management’s outlook “gives us confidence in the underlying translation of Rx growth to sales growth going forward, and the latest prescription trends show over 30% year-over-year insulin-unit-based growth despite fewer free scripts.”
Livnat adds, “Separately, there is increasing investor interest in TreT-- Technosphere treprostinil--partnered with United Therapeutics...Assuming positive progress, it should bring in another $25 million in 2020 milestones, bringing total payments from United to about $100 million. MannKind would get double-digit royalties on this next generation version of United’s Tyvaso, which is running at about $450 million sales now.”
It should come as no surprise, then, that Livnat reiterated his bullish call and $2.50 price target. (To watch Livnat’s track record, click here)
Overall, with 100% Street support, the consensus is unanimous: MNKD is a Strong Buy. Additionally, the $2.67 average price target puts the upside potential at 157%. (See MannKind stock analysis on TipRanks)
EyePoint Pharmaceuticals (EYPT)
This biopharma company is committed to developing products for patients suffering from serious eye disorders. As each share is currently going for $1.02, EyePoint’s price tag could present investors with an attractive entry point.
Following its fourth quarter earnings release, this is the stance taken by Guggenheim analyst Dana Flanders. Net sales of $8.6 million, which came in above his prediction, were fueled by strong demand for Dexycu and Yutiq as they’ve seen momentum continue to accelerate.
Flanders commented, “Notably, we are encouraged by strong underlying demand for Dexycu and Yutiq, for which EYPT reported increases of 111% and 59%, respectively, compared to 3Q19...While we believe the increase in repeat order volumes shows solid adoption, we see room for further continued growth opportunities to expand Dexycu into new accounts where the company is actively negotiating agreements with additional GPOs while Yutiq still has ample runway to expand (58% of target account list unpenetrated).”
It should also be noted that back in February, EYPT signed an exclusive license agreement with Equinox Science to develop an anti-VEGF TKI (Vorolanib) that uses EYPT’s Durasert sustained release technology for the treatment of wet age-related macular degeneration (AMD), diabetic retinopathy (DR) and retinal vein occlusion (RVO). The candidate, EYP-1901, could improve the safety profile for Vorolanib. While Flanders doesn’t factor EYP-1901 into his model as it’s still in the early stages of development, he thinks it reflects a “compelling long-term opportunity."
Expounding on this, he said, “Although there are multiple long-acting agents in development, wet AMD is a multi-billion dollar market (Lucentis, Eylea, etc.), and we view Phase 1 data as an important catalyst for EYPT shares.”
Based on all of the above, Flanders stayed with the bulls. Along with his Buy recommendation, he left the $4 price target unchanged, implying 296% upside potential. (To watch Flanders’ track record, click here)
What does the rest of the Street have to say? Out of 4 recent reviews, 3 were bullish, making the consensus rating a Strong Buy. At $4.33, the average price target is more aggressive than Flanders’ and brings the upside potential to 329%. (See EyePoint stock analysis on TipRanks)
iAnthus Capital Holdings (ITHUF)
Switching gears now, iAnthus inhabits the cannabis space and has created several cannabis brands as well as a network of cannabis operations. With the broader market’s sell-off pushing shares down to $0.56 apiece, some members of the Street believe there’s a unique opportunity to get in on the action.
Ahead of its upcoming fourth quarter earnings release, the future looks bright if you ask Stifel analyst Robert Fagan. Thanks to three new store openings in Florida, which could have led to gross margin expansion in Q4, sales are expected to hit $27 million, representing a 20% quarter-over-quarter gain.
As for profitability, the result stands to be even better. Despite the fact that lower overall market growth in Nevada and New York and the slight network expansion delay in Florida and Massachusetts could weigh down 2020 sales, Fagan has high hopes when it comes to the bottom-line number. While Q4 EBITDA is slated to come in at a loss of $3 million, this is up from -$4 million in Q3 and higher than the Street’s -$6 million call.
With respect to 2021 sales, Fagan thinks the figure will land at $376 million, which if achieved, puts year-over-year growth at 70%. This in tandem with increasing operating leverage from the expanded scale should result in EBITDA of $114 million on margins of 30%, a year-over-year boost of 800 basis points.
The source of these potential wins? Fagan notes, “We expect ITHUF to continue to invest in Florida, given its solid 4% market share, and steady stream of new store openings over the past year (~1/month), a trend we believe will continue. In Massachusetts, we expect ITHUF’s two production facilities and two REC stores to be fully operational in 2021, enabling good market share capture and growth.” The analyst also mentions that its first mover advantage in New Jersey bodes well for the cannabis company.
Fagan concludes, “We note its gross margin profile is already in line with its larger peers, presenting a possible quick path forward toward profitability upon realization of higher volumes.”
It makes sense, then, that Fagan kept a Buy rating on the stock. However, he did drop the price target to $2.47, but this still leaves room for a 340% twelve-month rise. (To watch Fagan’s track record, click here)
Looking at the consensus breakdown, 2 Buys and 1 Hold published in the last three months add up to a Moderate Buy Street consensus. Based on the $1.96 average price target, shares could skyrocket 266% in the next twelve months. (See iAnthus stock analysis on TipRanks)
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