Down More Than 40%: Analysts Say These 2 Beaten-Down Stocks Are Oversold
After 7 weeks of straight losses, the markets went into the long weekend on positive note: their best single week since 2020. The S&P 500 added more than 6% wiping away its losses from the month of May.
The sudden drop in value, combined with the even more sudden bullish shift, even if it is temporary, has brought out the discount shoppers of the equity world. ‘Buy the dip’ is a real thing, and frequently successful path toward long-term portfolio gains, and the current environment is ripe for this kind of trading.
Weighing in from RBC Capital, head of US equity strategy Lori Calvasina noted: "It is fair at this point to start doing some bargain-hunting. If you can get people more comfortable in the fundamental narrative going forward, I think that stocks are cheap enough to buy."
With this in mind, we scoured the TipRanks database and picked out two names which have been heading south recently, specifically ones which have been flagged by those in the know as oversold. Not to mention substantial upside potential is on the table here. Let’s take a closer look.
MeiraGTx Holdings (MGTX)
We'll start with MeiraGTx Holdings, a clinical-stage biopharmaceutical firm focused on the development of novel gene therapies for severe diseases. MeiraGTx’s research program has three broad areas, including neurodegenerative diseases, severe xerostomia, degenerative ocular diseases and/or inherited retinal diseases. Each of these areas can severely impact the patient’s quality of life, and each has high unmet medical needs, offering an opening for a firm that can create successful treatments.
MeiraGTx has a varied and active research pipeline, with 8 pre-clinical tracks and 6 at various stages of clinical trials. The leading program, AAV-RPGR, is a new gene therapy designed to treat X-linked retinitis pigmentosa (XLRP), a form of hereditary progressive blindness passed down through maternal lines. AAV-RPGR, also called botaretigene sparoparvovec, is under development in partnership with Janssen, and is currently the subject of the Phase 3 Lumeos clinical trial which is enrolling and dosing patients. MeiraGTx expects to release full data on the previous Phase 1/2 trial later this year.
The company’s second leading candidate is AAV-AQP1, a treatment for xerostomia. This is a condition of the salivary glands, with a variety of potential causes, in which the glands fail to produce enough saliva to prevent the mouth from drying out. MeiraGTx completed dosing unilateral and bilateral cohorts in the Phase 1 trial during 1Q22, and will present data on the study during Q4. A Phase 2 placebo-controlled trial in the planning stages, with initiation scheduled by the end of this year.
In addition to its strong development programs, MeiraGTx has the advantage of a constant revenue stream, derived from license agreements with partner companies – such as Janssen, mentioned above. In 1Q22, the company reported $5.6 million in such revenue, up 21% year-over-year. MeiraGTx expects to receive another payment of $13.1 million from Janssen during Q2.
Nevertheless, MeiraGTx's share price has fallen 65% so far this year. This doesn’t mean that the stock is unsound, according to RBC analyst Luca Issi.
"We think the JNJ collaboration across multiple ocular indications (XLRP, achromatopsia, options for others) provides pharma validation and was struck on favorable economics given $100m upfront, up to $340m milestones, and 20% untiered royalties. Importantly, JNJ funds all clinical costs, so MGTX has a shareholder-friendly burn vs. Biotechs of similar size," Issi noted.
“Overall, we continue to like the setup given an undemanding valuation and clinical POC across eye, salivary glands, and CNS... At this valuation, we think the stock is oversold,” the analyst added.
Taking all of this into consideration, Issi rates MGTX an Outperform (i.e. Buy), while his $27 price target suggests an impressive 228% one-year upside. (To watch Issi’s track record, click here)
Wall Street is in broad agreement with the RBC viewpoint, as shown by the unanimous Strong Buy consensus rating. The shares are priced at $8.23 and their average target of $29 indicates a 252% upside for the next 12 months. (See MGTX stock forecast on TipRanks)
iSun, Inc. (ISUN)
And now we move on to the energy technology sector, where iSun has been in business for 50 years. The company works in the solar power niche, providing a range of products for solar power projects at all scales: residential, commercial, industrial, and utility. The company also offers operations and management services and software systems for running solar power operations. Overall, iSun has generated more than 348 million kilowatt hours of power through its solar systems.
iSun has benefited in recent months from the political will to promote alternative, greener, energy systems, including solar. The company’s revenues in 2021 came to $33.3 million, a gain of 60% over the $20.8 million reported in 2020. In the first quarter of 2022, iSun reported $15.1 million at the top line, a 107% gain over the 1Q21 result, and the gross profit came to $3.2 million, a dramatic year-over-year improvement from the $100K reported in the year-ago quarter. In a key metric that bodes well for the company’s future, iSun reported a work backlog of $128.3 million as of the end of 1Q22. Almost 80% of this backlog comes from the company’s commercial and industrial division.
Despite these sound results, iSun’s shares are down 47% in 2022. However, Roth Capital analyst Justin Clare sees the current low share price as an opportunity, based on iSun’s potential business going forward.
"For 2023, we have maintained our revenue and adjusted EBITDA forecasts, though we see potential for meaningful upside if panel availability is resolved. With the 2022 project delay into 2023, there is potential that ISUN could construct a meaningful portion of two ~110MW projects with revenue potential of ~$1/W, or ~$220mn in revenue. This could result in material upside to our 2023 forecast, though significant uncertainty to panel availability in 2023 remains. Overall, given ISUN's growing backlog and improved margins, we believe shares are oversold,” Clare opined.
Clare’s comments back up his Buy rating, and his $6.50 price target implies a potential for 104% growth in the coming year. (To watch Clare’s track record, click here)
Overall, this alternative energy company has picked up reviews from 2 analysts, who both agree that it’s a buying proposition, making the Moderate Buy rating unanimous. ISUN shares are selling for $3.18 and the $8.25 average target suggests a 159% upside from that level. (See ISUN stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.