Investing

11 Analyst Stocks Under $10 With Massive Upside Targets

Stocks ended the week on a very strong note, after payrolls gave Fed-fearing investors a breather. While the market is again close to all-time highs, investors keep buying pullbacks and they keep looking for value and undiscovered or overlooked stories. 24/7 Wall St. reviews dozens of analyst reports each morning of the week to find new trading and investing ideas for readers. While some analyst calls cover stocks to buy and some cover stocks to sell, the weekend reviews of these show that many small-cap and stocks under $10 have massive upside calls in these analyst reports.

Along with that massive upside potential, investors must keep in mind that low-priced or small-cap stocks almost always come with more risk than Dow Jones Industrial Average or S&P 500 stocks. Analyst calls in Dow or S&P 500 stocks generally come with upside projections of 10% to 20%. In the low-priced and small-cap universe, the analysts often have upside targets of 30%, 50% or even 100% and above. Those huge target prices should also confirm that the stocks are much riskier by nature.

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24/7 Wall St. would, on top of stating higher risk parameters here, remind readers that many analyst calls just do not live up to expectations. Some of the reports are also all-or-none calls. To prove the point: some stocks with small market caps and low share prices languish for a decade, some get delisted and some even implode. Many risk-taking investors fall into a trap of believing that small-cap and low-priced stocks eventually grow into huge companies. Unfortunately, that just is not the case.

These are the 11 analyst stock picks under $10 from this past week. They have been broken up into two groups, one with more detail and the second group is generally made up of the lesser-known names or where less information was available.

Advanced Micro Devices Inc. (NASDAQ: AMD) has been featured in the analyst calls to buy because Wells Fargo maintained its Outperform rating and $3.00 to $3.50 price valuation range after AMD’s analyst day this past week. The big caveat here is that most analysts were not positive, and some were very negative. Still, this was covered in detail to see if there is upside remaining for the bulls. Wells Fargo called its analyst day takeaway a clear and decisive strategy, and the firm thinks it is cheap at 0.5 to 0.6 times expected revenues, despite some serious risks that it admitted to. The firm also talked about the potentiality of $0.50 in earnings per share.

Alcatel-Lucent S.A. (NYSE: ALU) had earnings this week and shares rose from under $3.50 before earnings to $3.80 at the close of Friday. We saw more than one upgrade this week: to Buy from Neutral at Citigroup, to Buy from Neutral at UBS and to Buy from Hold at Soc-Gen. Many things feel hard to get excited about here, but the Nokia merger is not being panned as much as it was earlier.

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Genworth Financial Inc. (NYSE: GNW) remains a controversial stock due its more recent issues with long-term care insurance. The stock also fell this week to $8.28 from above $9.00 earlier in the week. The big call here was that Jefferies maintained its Buy rating and the firm raised its price target to $12 from $10, implying close to 50% upside if it is right. While the consensus price target is $10.50, there were multiple downgrades and cautious analyst calls here as well: UBS has downgraded it to Neutral from Buy, Morgan Stanley downgraded it to Underweight, and Macquarie cut it to Underperform.

Groupon Inc. (NASDAQ: GRPN) is always a stock full of controversy, and this call is somewhat puzzling with the upside versus the official rating. Groupon was maintained as Neutral at Janney Capital Markets after earnings, but the firm also maintained its $9 fair value target, compared to a prior $6.84 close and a $6.63 close on Friday. That represents roughly 35% upside. And for the big call, Sterne Agee CRT maintained its Buy rating and $12 price target. The firm felt the quarter was good and that guidance was solid, after the noise is removed.

Rocket Fuel Inc. (NASDAQ: FUEL) had two bits of news this week. It had better earnings and received a fairly odd at-the-money $350 million buyout offer from a firm called Gravity4. Prior to that second bit of news, Janney Capital Markets maintained its Buy rating, but the fair value target was lowered to $15.00 from $17.50. This was versus a $7.63 close and is against Friday’s closing price of $8.32. What investors need to know here is that Rocket Fuel shares have been battered, with a 52-week range of $7.53 to $31.84. Janney feels it very cheap against revenue and growth, and they feel it can achieve revenue and profitability goals. Rocket Fuel’s consensus price target is closer to $11, and note that $15 is now the highest target on Wall Street.

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Additional analyst calls in stocks under $10 were in Boulder Brands, Gaiam, Nokia, Quantum Corp., Scorpio Bulkers, and Standard Pacific.

Gaiam Inc. (NASDAQ: GAIA) showed that revenues rose 13% to its top 25 customers, but the West Coast port shutdown and stocking level issues at the largest customer hurt earnings to where it lost $3.9 million in the quarter. Roth Capital came out and started the yoga-themed player with a Buy rating and $8.00 price target ahead of the report. This was against a $6.47 close, but shares rose late in the week to end up at $6.94 on Friday’s close. Gaiam has a consensus price target north of $9.00.

Nokia Corp. (NYSE: NOK) had a solid week on news that Uber may spend $3 billion to buy its HERE mapping technology, if it beats out other carmakers interested. Nokia shares closed out the week at $6.93, versus a low of just under $6.40 this week. UBS stepped up to the plate here and raised Nokia to Buy from Neutral. Alcatel-Lucent’s better than expected earnings and multiple analyst upgrades also helped out Nokia shares last week.

Quantum Corp. (NYSE: QTM) provides scalable data storage and data protection solutions for enterprises and small businesses, putting it in a hot niche of late. The firm Northland Securities raised its rating last week to Outperform from Market Perform, but what stood out was a doubling of the price target to $3.00 in the call. This was against a prior $2.03 closing price, and Quantum closed at $2.06 on Friday, leaving almost 50% upside if the firm is right. Only three analysts cover this stock, and the other two price targets are listed as $2.50 and $3.50. Quantum has a 52-week range of $1.02 to $2.22 and a market cap of $528 million.

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Scorpio Bulkers Inc. (NYSE: SALT) lives and dies by transporting and shipping dry bulk commodities like grain, fertilizer, coal and ore. Trading at $2.65, it has a 52-week range of $1.30 to $9.46, which should offer a clue on how volatile it is. This week we saw that UBS raised its rating to Buy from Neutral, and the firm gave a price target of $3.50. This was versus a $2.50 closing price then, and shares closed at $2.65 on Friday. If UBS turns out to be right, this implies more than 30% upside. If UBS seems too aggressive, consider that Scorpio Bulkers has a consensus price target closer to $4.00.

Standard Pacific Corp. (NYSE: SPF) may be down over the past month, but after earnings this homebuilder was raised to Buy from Hold at Evercore ISI. The firm also gave a $10.00 price target in the call. Standard Pacific had closed at $8.20 ahead of the call, and shares went out at $8.29 on Friday. Despite a low stock price, Standard Pacific has almost a $2.3 billion market cap. It also has a 52-week range of $6.52 to $9.19 and a consensus price target of $9.25. Investors also should know that $10.00 is the highest price target.

Boulder Brands Inc. (NASDAQ: BDBD) met earnings expectations this week and serious interest, and controversy, remains with this gluten-free food maker. Janney Capital Markets reiterated its Buy rating and $11 price target after earnings. While the call came at a prior close of $9.99, Boulder Brands shares closed down at $9.51. Also, this $11 target is under the $11.95 consensus price target and is against a 52-week range of $7.77 to $15.47. Canaccord Genuity maintained its Hold rating, but that firm has a $12 price target. Janney’s note on Boulder Brands said:

Consumption increased 18% in the Natural segment. This was strong performance, driven by strength in Udi’s and EVOL, partially offset by difficult comps and lower consumption trends in Glutino. Gluten-free consumption in the combined Udi’s and Glutino brands increased 11.9%; sales increased 3% as shipments trailed retail takeway volumes. … We maintain our Buy rating on the stock with fair value price of $11.00 per share. The stock is cheap on an EV/Sales ratio valuation, and comps should improve throughout 2015.

Canaccord Genuity’s note on Boulder Brands said:

We continue to view the Udi’s, EVOL & Earth Balance brands as growth engines whose collection value likely supports the majority of the valuation on a sum-of-the-parts analysis. However, gluten-free category is more modest as the category matures, limiting the ability to offset double-digit declines at Smart Balance. We maintain our HOLD rating, but our confidence is boosted after an in-line first quarter performance.

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