Many investors have been shell-shocked by the waves of the latest selling pressure. Whatever could go wrong for the markets has gone wrong. Still, many of the more experienced investors and those with a higher risk tolerance remain interested in stocks and have been looking to buy the dips in the market.
24/7 Wall St. reviews dozens of analyst research reports each morning. The aim is to find undiscovered value and other upside calls for our readers. Some of these analyst calls cover stocks to buy, and some of these Buy and Outperform ratings come with much more implied upside than the traditional 8% to 15% in traditional Dow or S&P 500 stocks.
We have outlined five stocks that had big analyst calls during this week, when the markets have tried to stabilize. While none of the calls are breaking news at this point, these are standout calls in which analysts are looking for an average upside north of 50%.
If a traditional analyst upgrade comes with 8% to 15% upside, what do you think it means when an analyst call sees upside of 40%, 50% or even 75%? It means that there is a lot more risk than with traditional stocks. In fact, it would be easy to find at least one serious risk in the viability or the upside prospects in each of these companies.
U.S. Steel
United States Steel Corp. (NYSE: X) has had a truly dismal year, with the demand for anything metal going down the drain. Still, JPMorgan added the steel giant to the U.S. Analyst Focus List this week with a formal Overweight rating, and said that its price target is $28.00 out to the end of 2016. With a share price of close to $16.00, this represents upside to the tune of 75%.
JPMorgan likes that the pending steel trade cases could be positive catalysts ahead. The firm also noted a positive inflection point in the near-term domestic steel outlook. U.S. Steel also was shown to have significant leverage against an improvement in steel prices even if it is negotiating a big domestic labor pact.
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Ashford Hospitality Prime
Ashford Hospitality Prime Inc. (NYSE: AHP) was upgraded to Buy from Hold and the price target was raised to $21.00 from $14.00 at Canaccord Genuity. While this was against a prior $13.83 close, Ashford was at $14.85 midweek. The impetus for this upgrade was on Ashford’s sale prospects, after last Friday’s announcement that the board is exploring strategic alternatives.
There was even more implied upside if you look closer here. As the analyst note said: “Our view on that dynamic has now changed as we believe the launch of a strategic review process should culminate in a transaction that offers AHP shareholders a value much closer to our current $24.76 net asset value estimate.” As a reminder, there are no assurances that this company will secure a successful buyout.
On Deck Capital
On Deck Capital Inc. (NYSE: ONDK) was part of a sector call in the peer-to-peer and alternative lending group. It also came with more than 50% in implied upside. FBR Capital Markets started On Deck Capital with an Outperform rating. What stood out was the $14 price target, way above a $9.25 or so share price.
When you consider the $19.00 consensus price target, On Deck almost sounds like a conservative call. Almost. On Deck has a 52-week trading range of $8.55 to $28.98. Needless to say, the premium valuation brought on a lot of shareholder pain and angst during the selling pressure.
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Sunrun
Sunrun Inc. (NASDAQ: RUN) is a recent IPO that just came off its quiet period. It makes and sells residential solar energy systems. Some analysts see almost 50% upside here in their coverage that was announced on Monday. Investors need to pay attention here because this upside may be solely due to a very poor IPO — it priced at $14.00 and fell 20% almost immediately. Shares were barely at $11.50 midweek.
RBC Capital Markets started Sunrun as Outperform with a $16 price target. Bank of America Merrill Lynch started coverage as Buy with a $17 price objective. The biggest call was from Credit Suisse, which started Sunrun as Outperform and with a whopping $20 price target. Big upside awaits here if the analysts are right, but it is a very speculative solar stock that is late to the game of being public.
AcelRX Pharmaceuticals
AcelRX Pharmaceuticals Inc. (NASDAQ: ACRX) was featured last because it seems to be the most speculative of all analyst calls featured with immense implied upside. AcelRx was started as Buy with an $8.50 price target at H.C. Wainwright on Wednesday. This was on a day that stocks rallied handily, and it was versus a $4.37 prior close.
While this call has huge upside from the current $4.50 or so share price, the reality is that there are several catalysts coming ahead. The real impact might also not even be felt until after 2016, so don’t be thinking that this analyst call is just looking for a quick-buck trade opportunity setup.
ALSO READ: 5 Stocks Warren Buffett Likely Bought More of During the Sell-Off
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