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8 Analyst Stocks Under $10 With Massive Upside Potential
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The end of 2015 brought the first slightly down year since 2008, and 2016 has turned out to be a very hard time for the bulls to keep their conviction. The world growth story has been slowing, even as the Federal Reserve seems more eager than not to raise interest rates. Investors in 2016 have become more value conscious and have been selling into rallies rather than the prior four-year trend of buying dips. It is also an election year and the daily rhetoric is mind-numbing. All of this is setting up for a serious tug-of-war between a tired bull market and a rising bear market case ahead.
24/7 Wall St. is always on the hunt for undiscovered opportunity and value in the financial markets. After all, there is always an opportunity to make money somewhere. Each morning of the week we review dozens of analyst upgrades, downgrades and initiations, totaling hundreds of calls per week. These are from bulge bracket firms like Goldman Sachs and Merrill Lynch and even include many middle market and boutique research firms.
One category of analyst calls often comes with the most wild predictions. That is stocks trading under $5 and $10 per share with sometimes zany upside predictions. This of course also means that there is almost certainly more risk than you might expect say from a Dow Jones Industrial Average or S&P 500 stock’s typical analyst upside prediction of 8% to 15%. In the lower priced and smaller cap stocks you often see implied analyst upside projections of 35%, 50% or even over 100%. Again, this is much higher risk, and there are of course no sure bets.
Many of these stocks have been beaten up or are down handily from their highs. Be advised that analysts are often wrong. Many times something new comes into play, and other times they just looked at the situation upside-down. These calls also often seriously conflict with other analysts, but that is par for the course in analyst calls and is one thing that helps to make a solid market. Many times you see the same analysis but the opinions end with “therefore, we think investors should buy” or “therefore, we think investors should sell.”
You may notice that some of the upside targets listed here have been lowered. While this seems like a downgrade in those cases, the reality is that this is rather typical of what to expect during market sell-offs, as old price targets may look more unrealistic. There are many more caveats to consider, but here are eight analyst stock picks under $10.00 with massive upside potential, if the analyst assumptions in each prove to be correct.
BBVA
Banco Bilbao Vizcaya Argentaria S.A. (NYSE: BBVA) had a volatile week, with the European bank fears about negative interest rates and mounting international lending losses. Still, BBVA was raised to Outperform from Underperform at BNP Paribas. The stock closed down 3.2% at $6.09 on Tuesday but was indicated up 5.5% at $6.42 on Wednesday — only to close out Friday at $6.22.
BBVA’s consensus analyst target price was listed as $6.60 ahead of the call and $6.35 at the end of the week, but this may be imperfect for American depositary shares (ADSs), and its 52-week trading range is $5.89 to $10.75.
Kinross Gold
Kinross Gold Corp. (NYSE: KGC) looks as though it missed earnings expectations, but it has been in the midst of a serious gold and massive gold stocks rally in 2016. In fact, this 2016 gold rally now already has taken Kinross shares up to $3.00 from $1.82 at the end of 2015.
Kinross shares were raised to Outperform from Neutral and the price target was raised to $2.75 from $2.25 by Credit Suisse this past week. Kinross is expected to have potential margin expansion and the firm increased its net asset value to $2.43 per share from $2.25. What does an analyst say when his target gets hit and then exceeded in very short order?
Marathon Oil
Marathon Oil Corp. (NYSE: MRO) was deemed to be one of the winners over the next three years, if oil stays at or under $35.00, in a big, long-term screening call by Goldman Sachs. It does deserve merit to point out that Marathon shares did not rally on the call, probably as energy investors have grown very tired of hearing “Buy me now!” only to see their toenails ripped out.
Marathon’s share price was $7.28 shortly after that call but closed out the week at $7.49. Marathon has a $5.1 billion market cap, a consensus price target of $15.21 and a 52-week range of $6.52 to $31.53.
Micron Technology
Micron Technology Inc. (NASDAQ: MU) may have formally missed the sub-$10.00 mark by two cents at the close of the week, but this stock traded under $10 every day in the week before Presidents’ Day and closed under $10 on three of those days.
Wells Fargo said that Micron held its analysts day and upcoming DRAM and NAND technology transitions could help drive bit growth over the next two years. It did warn that there would be several quarters in which bit growth paused, but it reiterated its Outperform rating and its valuation range is $16.00 to $19.00. Most of the focus on Micron was on fiscal 2017 rather than 2016.
Micron’s consensus analyst target is $16.73 and its 52-week range is $9.31 to $32.84. Be advised that any analyst defense of Micron in the past year or more has left investors and traders alike thinking they shook hands and did high-fives with Edward Scissorhands.
Monster Worldwide
Monster Worldwide Inc. (NYSE: MWW) was once the leader of the online jobs market that crushed the newspaper Help Wanted ads. Then came social media and then something else. Monster managed to beat earnings last week, but revenue was light and shares fell from $4.25 to $2.82 by Friday’s close.
Two firms following Monster maintained positive ratings but lowered their price targets: Evercore ISI (Outperform) lowered its price target to $7 from $8, and BMO Capital Markets (Outperform) lowered its price target to $4 from $8. Despite these lower targets, the analysts are still holding out for big upside. Monster’s 52-week trading range is $2.43 to $8.23.
24/7 Wall St.Nokia
Nokia Corp. (NYSE: NOK) is set to close on its merger with Alcatel-Lucent S.A. (NYSE: ALU) soon. Nokia’s earnings report this past week did very little to hurt its stock price, despite warning that telecom equipment is looking soft and despite warnings about order problems seen in China. Despite post-Samsung patent royalty woes causing downgrades, some Nokia analysts are sticking with upside here, even if they trimmed their targets.
BMO Capital Markets maintained its Outperform rating in Nokia but cut its price target to $8 from $10. Morningstar maintained its Buy rating and maintained its $7.50 fair value target, despite noting Nokia’s understandably cautious tone about near-term demand. Nokia closed out last week at $5.86, has a consensus target price of $7.81 and has a range of $5.71 to $8.37 over the trailing 52 weeks.
Pandora Media
Pandora Media Inc. (NYSE: P) had such a wishy-washy week that its stock looked like it might be back up to $10.00 on buyout rumors ahead of earnings. Then reality set in after earnings and Pandora shares closed down 12% at $8.00 on Friday. We did see some positive calls, but many target prices were lowered handily by analysts.
FBR Capital Markets raised Pandora to Outperform from Market Perform with a $16 price target before Friday’s market reaction had been seen. Credit Suisse maintained its Neutral rating but lowered its target price to $17 from $24. Wells Fargo maintained its Market Perform rating but lowered its valuation range to $10.00 to $12.00 from a prior $12.00 to $14.00 range.
Other Pandora ratings with Buy, Outperform or Overweight but with lower targets were seen as follows: Canaccord Genuity (to $13 from $16), JPMorgan (to $23 from $28, seems high) and Wedbush Securities (to $15 from $26). Keep in mind that Pandora is expected to lose money in 2016, and it has a 52-week range of $7.10 to $22.60.
Vonage Holdings Corp. (NYSE: VG) remains a top VoIP telephony company, but shares have slid from highs and its $4.70 close on Friday was down 18% from the $5.74 close at the end of 2015. Vonage reported that its 2015 adjusted EBITDA was $144 million and revenue was up 16% to $895 million. Its business revenue rose some 132% to $219 million.
At least two firms maintained positive ratings on Vonage but trimmed their upside targets. Vonage was reiterated as Buy at Dougherty, but its price target was cut to $7.00 from $9.50. Oppenheimer maintained its Outperform rating as well, but it lowered its price target to $6.50 from $8.00.
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