Investing

7 Speculative Analyst Stock Picks Called to Rise 100% to 400%

Jon C. Ogg

Published: June 24, 2017 9:25 am

Last Updated: January 12, 2020 10:43 am

While summer is generally a time that most people think about vacations and time with their families, investors are parsing through new ideas and considering how they should be positioned for the rest of 2017. The stock market has hit new all-time highs all over again, and valuations remain high but not ludicrously high. The bull market is now over eight years old and literally every stock market sell-off has been aggressively bought by the more savvy investing community.

Many investors have taken note that the markets and many of the go-to stocks have risen 200% to 300% from the 2009 lows during the recession. Perhaps it is time to consider newer companies that are either undiscovered or overlooked at their current prices.

24/7 Wall St. reviews dozens of analyst research reports each day of the week. This ends up being hundreds of analyst calls over the course of each month. At this time, most analysts issuing Buy and Outperform ratings are targeting upside of 8% to 15% in Dow and S&P 500 stocks. When it comes to speculative and small-cap stocks, there are sometimes analyst calls with upside projections of 50% or 100%, or exponential upside. It is that last group that often is overlooked or ignored by much of the investing community.

When a stock is called to double or more, any smart person has to understand that there is a much larger risk versus reward. It is just very unusual for such aggressive upside to be seen. Some weeks, no such analyst calls are ever seen by the investing public. 24/7 Wall St. has so far tracked seven such analyst calls in the month of June, ones in which analysts are calling for a stock to rise 100%, 200%, even as much as 400%.

Again, these are far riskier than traditional stocks. Conservative investors almost always need to ignore analyst calls of this magnitude. Some of the companies may implode or disappear rather than become the next major growth stock. Some already have seen their stars fade and analysts are looking for a phoenix in the ashes. Another risk can be that analysts are just way too aggressive, they have a conflict of interest, or they just turn out to be wrong in their upside estimates.

It turns out that the major would-be exponential stock picks are generally in the most speculative sectors in the market, such as biotech, emerging energy and emerging technology. Some companies are so young that they hardly have any revenues, and earnings are generally years away, so there is no reason to think that dividends will be coming any time soon.

What was most common about each of the seven picks called to double or more from the June analyst calls was that the companies are generally unknown to the non-investing public (and probably to another 95% of the investing public). They almost always have market capitalizations of under $1 billion as well, and some can be in the micro-cap class of stocks, with a market value of less than $100 million.

24/7 Wall St. does not cover analyst calls in companies that are traded in the over-the-counter (OTC) markets, nor in the penny stock category. Those often move the most for low-priced traders and investors, but they are less regulated than traditional companies and they tend to be the ones where mishaps are more of a norm than an exception.

We have tried to warn investors of the inherent risks in highly speculative stocks. Speculative stocks can be hazardous to your assets, and they might even be hazardous to your health.

Here were seven speculative analyst stock picks over the course of June in which analysts have called for upside of 100%, 200% or even 400%.

Aqua Metals Inc. (NASDAQ: AQMS) was started as Buy and assigned a $25 price target at Rodman & Renshaw on June 22. The call here might feel controversial, and not just because of the 100% upside. The stock of Aqua Metals was up at $16.00 as recently as May but ended most recently at $12.00. While this is a call to double, Aqua Metals is volatile and has a 52-week trading range of $8.13 to $22.75. This company has developed AquaRefining, a process for recycling lead acid batteries, and its revenues are just starting to advance. Its consensus analyst target was $26.25, but it is thinly covered with a mere $240 million market cap.

Eiger BioPharmaceuticals Inc. (NASDAQ: EIGR) was assumed in coverage with an Outperform rating by Wedbush Securities on June 21, and the prior price target of $28 was raised to $34, compared with a prior close of $6.75. While it is more than unusual for an analyst to call for 400% upside, other analysts also have massive upside targets about equally as positive for this speculative stock. Eiger is tiny, as its market cap was not quite $60 million at the time, and the $7.10 post-analyst call price compared to a $6.95 closing share price on June 23. The stock has 52-week trading range of $6.10 to $20.63.

Fairmount Santrol Holdings Inc. (NYSE: FMSA) provides sand-based proppant solutions for exploration and production companies. In other words, it’s a frac sand company. Jefferies has remained positive here but lowered its target to $8 while maintaining a Buy rating. RBC also chimed in at the start of June after its energy and power conference by keeping an Outperform rating and $11 price target. The stock was most recently trading at $3.73, in a 52-week range of $3.38 to $13.12. Fairmount Santrol has an $866 million market cap.

Helix Energy Solutions Group Inc. (NYSE: HLX) is in the business of offering specialty services, such as well intervention, robotics and production facilities, to the offshore energy industry. Cowen issued an early-June transfer of coverage report with an upgrade to Outperform and its target raised to $10 from $8, noting that it is a top pick and the low case is baked into the price, and also that it now has a very attractive risk-reward profile. That $10 target compared with a $4.90 share price at that time, but despite the oil weakness it had recovered to $5.13 as of the close on June 23. That means this is a “double” only on pullbacks. Helix Energy has a 52-week range of $4.82 to $11.87 and a market cap of almost $760 million.

Intellia Therapeutics Inc. (NASDAQ: NTLA) was part of a larger speculative buy grouping at Jefferies on June 22. The firm talked up its Buy rating with a $36 price target, implying upside of 141% at the time. Jefferies considers Intellia to be at the forefront of gene-editing to induce permanent changes, and the firm sees Intellia using its technology and platform to gain in value and appeal to larger biotech/pharma buyers. Shares of Intellia closed up 9.5% at $14.94 around that call, and its stock closed most recently at $15.10. Intellia has a consensus price target of $26.00 and a 52-week range of $10.83 to $27.20. Its market cap is $557 million.

Nutanix Inc. (NASDAQ: NTNX) was part of a set of Focus List calls from Credit Suisse back around June 7. The firm has an Outperform rating and a $38 price target, which compares to the $18.67 price at that time. On June 23, shares of the enterprise cloud platform solutions provider were at $19.31. One issue to consider here is that Nutanix is a high revenue growth company but it is expected to lose money through 2019. Credit Suisse admitted the short-term weakness but sees multiple drivers growing sales and better international markets while the company raises prices to offset component prices. Nutanix has a consensus target price of $27.76 and has a 52-week range of $14.38 to $46.78.

Recro Pharma Inc. (NASDAQ: REPH) was reiterated as Buy with a $21 fair value estimate at Janney on June 14. This was up over 200% from the prior $6.47 closing price, though the shares ended the week at $7.10. The firm sees IV-Meloxicam leading to more opioid-free recovery after surgery after new Phase 3 data. Recro Pharma has a 52-week range of $5.89 to $12.50, and its market cap is tiny at $139 million.

It is important to keep track of how these speculative calls look and perform to keep from getting suckered. After all, you were already told that they were full of risk and that many of the calls implode rather than skyrocket. Here are seven biotech and emerging pharma picks from May that were called to potentially more than double as well. Some of those stocks have rallied, and so far there had not been any major stock implosions.

Investors have to be careful and disciplined to know what they are investing in. That is true for the large companies and large exchange traded funds. It is exponentially true for the highly speculative small-cap stocks. As always, caveat emptor.