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3 Stocks to Buy Now With Up to 100% or More Upside Potential
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One reason that investors continue to do business with full-service brokerage firms is they generate investment ideas, and when they make a call, they typically have solid reasons and a good thesis to back it up, regardless of whether the ideas is long or short.
Here at 24/7 Wall St., we continually comb through sell-side research generated by the top brokerage firms and banks, looking for ideas that can generate big returns for our readers.
A series of new Stifel reports focus on three companies, all are rated Buy, that have astronomical target prices. While the stocks are not suitable for all accounts, investors with a higher risk tolerance may be very interested in these very speculative calls. Despite the risk involved, some big gains could be in store, even if the companies don’t go all the way to the projected highs.
Clovis Oncology
This top biotech recently posted numbers that surprised Wall Street, and it is a rumored takeover candidate. Clovis Oncology Inc. (NASDAQ: CLVS) is an oncology-focused biotechnology company that launched its first drug, Rubraca, in late 2016. The drug is indicated for the treatment of germline and somatic BRCA-induced ovarian cancer after failing two prior lines of chemotherapy.
The company fully owns rights to Rubraca and is investigating expansion into a broader ovarian cancer market and additional tumor indications. Top analysts have raised their price targets, as many have higher confidence in Rubrica’s potential in BRCA-mutated cancers. A damaged gene in either location can lead to increased risk of cancer, particularly breast or ovarian in women. A BRCA mutation is a mutation in either of the BRCA1 and BRCA2 genes, which are tumor suppressor genes.
Physicians also are gaining confidence in Rubraca, and Stifel noted this:
Rubraca maintenance approved in the U.S., thoughts on upcoming QUADRA and SOLO-1 data: Bottom line – Clovis’s Rubraca was approved for maintenance therapy in patients with recurrent ovarian cancer who are in a complete or partial response to platinum-based chemotherapy. This is the same indication that AstraZeneca’s Lynparza as well as Tesaro’s Zejula maintenance are approved. With last Friday’s approval, Clovis will now have access to the larger maintenance setting (versus treatment setting) where an estimated 80% physicians intend to prescribe a PARP inhibitor. We expect a smooth commercial rollout with the new indication as Clovis’s salesforce is simply extending a new indication to the same ovarian cancer doctors they are already calling upon (bodes well for our $166 million/$642 million fiscal year 2018 and 2020 revenue estimates).
The Stifel price target is a stunning $110, and the Wall Street consensus price objective is $86.90. Shares closed on Tuesday at $61.08.
Mallinckrodt
This company has been on a mergers and acquisitions binge over the past three years, and its stock was hit hard in 2017. Mallinckrodt PLC (NYSE: MNK) is a global specialty biopharmaceutical and medical imaging business that develops, manufactures, markets and distributes specialty pharmaceutical products and medical imaging agents.
The company’s areas of focus include therapeutic drugs for autoimmune and rare disease specialty areas, like neurology, rheumatology, nephrology and pulmonology, as well as neonatal critical care respiratory therapies and analgesics and central nervous system drugs.
Stifel is bullish on Mallinckrodt’s outstanding pipeline and noted this:
The company’s late-stage pipeline is rapidly approaching several meaningful clinical and regulatory catalysts this year, which if successful, will meaningfully change the profile of the company. Specifically, we look forward to the stannsoporfin/infant jaundice AdComm in May followed by expectation of a positive PDUFA in August.
Notwithstanding, the company will also see important data events for terlipressin/hepatorenal syndrome (interim analysis), VTS-270/Niemann-Pick (pivotal Phase 2), and Acthar (Phase 4, RA and MS), which should shape the conversation in the second half of 2018 and beyond. Capital allocation remains rational; debt pay down remains a priority, following the $1.2 billion acquisition of Sucampo, to rapidly return to its 3.5-4.0 times historical leverage ratio (currently >4.0x).
Stifel has a massive $50 price target, while the consensus target is $27.58. The stock closed at $15.02 on Tuesday.
Northern Oil & Gas
Stifel is very positive on this small-cap energy play. Northern Oil & Gas Inc. (NYSE: NOG) is engaged in the acquisition, exploration, development and production of oil and natural gas properties, primarily in the Bakken and Three Forks formations within the Williston Basin in North Dakota and Montana.
The company holds working interests in over 2,630 gross (204.3 net) producing wells, including over 2,630 wells targeting the Bakken and Three Forks formations and other wells targeting other formations. It leases approximately 165,910 net acres, all located in the Williston Basin. The company engages in oil exploration and production through nonoperated working interests in wells drilled and completed in spacing units that include its acreage.
The analysts noted this when they initiated coverage on the company:
Our investment thesis is predicated on differentiated asset performance in a preferred basin with limited competing investment alternatives. As a result of improving trends in asset productivity and differentials, the Williston Basin is quickly becoming the preferred quality basin for investors to hedge their Permian Basin exposure. As a result of Northern Oil’s strategic business model, the company has the opportunity to participate in the best wells in the basin and acquire highly accretive assets in an environment with limited buyer competition. Equally important, NOG is the only Bakken pure-play in the sector at present.
The $3.10 Stifel price target compares with the consensus figure of $2.83. Shares closed most recently at $1.56.
Three totally different plays that all have huge upside potential for investors able to commit some of their more speculative capital to these trades. It may make sense to scale in some money as earnings reports are right around the corner.
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