Investing

Jefferies Has 5 Stocks Trading Under $10 With Incredible Implied Upside

Lee Jackson

Published: August 24, 2019 9:15 am

Last Updated: January 30, 2020 5:01 pm

While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Often the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.

Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.

Each and every week, we screen our 24/7 Wall St. research database looking for stocks with Buy equivalent rating at major firms and priced under the $10 level (last week’s picks included Encana and Vivint Solar), and this week was no exception. We found five more stocks that could provide investors with some solid upside potential. While more suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential.

C&J Energy Services

This smaller cap company is well liked across energy desks on Wall Street. C&J Energy Services Inc. (NYSE: CJ) is a completion and production services company that provides well construction, well completions and well services to the oil and gas industry. The company also manufactures, repairs and refurbishes equipment used in the oilfield services industry.

C&J operates in various North American onshore basins. Its Completion Services segment includes the hydraulic fracturing services, cased-hole wireline services, coiled tubing services and other well stimulation services. Its Well Support Services segment includes services, including rig services, fluid management services and other special well site services.

The company recently announced that it has entered into a definitive agreement with Keane Group in which the companies will combine in an all-stock merger of equals. The combined company will be positioned as an industry-leading, diversified oilfield services provider with a pro-forma enterprise value of approximately $1.8 billion, including $255 million of net debt.

Jefferies has restarted coverage of the stock with a $13.50 price target. The Wall Street consensus target is $12.00, and shares were trading at the close of Friday’s session at $8.93.

Cleveland-Cliffs

Jefferies likes this top mining play. Cleveland-Cliffs Inc. (NYSE: CLF) is a mining and natural resources company. It is a supplier of iron ore pellets to the North American steel industry from its mines and pellet plants located in Michigan and Minnesota. The company’s segments include U.S. Iron Ore and Asia Pacific Iron Ore. Operations of the latter are located in Western Australia and consist of its Koolyanobbing operation.

While the company is a pure play iron ore miner, Cleveland-Cliffs offers high leverage to U.S. steel prices and production as U.S. contracts are linked to a mix of seaborne iron ore and U.S. steel prices.

Cleveland-Cliffs investors are paid a 2.91% dividend. The Jefferies price target set at $15, and the posted consensus target is $13.30. The stock closed well below those levels on Friday at $7.97.

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Freeport-McMoRan

This may be a compelling value at current trading levels, and it is one of the top picks at Jefferies in the sector. Freeport-McMoRan Inc. (NYSE: FCX) is the world’s largest publicly traded copper and molybdenum producer, and the eighth largest gold producer. Its key operating and development assets are in Indonesia, North and South America, and Africa.

Highly leveraged toward copper mining, the company could be a big player in a scenario of rebuilding and repairing old and battered projects and would clearly benefit from stronger demand and higher prices for industrial commodities.

The $14.50 Jefferies price target is well below the $19.19 posted consensus target price. Shares closed on Friday at $8.83 apiece.

Intra-Cellular Therapies

This smaller cap biotech has huge upside potential for aggressive investors. Intra-Cellular Therapies Inc. (NASDAQ: ITCI) is a biopharmaceutical company that focuses on the discovery and clinical development of innovative, small molecule drugs that address underserved medical needs in neuropsychiatric and neurological disorders by targeting intracellular signaling mechanisms within the central nervous system.

The company’s lead product candidate, ITI-007, is in clinical development as a first-in-class treatment for schizophrenia. The company also includes preclinical programs that are focused on advancing drug candidates for the treatment of cognitive dysfunction, in both schizophrenia and Alzheimer’s disease, and for disease modification and the treatment of neurodegenerative disorders, including Alzheimer’s.

The Jefferies team started the stock with a massive $16 price objective earlier in August. That compares to the consensus target price of $14, and the stock was trading at $8.49 on Friday’s close.

Osmotica Pharmaceuticals

This is another small cap biotech play with massive upside to the Jefferies target. Osmotica Pharmaceuticals PLC (NASDAQ: OSMT) is a fully integrated biopharmaceutical company focused on the development and commercialization of specialty products that target markets with underserved patient populations. Its diversified product portfolio in the specialty neurology and women’s health therapeutic areas, together with non-promoted complex formulations of generic drugs, form the foundation of our unwavering commitment to improve patients’ lives.

Osmotica has a late-stage development pipeline highlighted by two NDA candidates that recently completed Phase 3 clinical trials: arbaclofen extended-release tablets for spasticity in multiple sclerosis patients and RVL-1201 for the treatment of blepharoptosis, or droopy eyelid.

The Jefferies price target is a gigantic $10. The consensus target is $8, and the stock was changing hands at $2.80 per share as the week came to a close.

These are five stocks for aggressive accounts looking to get share count leverage on companies with sizable upside potential. While not suited for all investors, they are not penny stocks with absolutely no track record or liquidity, and major Wall Street firms have research coverage on them. Note though that while markets have retreated somewhat from all-time highs, value stocks still come with some risks.