The rapid rise in the stock market has investors in buying mood. Rising stocks are offering the best returns in today’s climate of ultra-low interest rates, and if investors choose carefully, they can find stocks that are poised to beat the increasing rate of inflation as well.
And that will bring us to penny stocks.
For any investor seeking the best returns, the ‘pennies’ are a natural place to look. Traditionally stocks sold at prices lower than one dollar, penny stocks these days are considered those priced below $5 per share. At that rate, even a small incremental gain in price can quickly turn into a high percentage gain on the total investment. Of course, it’s wise to remember that there could be a very good reason these shares are priced so low. This can be poor fundamentals or headwinds that are too strong to overcome.
Given the risk involved with these plays, they are not for the faint-hearted. That said, Wall Street pros can help investors pinpoint the penny stocks poised to outperform the rest.
That’s where top investment banking firm Wells Fargo comes in. The firm has developed a reputation for expertise in the stock market, and it lands amongst the top 10 on TipRanks’ list of top performing research firms.
Bearing this in mind, we used TipRanks’ database to take a look at two penny stocks getting rave reviews from Wells Fargo, with the firm’s analysts projecting over 400% upside potential for each. Both have also been cheered by the rest of the Street, as they boast a “Strong Buy” analyst consensus. Let’s take a closer look.
We’ll start with IMV, a micro-cap clinical-stage biopharmaceutical company developing a new class of immunotherapy treatments for cancer. The company’s research program is based on its proprietary DPX delivery platform, a unique technology promising a ‘no release’ delivery system. The company’s DPX system can be formulated to induce a robust immune response through the use of peptide antigens. IMV’s program holds the promise of new therapies for hard-to-treat cancers, such as recurrent ovarian cancer and diffuse large B-cell lymphoma (DLBCL).
IMV has three important ongoing Phase 2 clinical trials of its flagship vaccine candidate, maveropepimut-S. Data from earlier Phase 1/1b trials showed best-in-class results.
In the current Phase 2 trials, maveropepimut-S was tested as a treatment for advanced recurrent ovarian cancer. Translational data from the 22-patient ovarian cancer study showed that maveropepimut-S had a clinically significant positive effect, with greater than 10% on-treatment tumor regression, and long-lasting clinical effects. The company will be submitting the Phase 2 clinical study protocol for this trial for FDA review by the end of this year.
In the second study, as a treatment for DLBCL, maveropepimut-S is being evaluated through randomized Phase 2B clinical trial, with recruitment in multiple sites in North America. DLBCL study is in combination with Merck’s anti-cancer drug Keytruda. Like the ovarian cancer study above, this trial has shown significant benefits from treatment, with long-term tumor regression. The clinical update on this clinical trial is scheduled for mid-2022.
The third Phase 2 clinical trial of maveropepimut-S in combination with Merck’s Keytruda is a basket trial against several cancers, including bladder cancer, liver cancer, and MSI-H tumors. The trial was begun back in 2018, and the clinical update is expected by the end of this year.
At $1.45, Wells Fargo analyst Nick Abbott believes the company’s share price could reflect the ideal entry point given everything the company has going for it.
“We believe that IMV has a potential best-in-class vaccine platform, with upside potential as it broadens cancer vaccine maveropepimutS beyond diffuse large B cell lymphoma and beyond survivin as a target, with additional optionality in infectious disease,” Abbott opined.
“We would be buyers of IMV following encouraging statements made on forthcoming bladder and MSI-high cohort basket trial data for maveropepimut-S (MVP-S) plus KEYTRUDA, which the company characterized as ‘very exciting’ and ‘intriguing’ respectively,” the analyst added.
To this end, Abbott rates IMV an Overweight (i.e. Buy), and his $14 price target implies a truly robust upside of 872% for the year ahead. (To watch Abbott’s track record, click here)
Looking at the consensus breakdown, most other analysts are on the same page. With 3 Buys and 1 Hold, the word on the Street is that IMV is a Strong Buy. The $8.04 average price target puts the upside potential at ~447%. (See IMV stock analysis on TipRanks)
Applied Genetic Technologies (AGTC)
Florida-based Applied Genetic Technologies has an interesting niche in the biotech world, focusing on rare, inherited, ophthalmic conditions. That is, genetic diseases of the eyes, that can cause blindness. The company is a clinical-stage biotech researcher using a proprietary gene therapy platform to develop new therapies for patients with these rare, blinding, conditions. Applied Genetics has programs underway for the treatment of X-linked retinitis pigmentosa (XLRP) and achromatopsia (ACHM CNGB3 & ACHM CNGA3).
X-linked retinitis pigmentosa is a sex-linked form of a degenerative eye disease that manifests in early childhood. XLRP is inherited through the maternal line and appears in male offspring. It causes a gradual loss of vision in boys and young men, starting with loss of night vision and continuing through a gradual narrowing of the peripheral vision. Applied Genetics currently has drug candidate AGTC-501 in two clinical trials, the Phase 2 SKYLINE trials and the Phase 2/3 VISTA trial. These trials are based on positive data released earlier this year, from the highest-dosed groups in the Phase 1/2 study. SKYLINE and VISTA have several upcoming catalysts, mainly interim result releases, scheduled throughout 2022, and the company expects that the trials will justify a Biologics License Application to the FDA.
Applied Genetics’ other ongoing pipeline program is aimed at developing a treatment for achromatopsia. This condition is characterized by poor visual acuity, to the point of legal blindness, along with loss of color discrimination and extreme sensitivity to light. It is caused by a mutation in one of several genes, with the most common causal mutations being in CNGB3 or CNGA3. Applied Genetics is currently conducting early stage Phase 1/2 studies of various AAV gene therapy products to test efficacy against both CNGB3 and CNGA3 forms of achromatopsia. Milestones expected over the next 12 months include release of 3-month data on pediatric patients by YE21 and submission of the End-of-Phase 2 briefing to the FDA with feedback anticipated in 1H22.
In coverage of this stock, Wells Fargo analyst Yanan Zhu writes: “Clinical programs in XLRP and ACHM remain on track. With 3-month data from the SKYLINE study in XLRP expected in 1H22 (exact timing to be announced upon completion of dosing), we expect the study to recapitulate the 50% response rate seen in the earlier phase 1/2 study and set the program on a path to approval, as pivotal data from the phase 2/3 VISTA study begin to read out in 4Q22…”
“Overall, we continue to believe AGTC is undervalued relative to the opportunity in its XLRP AAV gene therapy with a best-in-class profile (including 50% response rate, benefit in visual acuity, better safety profile than peers, and evidence of improvement in macular structure),” the analyst summed up.
In line with these comments, Zhu rates the stock an Overweight (i.e. Buy), along with a $12 price target. Should the target be met, a twelve-month gain in the shape of a whopping 424% could be in store. (To watch Zhu’s track record, click here)
Are other analysts in agreement? They are. 5 Buys and no Holds or Sells have been issued in the last three months. So, the message is clear: AGTC is a Strong Buy. The shares are selling for $2.29 and the $13.40 average price target implies an upside of 485% in the year ahead. (See AGTC stock analysis on TipRanks)