Finding returns is the point of investing, it’s the path to profits and prosperity. But how to get there – that’s the question investors need to answer. One common strategy – and one that offers plenty of promise for investors who don’t mind shouldering the extra risk – is to go after penny stocks.
Traditionally seen as stocks priced for just pennies per share, these equities are now defined as those with a share price of $5 or less. For the tough-minded investors, these low-cost stocks present a combination of risk/reward that few other investment instruments can match.
The risk here stems from the same factor that fuels the potential gains. At the low share price of the ‘pennies,’ even an increase of a few cents can quickly turn into large-scale returns, sometimes on the order of a triple-digit gain. At the same time, should the stock fall, the low price will magnify the losses.
So, how are investors supposed to determine which penny stocks are poised to make it big? By taking a cue from the analyst community. These experts bring in-depth knowledge of the industries they cover and substantial experience to the table.
With this in mind, we used TipRanks’ database to zero in on only the penny stocks that have received bullish support from the analyst community. We found two that are backed by enough analysts to earn a “Strong Buy” consensus rating. Not to mention each offers investors an upside potential of over 300% in the coming months. Let’s take a closer look.
Medicenna Therapeutics (MDNA)
We’ll start with Medicenna Therapeutics, a clinical-stage biopharma company using directed evolution/genetic engineering techniques to develop a new class of interleukins, Superkines, to ‘modulate, fine-tune, or amplify the immune system’ in order to make it more effective against challenging diseases with unmet medical needs.
The company’s research platform, as noted, is based on interleukins, a class of cytokines, cellular messenger molecules that help to regulate the immune system. These messengers are specific to various functions, and are amenable to targeted use in the suppression of cancer tumors. Medicenna’s Superkines are enhanced interleukins created to alter tumor microenvironments and to deliver cell-killing agents directly to cancerous or other diseased cells, without harming healthy tissue.
The company’s leading drug candidate, MDNA11, had some interesting recent data releases, and more catalysts coming up. The company has reported dose escalation data from the Phase 1/2 ABILITY study, showing a possible partial response in pancreatic cancer, and the fifth dose escalation cohort has begun enrollment. Medicenna expects further data from the ABILITY study, including a comprehensive update from dose escalation, which remains slated for 4Q22.
In addition to MDNA11, Medicenna also has MDNA55, a late-stage candidate for glioblastoma. MDNA55 has completed a Phase 2b trial in relapsed glioblastoma, and Medicenna is currently in the process of identifying a development/commercial partner before a Phase 3 trial is initiated.
As each share is currently going for $0.93, Medicenna’s price tag could present investors with an attractive entry point, according to Oppenheimer’s Matthew Biegler. The analyst takes a deep dive into the details of MDNA11, which he sees as the key factor for Medicenna in the immediate future.
“Management unveiled new details about the PDAC patient who responded to MDNA11. The patient was heavily pretreated with multiple liver metastases, and had failed induction chemo before being trialed on Keytruda, which he/she did not tolerate. We think the response (~30%+ tumor shrinkage) is unprecedented… We continue to scratch our heads at the muted stock reaction, and the data-to-valuation gap makes Medicenna one of (if not the) most underappreciated stocks in our coverage… We believe activity could continue to improve and yield additional responses as dosing is pushed higher… Medicenna plans to present updated data from all six patients treated in the 60 μg/kg in September,” Biegler wrote.
As an ‘underappreciated stock,’ MDNA earns an Outperform (i.e. Buy) rating from Biegler, and his $8 price target suggests a hefty 764% upside for the coming year. (To watch Biegler’s track record, click here)
That Wall Street likes this stock is clear from the unanimous Strong Buy consensus rating, based on 4 recent analyst reviews. MDNA has an average price target of $5.74, which suggests a 12-month gain of ~523% is in store for the stock. (See MDNA stock forecast on TipRanks)
Longboard Pharmaceuticals (LBPH)
The second stock we’re looking at is Longboard Pharma, a biopharma firm that is working to develop a new generation of G protein-couples receptors, a proven class of drugs. In fact, GPCRs currently make up 40% of all prescription drugs. Longboard is creating a new group of small-molecule drug candidates in this class, designed to target diseases and conditions of the central nervous system.
The company has three drug candidates in its development pipeline; two in preclinical discovery and the third, LP352, in Phase 2 human clinical trials.
LP352 is a 5-HT2C superagonist, orally dosed, designed for the treatment of epileptic seizures. Specifically, LP352 is under study for the targeting of seizures related to developmental and epileptic encephalopathies.
The PACIFIC study, a Phase 1b/2a clinical trial, remains on track for completion during 2H23. The company recently expanded the age range for trial patients to 12 to 65 years, and began an additional open-label extension study in the trial.
Longboard has also initiated a Phase 1 trial of LP352, as an open-label study assessing pharmacokinetics and pharmacodynamic of the drug candidate in healthy volunteers. The company expects to release data from this study by year’s end 2022.
Covering this stock for Cantor Fitzgerald, 5-star analyst Charles Duncan sees plenty of potential for investors to grab onto.
“At the current share price, LBPH is trading at < 1x cash, which we believe is an attractive entry point for investors with longer-term time horizons, supporting our view of the stock having ‘deep value’. Longboard is well-capitalized to deliver product pipeline milestones in the next 12-18 months that may actualize share price appreciation, most notably of which is the PACIFIC readout in 2H23, as well as data reads from an ongoing normal human volunteer pK/pD study, and the OLE with ‘352,” Duncan opined.
In line with this bullish stance, Duncan rates the stock an Overweight (i.e. Buy) and puts a $21 price target on the shares, implying a one-year upside potential of 387%. (To watch Duncan’s track record, click here)
Of the 5 recent analyst reviews on file here, all are positive, or Buys, giving Longboard stock a unanimous Strong Buy consensus rating. The average price target of $18 indicates room for 317% from the current trading price of $4.31. (See LBPH stock forecast on TipRanks)
To find good ideas for penny stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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