Wall Street’s analysts know that buying low is part of a winning stock strategy, and they’ve been looking for stocks that are low – undervalued, and possibly hitting bottom. It’s the first step in an old formula for success, with the next, of course, being to sell high.
Some recent picks from the analyst corps, pulled up via the TipRanks platform, may raise eyebrows. These are stocks new to the public trading markets, but they already have two attributes that may endear them to risk-tolerant investors. They have dropping share prices – and high upside potential. And to sweeten the pie, all three are priced low, between $5 and $15 per share.
Let’s take a closer look at these stocks, to find out what makes them interesting Buys. We’ll flesh out the data with comments from the analysts; here are the details.
First on our list is UpHealth, a behavioral telehealth company. UPH works with medical providers, health systems, and payers to create a comprehensive care system that enables patients with complex medical and behavioral health needs to manage their conditions while improving primary care access. UpHealth uses digital tech to create a holistic health services platform.
Like many ambitious small-cap companies, UpHealth recently entered the public markets through a SPAC transaction. SPACs, special purpose acquisition companies, are public firms that exist solely to locate and merge with a target company. The merger will take the target company public, without the complexities of an IPO. SPACs have grown more popular of late; there were 105 such mergers in 2020, but this year saw more than 112 in just the first four months. The fast pace continues, with the June completion of UpHealth’s SPAC transaction.
The merger was conducted with GigCapital2 as the SPAC company; the targets – two, in this case – were UpHealth and fellow telehealth company Cloudbreak. The combined entity took UpHealth’s name for business purposes and the ticker, and the new UpHealth now has the combined advantage of both targets’ networks. The UPH ticker started trading on June 10, and the combined company started out with a pro forma value of $1.35 billion.
Prior to completion of the merger, UpHealth released its 2020 financial results, basing the numbers on the combined performance of both UpHealth and Cloudbreak. The release showed $117 million in revenues, with a gross margin of 58%. Looking forward, the newly combined company expects to see $120 million in revenue for 2021.
Since entering the NASDAQ, UPH shares have lost 41%. The fall in share price, however, has not prevented 5-star analyst Michael Latimore, of Northland Securities, from putting his approval on the stock.
Initiating his coverage, Latimore says of UPH, “Healthcare spending is immense at about 18% of the US GDP and growing. Spending on digital health is a large and growing share of healthcare IT spending, posting a 25%+ CAGR in many subsegments. UpHealth seeks to capture share within those categories via its horizontal platform and the network effect of onboarding myriad providers, data sources and applications to the platform…. We estimate UpHealth can grow at 50% with 9% EBITDA margins this year, propelled by integrated care and telehealth wins.”
In line with his bullish view, Latimore rates UPH shares as Outperform (i.e., a Buy), with a $13 price target that suggests room for 131% upside growth this year. (To watch Latimore’s track record, click here.)
UPH has picked up 2 recent analyst reviews – and both agree that this is a stock to Buy, making the consensus a Moderate Buy. The shares are priced at $5.65, with an average target of $13, the same as Latimore’s. (See UpHealth’s stock analysis at TipRanks.)
For the next stock on our list, we’ll take a look at another company in the health care universe. Femasys occupies a unique niche, whose nature is implied in the name. This biomedical researcher deals with feminine issues, working on new solutions and devices for treatment of infertility, effective birth control, and the diagnosis of female cancers. Femasys’ goal is the creation of safe, minimally invasive, non-surgical procedures which can be conducted in the provider’s regular office.
The profit potential here is enormous. Industry estimates point to 13 million candidates for permanent female birth control and 9 million for infertility treatment, in the US. They are part of a reproductive health market that exceeds $20 billion.
Femasys has two leading product candidates at the moment – FemBloc, a permanent birth control product, and FemaSeed, an infertility treatment focusing on artificial insemination. Both are in the clinical testing stage. FemBloc is undergoing a 50-person trial to determine the most efficacious confirmation test, with a pivotal study planned for 2H22 and a launch, pending positive clinical trial results, targeted at 2H24. FemaSeed will be the subject of a pivotal study starting in 3Q21, and the company hopes to launch the product commercially in 2H23.
That’s the environment behind Femasys’ June initial public offering. The company put 2.65 million shares on the market, and the FEMY ticker entered the NASDAQ on June 18. The IPO was considered successful, with an opening price of $13 per share and raising over $34.45 million. Since then, however, the stock has slipped by 47%.
Writing on Femasys for Chardan Research, 5-star analyst Keay Nakae takes care to laud “the potential of its next generation products addressing women’s reproductive health to achieve significant market penetration.” He goes on to say, “Its suite of product candidates address several large global market segments in which there has been little advancement for many years… We believe that Femasys is an intriguing microcap story that warrants consideration by new investors.” (To watch Nakae’s track record, click here.)
Nakae rates this stock as a Buy, with a $25 price target to suggest a most robust upside of 262% in the next 12 months. His is the only review on file for this stock, which is currently trading for $6.95 per share. (See Femasys’ stock analysis at TipRanks.)
Codex DNA (DNAY)
We’ll wrap up with Codex DNA, another biotech company with a unique niche. Codex develops the technology and tools needed to synthesize artificial DNA. The company has developed the BioXp, the first DNA printer. Codex’s technology is designed to allow genetic researchers the ability to design, code, and create synthetic DNA, with applications in a variety of fields: cell and gene therapy, biologic drugs, personalized medicine, genome editing and research, and vaccine development.
Codex’s founder, Dan Gibson, developed the Gibson Assembly method, an industry standard in DNA synthetization field. He created Codex to make synthetic DNA and mRNA available to academic and medical researchers through an ‘on demand’ model. Codex boasts the ability to create biologically active mRNA within 24 hours.
Once again, we are looking at a biotech firm with a recent IPO. Codex DNA announced the initial pricing of its IPO on June 17, and started trading on the NASDAQ the next day. The shares were priced at $16 each, in line with expectations, and the company sold 7.666 million shares – the full offer, plus the underwriters’ option. The sale brought in $122.7 million in gross proceeds, before deductions. The company will get the full benefit from the proceeds, as it was the sole seller in the IPO.
DNAY shares have been volatile since their debut on the NASDAQ, and peaked at the end of June at $22 each. The price has since dropped, and the stock has lost 33% of its value. The company’s market cap currently stands at $433.17 million.
Even though the stock is down, Jefferies analyst Brandon Couillard, rated 5-stars by TipRanks, sees it as a buying opportunity. In particular, he notes, “DNAY is a commercial-stage synthetic biology player focused on enabling researchers to rapidly & accurately ‘print’ high-quality synthetic DNA and mRNA at the bench top. It already has a strong installed base (>160 systems), which we think could grow to >1,200 units by ’25… The BioXp addresses multiple bottlenecks involved in writing synthetic DNA and mRNA, which today requires using multiple CROs or complex manual steps in-house. The BioXp brings automation & standardization to the process, dramatically accelerating turnaround times…”
Couillard gives DNAY shares a rating of Buy; his price target, at $23, implies an upside of 55% this year. (To watch Couillard’s track record, click here.)
There is a unanimous Strong Buy consensus rating on this stock, based on 3 reviews from the analysts. The shares are priced at $14.83 and their $26.50 average target is somewhat more bullish than Couillard’s, suggesting growth of 79% for the next 12 months. (See Codex DNA’s stock analysis at TipRanks.)
To find good ideas for 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.