There is another side of Wall Street research outside of Dow stocks and large cap stocks, and that is the small cap stocks and stocks with share prices under $10. When possible, 24/7 Wall St. accumulates and publishes summaries of those analyst stock picks trading under $10 — and this week we tracked eight analyst calls in stocks that were under $10.
Investors may get excited because these are low-priced stocks or because they have low market caps. After all, someone has to eventually grow up to be the next behemoth with exponential possible returns. Still, 24/7 Wall St. wants to again make the firm reminder that these stocks, with small market caps and with prices under $10, are generally far more risky than your Dow stocks and well-established companies.
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Investors need to know that the risk profile is far worse in small caps and low-priced stocks than in normal companies with large established values. Almost none of these would pass a “widows and orphans” suitability test. And to emphasize risk even further, some stocks of this sort might not even survive as viable entities through time.
Of the eight stocks under $10 with key analyst calls this past week, we have one gold stock, two were solar, two were financials, and three were technology. We show the current price and the prior price to the close, the analyst target price named, the consensus analyst price target, and even a 52-week range. Some color was added on each as well.
First Niagara Financial Group Inc. (NASDAQ: FNFG) was raised to Buy from Hold at Jefferies at the start of the week, after beating earnings expectations the prior week. The price target was also put at $9.50, which now is a street-high price target. Shares of the regional bank closed at $8.25 after the upgrade, and they were back down to $8.11 in mid-Friday trading. This bank’s market cap is still small, at just under $3 billion. Its 52-week range is $7.00 to $9.61, but note that First Niagara’s consensus price target was $8.12 on Friday’s close.
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Genworth Financial Inc. (NYSE: GNW) was started as Buy at Jefferies on Friday. What stands out here is that the $10 price target, versus a $6.94 prior close and a Friday close $6.98, implies upside that is above 45%. Genworth has been a truly troubled stock over time, and the turnaround that was taking a hold blew apart on it early last November. Genworth’s 52-week trading range is $6.75 to $18.74, and the consensus analyst price target is almost $12.
Groupon Inc. (NASDAQ: GRPN) was raised to Buy, all the way up from a Sell rating, at a boutique firm named Ascendiant Capital Markets at the end of the week. The listed price target was $10, versus a prior $7.34 close. Shares tried to rally 2% initially, but the realization that Ascendiant probably does not create millions on millions in share volume of new stock purchases based on its research kept the stock from running handily. Shares ended the week at $7.16, and the consensus price target is now only $8.46. Groupon has a 52-week range of $5.18 to $11.21, yet its market cap is still worth $4.8 billion.
Harmony Gold Mining Co. (NYSE: HMY) was raised to Overweight from Neutral at J.P. Morgan in a mixed gold sector report early in the week. The $3.90 price target was above the prior $2.88 close, and the price target was still around 30% higher than the $3.10 share price on Friday’s close. This is one of the smaller gold outfits in the call, and we would point out that this South African gold miner has a consensus analyst price target of only $3.23 and a 52-week range of $1.53 to $3.80.
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JA Solar Holdings Co. (NASDAQ: JASO) was raised to Outperform from Sector Perform by RBC Capital Markets. The Chinese photovoltaic solar cells and solar power products maker was given a $13 price target in the call. That was up from a $7.77 prior close and was still much higher than the $8.00 close on Friday. The belief here is that China’s solar makers might be less affected by subsidy expirations that are coming down the pipe in the United States. Keep in mind that the consensus analyst price target was above $14 on Friday. The stock has traded in a 52-week range of $6.70 to $13.14.
Ruckus Wireless Inc. (NYSE: RKUS) was above $10 by the close of Friday, but the stock was not above $10 when the wireless connectivity player was started with a Buy rating at Citigroup. Its price target was put at $13, which is actually almost $3 under the consensus analyst price target. This call from Citigroup came just one week after the stock was raised to Outperform at Northland Securities, and that upgrade had the same $13 price target. Ruckus shares changing hands at $10.59 as Friday trading came to an end, versus a $9.94 close before Citigroup touted it. Ruckus has a 52-week range of $8.65 to $15.50.
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STMicroelectronics N.V. (NYSE: STM) was given a very positive call from Bank of America Merrill Lynch on Wednesday. The firm said that the FX tailwinds are likely to accelerate into 2015, making its margin target of 10% achievable. The firm reiterated its Buy rating and $10.30 price target. The prior close was $8.34 prior close and shares traded at $8.30 by the close on Friday. What investors will care about is that this is the highest listed analyst price target of all U.S. firms covering STMicroelectronics. This target also represents 24% in implied upside, significantly higher than the average upside for large semiconductor companies. The consensus price target is actually under $9, and the 52-week range is $6.27 to $10.00.
Trina Solar Ltd. (NYSE: TSL) was also raised to Outperform from Sector Perform by RBC Capital Markets on Friday. Its price target was raised to $13 from $12, and that was against a prior closing price of $8.86 and a 52-week range of $7.52 to $18.77. Shares were up over 5% at $9.32 earlier on Friday trading on the news, but they ended the day at $9.05. Amazingly, the consensus price target is above $16. Does that mean that a call for Trina is “conservative” when compared to peers? Doubtful, but everything is relative.
Source: Thinkstock
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