Some of these analyst stock picks come with big Buy ratings, or the equivalent, and some of the calls have big upside. Outside of the S&P 500, there is a realm of stocks in the small cap category that trades under $10 per share. Sometimes analysts offer considerable upside price targets in this class of stock, which sort of makes sense when you consider that these are far more speculative in nature.
When investors see analyst upgrades and initiations with calls for a stock to rise 50%, 100%, 200% or more, they better know they are not looking at an analyst call in a Dow Jones Industrial Average stock. Over the trailing 52-weeks, only three of the S&P 500 stocks doubled — and not a single S&P 500 stock has risen by 50% so far in 2015.
24/7 Wall St. cannot emphasize enough that these small cap and low-priced stocks are far riskier than traditional Dow and S&P 500 stocks. Stocks of this sort simply do not pass muster under an old broker suitability reference called “widows and orphans funds
A common misconception many investors have is that all small cap or mid-cap stocks grow up to be large cap stocks. This is just a myth, and some companies flounder forever — even among this weekend’s analyst stock picks under $10. Many companies in this small cap and micro-cap universe even come with risks that are big enough that the companies could literally disappear if the base-case scenarios or upside scenarios do not come to fruition.
Here are five analyst stock picks in the small cap arena with shares under $10 but with big upside potential.
Asterias BiotherapeuticsThis small cap biotech outfit sells itself as being in regenerative medicine with a stem cell technology platform. The boutique firm MLV started coverage with a Buy rating. What stands out here is that the $9 price target would imply a potential upside return of over 125% from Friday’s closing price of $3.98 and the pre-call close of $3.95.
Asterias Biotherapeutics Inc. (NYSEMKT: AST) has a mere $123 million market cap. It has a 52-week range of $1.51 to $6.95, and it recently raised about $5.5 million via a public offering. Be advised that this small player just moved from the OTC Bulletin Board last October to the NYSE MKT.
Two disclosures about this big rating — first is that MLV served as sole book-running manager for the recent capital raise, and second is that the average volume is under 50,000 shares per day and that it has only traded over 100,000 shares twice so far in 2015.
IAMGOLD
HSBC Securities gave a key upgrade to IAMGOLD Corp. (NYSE: IAG) late last week. The firm raised the nearly $1 billion market cap outfit to Overweight from Neutral. Another bump here was that IAMGOLD was given a price target of $3, versus a $2.28 prior closing price.IAMGOLD’s shares closed at $2.45 on Friday, implying upside of just over 30% from the prior close and upside of over 22 % from Friday’s closing price. Thomson Reuters lists the consensus price target as $3.10, and the average price target is about $3.10 — with a highest analyst target supposedly still being all the up at $6, if it has not been adjusted lower. IAMGOLD has a 52-week range of $1.42 to $4.35, and it traded above $20 during gold’s booming days of 2011
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JAKKS Pacific
JAKKS Pacific Inc. (NASDAQ: JAKK) managed to beat earnings expectations recently, and on Thursday the small-cap toy and electronics maker was raised to Buy from Neutral at the boutique firm of B. Riley. It also threw in an $8 price target, which implies upside of 25% from the $6.62 prior close.
Shares closed at $6.66 on Friday, which still leaves an implied upside of about 20%. The market cap is a mere $300 million here, and the stock has a 52-week range of $5.70 to $9.48. Of the five analysts that cover JAKKS, the average price target for the stock is $10 and the median price target is $9.
Ohr PharmaceuticalThis one is a small cap emerging pharma player with a focus on of ocular diseases. Roth Capital issued a new Buy rating on this $195 million stock, and it issued a whopping $30 price target. If Roth is correct, Ohr Pharmaceutical Inc. (NASDAQ: OHRP) has an implied upside of well over 200% from its $7.69 close.
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Only three analysts have targets on this stock listed, and the other two targets are $34 and $20. The company just named a new chief clinical officer, who previously served as Vice President of Ophthalmology at Regeneron and was in charge of the Eylea development program. Ohr recently raised almost $29 million via a securities offering. The underwriters in that offering were Cowen as the sole book runner, Brean Capital and LifeSci Capital as co-managers, and Roth Capital Partners as a financial advisor in the transaction.
Smith Micro Software
Smith Micro recently guided 2015 revenues to be between $45 million and $49 million in 2015, which implies growth of 22% to 33% from 2015. Its market cap is a mere $67 million, and its average volume is around 300,000 shares per day. In short, this is far from a household name.
Smith Micro has a 52-week range of $0.66 to $2.69, and it has been public since the 1990s. The firm H.C. Wainwright raised its rating to Buy from Neutral right at the start of 2015, and there are only a handful of analysts which follow this micro-cap stock.
Again, these are all highly speculative stocks by nature. There is a reason you do not see analysts from Goldman Sachs, Morgan Stanley and other bulge bracket firms covering small cap and low-priced stocks very often. If you want proof of just how speculative this category of stocks can be, 24/7 Wall St. has never even covered two of these five stocks in any capacity in the past 10 years.
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Source:http://247wallst.com/investing/2015/02/28/5-small-cap-analyst-stocks-under-10-with-massive-upside-potential/
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