Since the beginning of January, we’ve seen a steady rise in the stock markets. The NASDAQ is up 35% so far this year, and the S&P 500 has gained 19%. There has clearly been a shift in investor sentiment, away from last year’s bear market.
The shift makes sense. The annualized rate of inflation peaked at 9.1% last June, fell to 6.5% by December, and has since fallen further. The June 2023 data showed annualized inflation at just 3%. Additionally, Goldman Sachs currently assesses the probability of a US recession in the coming year at just 20%. All of this has investors feeling that the worst may be behind us, and that it’s worth taking on some added risk.
An appetite for added risk is good for the stock market in general, but it especially good for the higher-risk stocks. For investors willing to take those on, the rewards can be substantial. The penny stocks, equities priced below $5 per share, exemplify this combination of risk and reward, with upside potential that can double or triple the initial investment.
Given the nature of these investments, Wall Street analysts recommend doing some due diligence before pulling the trigger, noting that not all penny stocks are bound for greatness.
With this in mind, we set out our own search for compelling investments that are set to boom. Using TipRanks’ database, we pulled two penny stocks that have amassed enough analyst support to earn a “Strong Buy” consensus rating. Adding to the good news, each pick boasts over 200% upside potential. Let’s take a closer look.
Galecto, Inc. (GLTO)
The first penny stock we’re looking at is Galecto, a clinical-stage biotherapeutic firm working on new treatments, mainly novel small molecule drug candidates, to target the biological processes behind fibrosis, inflammation, and cancers. The company’s drug candidates target the protein galectin-3 and the enzyme LOXL2, each of which has been implicated in fibrotic and inflammatory diseases of the lung and liver; galectin-3 related diseases often advance to cancer diagnoses with a poor prognosis.
The company currently has three main drug candidate products, under study in four ongoing clinical trials, with a fifth trial planned to begin before the end of this year. The leading trial is the Phase 2b GALACTIC-1 study of GB0139, an inhaled galectin-3 modulator. The drug candidate is being investigated as a treatment for idiopathic pulmonary fibrosis (IPF), and is the most advanced product in Galecto’s pipeline. The company announced, in May of this year, that the last patient (of 144) had been dosed in the study. Results are expected for release this coming August.
Two other trials hold near-term catalysts in the form of data readouts. The MYLOX-1 trial, a Phase 2a study evaluating GB2064, a LOXL2 inhibitor, is expected to show top-line results in the second half of this year. This study is focused on the treatment of myelofibrosis. Also expected later this year is interim safety data from the GALLANT-1 Phase 2a trial of GB1211, an orally dosed galectin-3 inhibitor. The GALLANT-1 study is testing GB1211 as a combo with atezolizumab in the treatment of non-small cell lung cancer. Results from an earlier phase of testing showed potential for the treatment combination.
Finally, GB1211 has also shown promise in the Phase 2 Gulliver-2 study, in the treatment of Child-Pugh class b decompensated cirrhosis of the liver. The company released positive top-line results from the study this past June.
Based on multiple potentially significant clinical catalysts as well as Galecto’s $2.35 share price, Cantor 5-star analyst Kristen Kluska thinks that now is the right time to pull the trigger.
“We believe Galecto is currently receiving no credit for its developmental pipeline… We believe Galecto’s stock remains undervalued even if just one of its four lead Phase 2 product candidates ends up being successful; thus, we see multiple ‘shots on goal’ for upside in the near term, with significant 2023 catalysts/inflection points on deck. The literature and early studies support the role of targeting Galectin-3 in key fibrotic indications. These market opportunities are quite large, and we believe even a small market penetration could lead to meaningful revenues,” Kluska opined.
To this end, Kluska rates GLTO an Overweight (i.e. Buy), and her $17 price target suggests the stock will gain an impressive 623% in the year ahead. (To watch Kluska’s track record, click here)
Overall, this stock gets a Strong Buy rating from the Street’s analysts, and that verdict is unanimous – there are 4 recent positive reviews on file. In addition, the $13.50 average price target puts the upside potential at ~482%. (See GLTO stock forecast)
Larimar Therapeutics (LRMR)
Next up is Larimar Therapeutics, another clinical-stage biopharmaceutical company. Larimar is focused on the treatment of complex rare diseases, conditions that are usually progressive and terminal and have few or no current treatment options. The company is using a novel cell penetrating peptide technology platform to develop its drug candidates.
Larimar has one drug candidate in the clinic. This candidate, CT-1601, is recombinant fusion protein capable of delivering human frataxin to cellular mitochondria, and has shown potential as a treatment for the rare – and deadly – pediatric disease Friedreich’s ataxia (FA). FA patients are not capable of producing this essential protein in sufficient quantity, and this treatment path is showing some promise at the trial level.
The drug candidate has shown enough promise that it has been awarded several important designations from both the FDA and the European regulators. These include Rare Pediatric Disease, Fast Track, and Orphan Drug designations from the FDA, Orphan Drug designation from the European Commission, and a PRIME designation from the European Medicines Agency.
In May, Larimar announced preliminary top-line data from the 25mg cohort of the ongoing Phase 2 trial of CT-1601. The results showed that the drug dose promoted a meaningful increase in frataxin levels. In a follow-up, today, Larimar announced that it had received FDA clearance to proceed with the 50mg dose cohort in the Phase 2 study, and to initiate the open label extension trial.
Larimar’s early successes, and its regulatory clearance to proceed further, form the crux of JMP’s Jonathan Wolleben’s stance on the company. He writes, “We feel particularly good that CTI-1601 reached steady state after 14 days (some prior concern about drug accumulation will lead to AEs). We are also pleasantly surprised to see increases in frataxin at the low dose which did not lead to meaningful increases in the prior Phase 1 with less frequent dosing. We do not yet know how these increases translate to a clinical benefit, but the expectation is that some increases will translate to some benefit… We are maintaining our 25% POS for CTI-1601 and expect the FDA’s decision could provide a near-term boost to shares…”
These comments back up Wolleben’s Outperform (i.e. Buy) rating on this stock, while his $15 price target indicates his confidence in a 370% share appreciation for the next 12 months. (To watch Wolleben’s track record, click here)
Overall, the 4 recent analyst reviews on LRMR include 3 Buys against a single Hold, for a Strong Buy consensus rating. The stock is trading for $3.19 with an $11.88 average price target, a combination that suggests a robust 272% upside on the one-year time frame. (See LRMR stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a 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.
Source: https://finance.yahoo.com/news/2-strong-buy-penny-stocks-135940427.html