The big marquee names tend to get the most love and attention from investors and analysts alike. Monoliths like Apple, Amazon and Facebook have provided incredible returns for investors over the years. While there is room for further upside, the question for growth minded investors is how much further can these mega-caps really soar.
So, have latecomers missed the boat on these ubiquitous corporations as far as sky-high returns are concerned? Possibly. But no matter, there’s always opportunity for those willing to seek it out. The big names get all the press, but some of the little guys have been making giant strides in the market, too. What’s more, the lower valuation means these companies further down the food chain have ample room for growth.
With this in mind, we used TipRanks’ Stock Screener tool to find three tickers that not only grew substantially in 2019, but also boast huge upside potential in the year ahead. Let’s dig a little deeper.
Evofem Biosciences Inc. (EVFM)
First up, we come across a small company in the biotech space. In fact, with a market cap of just $264.5 million, Evofem qualifies as a micro-cap. If things work out for the women's sexual and reproductive health products company as some on the Street predict, it won’t be staying in small-cap territory for long.
Last year, Evofem added an impressive 47% to its share price. Investors were excited about the progress of the company’s lead candidate Amphora, a non-hormonal woman-controlled vaginal gel. The product completed a Phase 3 clinical trial for the prevention of pregnancy last year, with top-line data meeting the primary endpoint. Evofem has resubmitted a marketing application to the FDA for the approval of Amphora for a contraception indication, with a PDUFA date set for May 25 (the company received a CRL for the application in 2016). Adding to the good news, Amphora is also being evaluated in clinical trials for the prevention of chlamydia and gonorrhea in women. Positive top-line results from the AMPREVENCE Phase 2b trial were announced in December.
Oppenheimer’s Leland Gershell likes what he’s seeing when it comes to Evofem. The 5-star analyst recommends “investors take advantage of current levels to build a position in EVFM."
Gershell further added, “Amphora's Phase 2b trial in STI prevention, which demonstrated significant reductions in chlamydia and gonorrhea infection in sexually-active women, came as a positive surprise as investors had been focused on the initial contraception opportunity. We expect eventual label expansion to STI prevention to be enabled by a single confirmatory trial, to begin in 2H20. With Amphora set to be a non-hormonal, use-on-demand contraceptive as well as the only non-barrier method to prevent sexually-transmitted infections, we have revised our projections to capture the incremental STI opportunity.”
The positive data prompted Gershell to reiterate an Outperform rating on Evofem and give the price target a considerable increase - from $11 to $20, as it happens. The implications? Possible upside of a sky scraping 254%. (To watch Gershell’s track record, click here)
Two fellow analysts tracked over the last three months concur. Therefore, Evofem’s additional Buy ratings coalesce into a Strong Buy consensus rating. While not quite as mercurial as Gershell’s thesis, the average price target of $14.33 indicates possible upside of an impressive 154%. (See Evofem stock analysis on TipRanks)
Magenta Therapeutics Inc. (MGTA)
If you’re looking for growth stocks, you could do a lot worse than Magenta Therapeutics. The small-cap’s share price increased by a massive 162% in 2019. Boosted by positive pipeline updates and encouraging data, the share price was sent soaring. 2020 has started out rather more tentatively for Magenta – the stock has pulled back by 19% since the start of the year. Some on the Street, though, believe now is the right time to pull the trigger on this promising biotech.
Magenta’s focus is on the use of stem cell transplants to reset patients’ immune systems and, therefore, cure autoimmune diseases, blood cancers and genetic diseases. Currently, radiation and chemotherapy are more widely used to kill disease-causing cells, which in turn, can lead to unwanted side effects such as toxicity and infertility, a situation Magenta hopes to rectify.
The company has several candidates in various stages of development. Its lead candidate is CD117-ADC, a drug designed to enable curative stem cell transplant or gene therapy by removing the genetically mutated cells in the bone marrow that cause certain genetic diseases. Preclinical data has shown promising results, and management expects to present initial clinical data for MGTA-117 in 2021.
BTIG’s Amanda Murphy sees no reason for the recent sell-off and suggests investors buy on the weakness. Murphy said, “In our view, the future of the company is dependent on the success of its conditioning programs. We elected to be conservative in our market model by limiting the addressable market for these products to indications where the procedure is already well-established and considered standard of care (i.e., blood cancers); however, we see considerable upside if Magenta is able to increase adoption in indications where the procedure is not widely used despite being the only curative treatment option (i.e., autoimmune diseases and hemoglobinopaties). There is also potential for these programs to be used prior to stem cell gene therapy.”
Accordingly, then, Murphy reiterated a Buy rating on Magenta along with a price target of $20. A handsome gain of 62% could be heading investors’ way should her price target materialize over the next year. (To watch Murphy’s track record, click here)
Out on the Street, only two other analysts currently have a view on the promising biotech. One suggests a Buy, while the other recommends a Hold. Added together, Magenta receives a Moderate Buy consensus rating. The average price target of $19 suggests possible upside of a plentiful 54%. (See Magenta stock analysis on TipRanks)
DHT Holdings (DHT)
Although not quite as mercurial as Magenta’s 2019, DHT Holdings’ gains in 2019 are nothing to be sniffed at. An increase of 96% would be considered an extremely successful year in anyone’s book. So far in 2020, though, the Bermuda-based oil tanker owner-operator is sailing on choppy waters; the share price is down by 32% year-to-date.
New shipping regulation, which came into effect at the start of the year, in addition to sanctions on China’s COSCO Dalian shipping unit (for transporting Iranian crude oil) sent VLCC spot shipping rates through the roof last year. Tanker rates, though, have gone down in 2020. Add to this congestion in China ports, the uncertainty amidst the coronavirus scare and an earnings miss in the last quarterly report as additional reasons for downward pressure on the stock this year.
Right now, the tanker market is in the midst of a perfect storm of uncertainty and seasonality. However, Evercore’s Jonathan Chappell expects the situation to “eventually correct amid a strong fundamental backdrop.”
Chappell said, “Even with rates declining meaningfully amid usual seasonal refinery demand softness and the initial panic regarding the coronavirus, DHT is still set up to generate record profitability and robust dividends in both 2020 and 2021. Unless the virus ends up being a black swan event that hurts global oil demand by one million barrels per day or more for an extended period of time, the muted orderbook should provide a buffer to crude tanker rates.”
What does this mean for investors, then? It means Chappell kept his Outperform rating on DHT as is. The price target, though, comes down a notch, from $12 to $11. The new figure still implies substantial upside potential of 97%. (To watch Chappell’s track record, click here)
With 2 Buys and 1 Hold, the consensus on the Street is that DHT is a Moderate Buy. Should the average price target of $8.93 be met over the coming months, investors will be taking home a 60% profit. (See DHT stock analysis on TipRanks)