Let’s talk about penny stocks. These are equities that trade for less than $5 per share, the very bottom of the price range. While they are priced that low for a reason – and the reasons may vary – low price in itself doesn’t mean that the stock’s fundamentals are sour. Smart investors can find some true bargains among the penny stocks, and set themselves up for outsized gains.
The opportunity is linked to a simple question: Why is the company’s stock priced so low? If the answer is mainly benign (a reaction to a new share offering, or to an unexpected capital expenditure), then investors have a chance to buy in at a bargain price. The key is learning to recognize when a low-cost stock is sound versus unsound.
No matter which side you take, one thing is certain, due diligence is necessary before making any investment decisions. That’s where the experts come in, namely the analysts at Raymond James. These pros bring experience and in-depth knowledge to the table.
With this in mind, our focus turned to two penny stocks that have received Strong Buy ratings from Raymond James. According to the firm’s analysts, both of these stocks could climb over 300% higher in the year ahead. Using TipRanks’ database, we found out what makes the two such exciting plays even with the risk involved.
ADMA Biologics (ADMA)
We’ll start with ADMA Biologics, a company involved in human blood fractionation, or the derivation of multiple therapeutic compounds from the various components of the blood. The company operates blood plasma fractionation facilities, and uses the plasma-derived products to develop and commercialize new preventatives and treatments for infectious diseases.
ADMA currently has three blood-plasma products on the market. Two of these, Asceniv and Bivigam, are immune globulin solutions intended for intravenous administration in the treatment of primary immunodeficiency disease (PI). The third therapeutic agent, Nabi-HB, is also an immune globulin product, designed for the treatment of Hepatitis B.
The company reported solid revenue in 3Q21, at $20.7 million. This was up 101% year-over-year – and was the first quarter that the company has recorded a positive gross profit. While ADMA typically runs a net loss, that narrowed in the recent quarter; the EPS loss of 13 cents per share was the lowest yet recorded. And, the company remains on track in its expansion efforts, looking to have 10 or more plasma collection sites up and running, with FDA licensing, by the end of 2023.
Looking ahead, the company reiterated guidance of $100 million annualized sales run rate exiting 4Q21, and expects continued quarter-over-quarter growth thereafter.
With shares changing hands for $1.19 apiece, Raymond James analyst Elliot Wilbur sees an attractive entry point for investors.
“Narrative shifts to ADMA’s ability to deliver on further center expansion and supply continuity considering strong overall market demand in order to maintain revenue trajectory. We see a solid near-term trends supporting sequential top line growth and improving margin performance through at least year-end 2022. As such… we are seeing a substantially more favorable risk/reward scenario given continued positive revenue momentum, earlier than anticipated positive gross margin dynamics, reduced net losses, continued positive market dynamics in terms of stable demand trends and tight competitor supply situations, and recent capital raise that removes near-term issuance overhang,” Wilbur opined.
To this end, Wilbur rates ADMA a Strong Buy, and his $5 price target implies a robust upside of ~324% for the year ahead. (To watch Wilbur’s track record, click here)
Overall, ADMA gets a Strong Buy from the Wall Street consensus, too, with 3 positive reviews for a unanimous view. Based on the $4.17 average price target, shares could gain ~250% in the coming months. (See ADMA stock forecast on TipRanks)
VBI Vaccines (VBIV)
The next stock we’ll look at is VBI Vaccines, which as its name suggests develops and produces vaccines for a wide range of human diseases. The company’s pipeline can be divided into two segments – prophylactic, or preventative vaccines, and therapeutic, or vaccine-based disease treatments. VBI made some headlines earlier this year with work on a potential vaccine for the novel coronavirus that has wrought such havoc in the last two years.
In addition to work on COVID-19, VBI has preclinical programs on other coronaviruses and on Zika virus in the prophylactic track. In more advanced programs, another COVID-19 vaccine is at Phase 1 trials, as is a Cytomegalovirus program. Data on the Phase 1b COVID program is expected in 1Q22.
Turning to the company’s therapeutic vaccine program, the two main programs underway are vaccine treatments for Hepatitis B and Glioblastoma. Both are at Phase 2. Top-line interim data on the Hep track is expected for release in 2H22, while the Glioblastoma study is enrolling additional recurrent patients for trial initiation in 1Q22.
While any clinical-stage biopharma company would be thrilled to have such a diverse pipeline, and would rightfully tout it as attractive for investors, the big news for VBI comes from two different sources.
In the first development, this past November the CDC’s Advisory Committee on Immunization Practices (ACIP) updated its recommendations on Hepatitis B vaccinations. The new word from ACIP is that all adults aged 19 to 59 should receive an approved Hep B vaccine. This is a major change, with real implications for public health. It’s estimated that there are up to 2 million US adults living with chronic Hep B infection, and between 15% and 25% of them will develop complications such as cirrhosis or liver cancer.
The second major – a closely related – development for VBI was the December 1 announcement that the FDA approved the company’s PreHevBrio vaccine for Hepatitis B in adults. This makes VBI’s product the only FDA-approved 3-antigen Hep B vaccine for adults in the US. While there are other Hep B vaccines on the market, this differentiation should help VBI with the marketing efforts.
VBI is aiming to launch the PreHevBrio vaccine in the US during 1Q22, and is already looking to expand its reach with this product. The company has announced filing of its New Drug Submission for the 3-antigen Hep B vaccine in Canada, and is working on a submission to the UK’s Medicines and Healthcare products Regulatory Agency.
All of this caught the attention of Raymond James analyst Steven Seedhouse – but he was especially cognizant of the ACIP update. In his note for Raymond James, Seedhouse wrote, “ACIP’s recent expansion (and simplification) of adult HBV vaccine recommendations which now call for universal vaccination against Hep B serve as an important tailwind for VBIV’s launch assuming PreHevbrio also gets specific mention in updated ACIP guidelines (soft expectation of 1Q22). This endorsement would open up universal coverage including a requirement for private healthcare plans to reimburse PreHevbrio for adult vaccination in addition to Medicare and Medicaid coverage.”
Getting into the numbers, the analyst adds, “…[We] estimate a total # of U.S. adult HBV vaccinations per year. We grow that from an estimated ~1.2 million/year currently to 5 million/year over the next decade to reflect the ACIP universal recommendation, and give VBIV 40% market share of the total… our U.S. PreHevbrio peak sales estimate is ~$260M.”
These comments support Seedhouse’s Strong Buy rating on this stock, while his price target of $9 indicates plenty of room for VBIV to run – on the order of 311% in the next 12 months. (To watch Seedhouse’s track record, click here)
While there are only 2 recent reviews on record for VBI, they both agree that the stock is a Buy proposition, making the Moderate Buy consensus unanimous. The shares are priced at $2.19 and the $7.67 average price target suggests a strong upside potential of ~250% by the end of 2022. (See VBIV stock forecast on TipRanks)
To find good ideas for penny stocks stocks trading at attractive valuations, visit TipRanks’ Penny Stocks Screener.
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.