Finding solid returns is the key to success in stock investing, but there are almost as many paths to that as there are investors. You can pack your portfolio with long-term stocks featuring slow appreciation; you can invest heavily in trending stocks that are riding a bubble, hoping to cash out at the right time; or you can buy into low-cost equities that feature high potential to boom. That last is the allure behind the penny stocks.
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Traditionally priced for a dollar or less per share, today the ‘pennies’ are considered those stocks trading for under $5. At this low price, even small changes in the share price are magnified – a small gain will turn into a high-percentage return, or a small dip can turn into a deep loss. While the reward potential is real, penny stocks are instruments for risk-tolerant investors.
So, how should investors approach a potential penny stock investment? By taking a cue from the analyst community. These experts bring in-depth knowledge of the industries they cover and substantial experience to the table.
Taking this into account, we used TipRanks’ database to identify two penny stocks that have earned a “Strong Buy” consensus rating from the analyst community. Not to mention each offers up massive upside potential and could rally to $10, or even more.
Milestone Pharmaceuticals (MIST)
The first penny stock we’re looking at is Milestone Pharmaceuticals, a clinical-stage biopharma firm with a focus on cardiac issues. Specifically, Milestone is working on an innovative therapy for cardiovascular conditions, and aims to ‘fill the gap’ that exists between severe episodic cardiovascular conditions, such paroxysmal supraventricular tachycardia (PSVT), atrial fibrillation, and angina, and emergency room visits. Currently, these serious cardiac events usually result in an ER visit; Milestone wants to develop an at-home treatment for acute patients living with heart rhythm disturbances.
To achieve this goal, Milestone is working with the drug candidate etripamil, an investigational new drug for the treatment of PSVT, as well as atrial fibrillation and rapid ventricular rate (AFib-RVR). Unlike most medications for these conditions, which require administration by medical personnel, usually in a hospital setting, etripamil is designed to be self-administered by the patient, at home.
Etripamil, a proprietary calcium channel blocker, is formulated as a nasal spray, which allows for rapid absorption due to the rich network of blood vessels in the nasal lining. This mode of administration ensures a quick onset of action with a short duration of effect, minimizing potential side effects.
Milestone’s progress is supported by two clinical programs, including a Phase 2 trial of etripamil in the treatment of atrial fibrillation and a Phase 3 trial focusing on PSVT treatment. On the PSVT track, the company published positive Phase 3 data showing that the primary endpoint was met, with 64.3% of patients who used self-administered etripamil showing a return to normal sinus rhythm within 30 minutes, compared to 31.2% of patients on placebo. In addition, the drug showed an acceptable safety and tolerability profile. The company is on track for an NDA submission by the end of September.
In the Phase 2 trial, data released by Milestone in May of this year showed that self-administered etripamil gave AFib-RVR patients a sustained reduction in ventricular rate, over a period of 60 minutes. Topline data from the study is on track for 2H23.
Currently going for $2.95 apiece, Cowen TD’s 5-star analyst, Ritu Baral, believes MIST’s share price presents an attractive entry point. The potential of etripamil as a game-changer, along with its large addressable market and consequent potential to generate revenue, form the thesis behind Baral’s bullish stance.
“Etripamil demonstrated rapid, stat sig efficacy in the pivotal Phase 3 RAPID study, with excellent safety. MIST plans to submit an NDA in 3Q23. If approved, etripamil will be the first and only intranasal CCB for pSVT as current CCBs approved require acute intravenous administration under medical supervision. MIST’s approach would potentially change the treatment paradigm with its ease of self-administration and portability,” Baral opined.
“We forecast U.S. peak sales of ~$668MM peak sales in 2030 (7 years after potential launch in 2024). We think the consistent safety and impressive efficacy profile will likely set up etripamil for great commercial success, particularly given the limitations of the current standard of care management for moderate to severe and massive unmet need in pSVT… If etripamil demonstrates success in AFib studies, the market opportunity could nearly double for the therapy,” the analyst added.
To this end, Baral rates MIST an Outperform (i.e. Buy), along with a $17 price target that implies a powerful upside of 476% for the year ahead. (To watch Baral’s track record, click here)
Similarly, other analysts are in MIST’s corner. 4 Buys and 1 Hold assigned in the last three months add up to a ‘Strong Buy’ consensus. Its $14.20 average price target brings the upside potential to 381%. (See MIST stock forecast)
Beyond Air (XAIR)
Next up is Beyond Air, a biotech medical researcher working on new treatments for severe lung conditions. The company’s treatment mode involves the use of nitric oxide (NO), which in its medical grade can be mixed with common air and is used to treat lung infections, pulmonary hypertension, chronic obstructive pulmonary disease (COPD), and even some solid tumor cancers.
Beyond Air’s research pipeline is based on its proprietary LungFit device, a medical device used for generating nitric oxide from room air – possible because NO gas is composed of nitrogen and oxygen, the most common components of the atmosphere – and mixing it with breathing air on demand. The LungFit can produce NO at a range of concentrations, from low levels below 80ppm to higher levels between 80ppm and 400ppm. The company’s LungFitPH, the low concentration unit, is designed for use in hospital neonatal ICU settings, while the LungFitPRO and LungFitGO, the higher concentration units, are designed for hospital and home use respectively.
On the clinical side, Beyond Air has both the LungFitPRO and the LungFitGO undergoing trials, and is in discussions with the FDA on study initiation and pivotal trial design. The company plans to initiate further clinical studies of the LungFitPRO by the end of this year.
These discussions with the FDA follow the approval of the LungFitPH system for use. The approval covers persistent pulmonary hypertension of the newborn (PPHN), and commercialization activities began in Q4 of fiscal year 2023, which ended on March 31. Phase 1 of the commercialization included contracting with multiple hospitals in the US; Phase 2 of commercialization involves expansion of the commercial team to power an expanded release of the product.
In addition to these developments, Beyond Air has plans to submit a PMA supplement to the FDA, for a label expansion of the LungFitPH to patients undergoing cardiac surgery. The PMA is expected to be submmitted before the end of calendar year 2023.
This is another medical technology with game-changing potential, and Piper Sandler analyst Jason Bednar is impressed. He writes of the company and its product line, “BeyondAir’s LungFit PH solution should be no-brainer technology conversion for hospitals in our view. We say that as the therapeutic delivery and patient outcomes are consistent with technologies already established on the market while LungFit PH has the benefit of being a cylinder-free system. Eliminating the use of antiquated systems relying on bulky high-pressure cylinders for the treatment of PPHN should provide economic, logistical, and convenience benefits to hospitals.”
“The near-term investor focus will be on the success and ramp of LungFit PH in the U.S., but the long-term potential for XAIR is inclusive of an international rollout of LungFit PH, as well as having Nitrous Oxide delivery be a platform-type technology administered across multiple applications. CE Mark and an international partnership for LungFit PH could be solidified in the next year, while there are multiple regulatory and clinical data milestones over the next few years that could help XAIR establish footholds in new indications (Viral Pneumonia, NTM, COPD, Autism) and serve as positive stock catalysts that aren’t being readily accounted for by the market,” the analyst added.
Looking ahead, Bednar gives XAIR shares an Overweight (i.e. Buy) rating, and he sets his price target at $10, showing his confidence that the stock will rise ~209% by this time next year. (To watch Bednar’s track record, click here)
Overall, the Strong Buy consensus rating on XAIR is unanimous, based on 4 positive analyst reviews set in recent weeks. The shares have a $12.75 average price target, even more bullish than Bednar’s, suggesting a 293% upside from the share price of $3.24. (See XAIR stock forecast)
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.
