Stocks can flirt with a price bottom for a lot of reasons. Usually, however, investors will assume that there is something fundamentally unsound about the stock, or the company. Perhaps its business model is flawed, perhaps its product has grown unpopular – these, and many more factors can drive the share price down.
But sometimes, perhaps just as often, a stock price will fall when there is no underlying unsoundness. A spate of bad news, a quarter that misses expectations, or a bad sales month – fleeting factors like these might push a stock down, but will also frequently reverse themselves quickly. For a savvy investor, that window between the share price dropping and the causal factor reversing can mark an opportunity.
Plenty of Wall Street stock analysts are willing to recommend stocks that may seem to be running down – but have potential for powerful gains in the near- to mid-term.
Using TipRanks database, we pulled up two such stocks. These are equities with Strong Buy ratings and enough upside potential to convince the analysts that what goes down might come up.
Cellectis SA (CLLS)
Headquartered in Paris, and with offices in New York City and Raleigh, North Carolina, Cellectis is a cutting edge biopharma company engaged in cancer immunotherapy research. The company is working to develop chimeric antigen receptor (CAR) T-cells, a technology that uses the patient’s immune system to combat the cancer cells. Cellectis’ proprietary gene editing tech is geared to develop CAR-T as an ‘off the shelf’ treatment.
Shares in CLLS peaked at $34 in January of this year, and since then the stock has slid 58%. This slide has come even as the company’s research pipeline and partnerships are showing progress.
The company’s leading treatment candidates are the UCARTs, universal chimeric antigen T-cells, a class of new drugs tailor made to combat particular cancers. Each UCART is an allogenic CAR T-cell intended for wide distribution. Cellectis has four of them in the development pipeline, with the leading candidate, UCART19, under development in partnership with Servier and Allogene. As part of the partnerships, Allogene is conducting a study on its own version, called CD19. This study, conducted in the US, has shown success as proof-of-concept for the UCARTs generally. In Cellectis’ own study, UCART19 showed a 55% overall patient survival during its Phase 1 clinical trial against hematological malignancies.
Among the other UCARTs under development, UCART22 stands out. This candidate, under investigation as leukemia treatment, specifically relapsed and refractory B-cell acute lymphoblastic leukemia, is currently undergoing a Phase 1 dose escalation study, with results expected at the end of this calendar year.
During the first quarter of this year, Cellectis’ new drug candidate manufacturing facility, under construction in Raleigh, North Carolina, showed progress toward it go-live schedule for late this year. The facilities laboratories have gone on-line, and method transfer and qualification activities are ongoing.
Despite the hefty losses incurred so far in 2021, Baird analyst Brian Skorney sees plenty of reason for optimism in CLLS shares. The analyst rates the stock an Outperform (i.e. Buy) and his $39 price target suggests it has a 170% upside potential in the year ahead. (To watch Skorney’s track record, click here)
“We continue to believe in the long-term prospects of allogeneic CAR-T, and note that recently announced data from Cellectis’ partner Allogene’s CD19 CAR-T program provides encouraging signals that TALEN-derived allogeneic products may be able to match the clinical profile seen with the autologous first-generation products… Allogene has also started to study a consolidation regimen that has the potential to further increase the number of responders. All told, we believe that by demonstrating clinical efficacy akin to autologous products, Allogene’s data provide strong proof-of-concept for the UCART platform,” Skorney opined.
Overall, this stock’s Strong Buy consensus rating is built on 5 recent reviews, which break down 4 to 1 in favor of Buy versus Hold. The shares are priced at $14.44 and their $37.33 average target implies a one-year upside of ~159%. (See CLLS stock analysis on TipRanks)
Youdao (DAO)
Shifting gears, we’ll turn our attention to one of the Chinese internet’s major search engines, Youdao. This company, established 14 years ago, is the featured search app on the NetEase web portal, and offers the full range of search options that web surfers have come to expect: news, music, images, websites, blogs – the whole 9 yards. Youdao also hosts an asset for Chinese web users, in the form of an online dictionary in both Chinese and Chinese-English writing. Youdao’s web products also include online translation tools, the Youdao Dictionary Pen, and a range of online learning tools.
Shares in DAO peaked last August, when they hit $46. The stock is down since then, having lost 57% of its share value. This loss has come despite the company’s steadily increasing quarterly revenues.
For the first quarter of 2021, DAO showed $204.5 million at the top line (1.3 billion RMB), up 22% sequentially and an even more impressive 163% year-over-year. The company saw strong growth in its online learning services and products, which grew 156% and 279% year-over-year respectively. Online marketing revenue grew 40% yoy, and gross billings increased by 55%. The company’s gross margin increased from 43% in the year-ago quarter to 57% in this year’s Q1.
Covering this stock for Nomura, analyst Jessie Xu sees the company profiting from increased web user traffic along with a diverse range of products.
“We expect the momentum to continue given the company’s strong R&D capabilities and new product pipeline. We also see upside in the monetization of other online courses (including China University MOOC and NetEase Cloud Classroom) in the long term,” Xu noted.
The analyst added, “DAO currently trades at 2x 2022F P/S, vs. major peers’ P/S range of 3-4x (our estimate), which is the lowest level among its China online K12 education peers… We expect DAO to outperform peers… as we believe it is relatively resilient to regulatory changes.”
Xu’s Buy rating on the stock comes along with a $30 price target that implies room for 51% growth this year. (To watch Xu’s track record, click here)
Overall, Youdao has 3 recent reviews on file, and all are positive – making the Strong Buy consensus unanimous. The shares are priced at $19.91 and hold an average price target of $32.33, giving a potential upside of ~62% for the year ahead. (See Youdao’s stock analysis at TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched 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.
