Stock Analysis & Ideas

Bargain Shopping? 2 ‘Strong Buy’ Stocks That Are Down 50% This Year

Who doesn’t like to find a good bargain? With inflation rising these days, quality buys at low prices seem like they’re getting harder to find – but maybe the bargain hunters are looking in the wrong places. The stock market has been slipping during the first quarter, and that’s giving investors an opportunity to find compelling stocks at low prices.

You may need to make these choices soon, though. The stock market has been showing signs of a rebound this week. The S&P 500 gained over 4%, in a bounce that found support from a series of tailwinds: a sudden drop in oil prices, the expected Fed rate hike has been fully priced in, and – positive investor sentiment on discount-priced stocks.

So let’s see what’s available in the market’s bargain corner today. We’ve used the TipRanks database to pull details on two stocks that are down sharply this year – but that also have ‘Strong Buy’ ratings from Wall Street’s analysts, a sign that the pros are not giving up on them. Both also feature robust triple-digit upside potential, indicating the possibility to double or more going forward. Are these stocks right for your portfolio? Take a closer look below, and decide.

IDEAYA Biosciences (IDYA)

We’ll start with a precision medicine biopharma company, IDEAYA. This firm is researching new treatments for various cancers, using molecular diagnosis to select patient populations for precisely targeted, synthetic lethality-focused therapeutic agents. In short, these drug candidates are designed to attack specific cancer cells, and offer the promise of becoming first-in-class or best-in-class treatment options.

IDEAYA’s pipeline features two main drug candidates, IDE397 and IDE196 (branded as darovasertib). IDE397 has several preclinical research tracks ongoing, and one clinical-phase study as a monotherapy for solid tumors. Darovasertib has two clinical-phase trials underway, and one preclinical program in the works.

Looking at the clinical trials, we find that earlier this month IDEAYA released interim data on its ongoing Phase 1 clinical trial of IDE397 monotherapy. The data release showed that the drug candidate exceeded its clinical effect target across all cases, and that Cohort 5 of the study showed no serious drug-related adverse effects. The company is now enrolling patients in Cohort 6 of the dose escalation stage of the Phase 1 study. By mid-2022, IDEAYA plants to initiate Phase 1/2 monotherapy cohort expansions in non-small cell lung cancer and esophagogastric cancer.

The IDE397 trials are important for another reason, as well. The company has a collaboration agreement with GSK, and GSK is approaching a decision point – it must decide weather or not to opt-in on additional collaborations. Should it do so, IDEAYA will stand to receive an opt-in payment of $50 million, and additional milestone payments going forward, of $465 million or higher.

On the darovasertib trials, IDEAYA has reported that the enrollment continues in the Phase 1/2 clinical trial in combination with crizontinib, as a treatment for MUM and GNAQ/11 patients. The company has already reported preliminary data, showing a robust clinical effect that met initial goals. IDEAYA is investigating expansion opportunities for this combination therapy. The company has completed patient enrollment in a Phase 1/2 trial of darovasertib as a monotherapy for MUM patients, and to initiate the trial by mid-year.

Looking at the discount side, IDYA shares are down ~50% so far this year. However, in coverage for investment firm Baird, analyst Joel Beatty explains why he sees this drop as an opportunity for investors.

“With the biotech sector having pulled back so much, an increasingly common question from investors is if any SMid-cap stocks in our universe stand out as particularly undervalued. We suggest IDYA. We believe an opt-in decision this year from GSK is likely to boost the stock higher. And, we see potential for this to become an acquisition by GSK, rather than an opt-in. At this depressed stock price, we believe the benefits of the approaching GSK opt-in decision outweigh risk around FDA feedback on MUM (anticipated in 1H22),” Beatty commented.

In-line with these comments, Beatty rates IDYA shares an Outperform (i.e. Buy), and sets a $28 price target to suggest an upside potential of 128% for the year ahead. (To watch Beatty’s track record, click here)

Overall, it’s clear from the unanimous Strong Buy consensus that Wall Street likes what it sees in this biomedical research firm. The stock is currently trading for $12.29 and its $27.50 average target implies an 12-month upside of ~124%. (See IDEAYA stock forecast on TipRanks)

Scholar Rock Holdings (SRRK)

Next up is another biopharma company. Scholar Rock is researching new treatment for a range of applications: spinal muscular atrophy, oncology, fibrosis, and iron-restricted anemias. Most of these research tracks are still in early stages of discovery and preclinical development – but two are at the clinical trial stage. SRK-015, or apitegromab, is a potential treatment for spinal muscular atrophy, and SRK-181 is a drug candidate in the oncology field.

The TOPAZ trial, for apitegromab, is a Phase 3 randomized, double-blind, placebo-controlled study of the drug as a treatment for spinal muscular atrophy. TOPAZ was initiated in November 2021, enrolled 48 patients, and has a scheduled 12-month run.

Also ongoing is the DRAGON study, a Phase 1 proof-of-concept trial of SRK-181. This drug candidate is a selective inhibitor of latent TGFβ1 activation under investigation as a potential treatment for a variety of solid-tumor cancers. The study has entered the dose escalation stage, and the preliminary efficacy and safety data are expected later this year.

These are all solid developments for the company, and show an active research program with a high potential – but even so, the stock is down ~50% this year.

David Nierengarten, 5-star analyst with Wedbush, notes in detail this company’s clinical programs and cash balance, before coming to a bullish bottom line: “We continue to see a significant opportunity for apitegromab in the non-ambulatory Type 2 & 3 SMA population… We look forward to the anticipated two-year data readout from the TOPAZ study in mid-2022… We [also] recommend buying SRRK shares ahead of the anticipated DRAGON Part B data later this year.”

To this end, Nierengarten puts an Outperform (i.e. Buy) rating on SRRK shares, along with a $50 one-year price target that indicates potential for an impressive 320% upside. (To watch Nierengarten’s track record, click here)

All in all, this ‘Strong Buy’ stock has received 5 recent reviews, which include 4 Buys and 1 Hold. The average price target here is $52, implying an upside of 337% for the next 12 months. (See SRRK stock forecast on 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.

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