Is 2018 the year of the soaring small-cap stocks? The S&P 600 index has raced up almost 12% this year. For comparison, the large-cap SPDR S&P 500 ETF (SPY) has floated under 5%.
Which small-cap stocks are worth a closer look? The RBC team says the biotech sector is on a tear this year: "In fact, 2018 biopharma M&A (mergers and acquisitions) activity (in terms of dollars) has nearly tripled that seen up to mid-June 2017.”
Moreover, RBC calls initial public offering and secondary activity “vibrant,” as mid-way through the year, we’ve already seen 23 biotech IPOs (in counting). That translates to a collective $2.5 billion boost. The iShares Nasdaq Biotechnology ETF (IBB) has fired up 8% this year, right over the S&P 500.
Here, we used TipRanks'stock screenertool to find stocks with a small market cap in the healthcare sector. We likewise set filters to only source names exhibiting ‘positive’ to ‘very positive’ investor sentiment. Let’s explore three drug makers backed by best-performing analysts on the Street.
Endocyte
Endocyte (ECYT), an Indiana-based biopharma company developing targeted therapeutics for personalized cancer treatment has earned a ‘Strong Buy’ analyst consensus. The biotech stock has won 3 buy ratings in 3 months- and shot up nearly 278% just this year alone. Consensus expectations also tell a bullish story: analysts call for roughly 13% in upside potential ahead. See ECYT Price Target and Analyst Ratings Detail.
One analyst in Endocyte’s bullish corner is a top analyst on Wall Street: Wedbush’s David Nierengarten. In fact, the analyst recently lifted his price target on the biotech stock from $15 to $21 (21% upside potential). Red flags on safety circling rival Bayer’s prostate cancer drug Xofigo could translate to stronger competitive standing for Endocyte’s 177Lu-PSMA-617.
Nierengarten, who is a top 150 analyst reaps 18.0% in average profits when recommending ECYT, rates the stock an Outperform. (See David Nierengarten’s other stock recommendations)
Five-star Cowen analyst Boris Peaker also bats for the bulls on the small-cap stock. Peaker upgraded the stock to Outperform this year, calling the company’s CAR-T program a “free lottery ticket.” The stock exhibits favorable risk/reward for its valuation- and doesn’t even factor in the CAR-T program yet. (See Boris Peaker’s other stock recommendations)
Mirati Therapeutics
Clinical-stage oncology company Mirati Therapeutics (MRTX) has attracted recent investor attention. American global assets manager BlackRock hiked its stake in MRTX by 24.3% to $19.47 million during the first quarter, according to the latest SEC filing. See MRTX Price Target and Analyst Ratings Detail.
BlackRock isn’t the only big investor getting more confident on the biotech player. Among other investors, the first quarter also saw Northern Trust Corp buy another 5,197 shares, taking the stake up to $1,852,00.
Year-over-year, the ‘Strong Buy’ stock has raced like wildfire: close to 1084%. Mirati has drawn 6 buy ratings around the Street in 3 months- one including a top 100 analyst.
H.C. Wainwright’s Edward White makes a killing when he bets bullish on this biotech pick: an impressive 138.5% in profits. Notably, the analyst rates MRTX a Buy and just boosted his price target from $42 to $63 (14% upside potential). (See Edward White’s other stock recommendations)
Here’s why: White anticipates “higher expectations for probability of success” for non-small cell lung cancer (NSCLC) drug sitravatinib. Now, the analyst sets a 45% probability of success (5% higher).
Look out for the drug come 2027. White forecasts $407 million in revenues for sitravatinib in combination with checkpoint therapy and $448 million for sitravatinib as a single agent. Additionally, the analyst calls for $179 million for NSCLC drug mocetinostat. “We value the early stage pipeline at $4.40/share to arrive at our price target,” writes White.
Akebia Therapeutics
Akebia Therapeutics (AKBA) is a biopharma company focused on delivering innovative therapies to patients with kidney disease through hypoxia-inducible factor biology. The ‘Strong Buy’ stock is one to watch as it boasts significant return potential. In the last 3 months, 4 analysts have reiterated buy ratings; and consensus expectations spell out a monster nearly 107% in upside potential. See AKBA Price Target and Analyst Ratings Detail.
Top analyst Difei Yang at Mizuho (ranked #86 out of over 4,800 analysts covered on TipRanks) is bullish on Akebia’s deal to merge with Keryx Biopharmaceuticals. The biotech players intend to become a renal-focused company with eyes on ruling the kidney disease market. Akebia CEO John Butler is set to lead the new combined company.
The deal showcases enticing long-term potential. Yang asserts, “We like the merger from a strategic and financial standpoint over time. We believe Keryx and Akebia products are complementary and will provide multiple avenues of value creation for the ‘new’ Akebia. CEO John Butler is the right person to lead the new company in our opinion given his strong track-record in the renal business.” (See Difei Yang’s other stock recommendations)
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This article was written by Julie Lamb.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
