Earlier this month, the S&P 500 officially entered a bear market; the current year-to-date loss is at 21%, and the NASDAQ, which has fallen faster and further, is at a loss of 30% ytd. The rapid turnaround not only brought the bulls back into the corral, but erased all of last year’s price gains, leading most analysts to meditate on the prospects of a recession. Under the headwinds they are considering is the highest inflation in more than 40 years and in response a sharp turn by the Federal Reserve towards higher interest rates.
But at least one strategist says not to worry. Oppenheimer’s John Stoltzfus has staked out a leading position among the bulls and has been calling for positive long-term projections for some time now. The measure of Stoltzfus’ bullishness? He predicts that the S&P 500 will reach 5,330 by the end of the year. Reaching that figure would mean a jump of about 40% or more from current levels.
Stoltzfus outlines his reasoning about the possible trajectory of the market, saying: “We don’t think there’s going to be a recession, we do think we can get around it. It’s not an easy time, but we think this Fed is handling it very well because of the experience with the Great Financial Crisis… We’re not out of the woods yet, but we think we’re on the right track and we think the light at the end of the tunnel is not a locomotive headlight, but sunlight.”
Oppenheimer’s stock analysts have taken these views to heart and have singled out two stocks they see as potential winners — with potential gains that could even significantly exceed Stoltzfus’ forecast. These picks are penny stocks, the cheap stocks that can be picked up at an ultra-low entry cost, less than $5 a share. At that price, even small changes — just pennies — will quickly turn into big percentage changes, and the analysts are predicting a 300% or better gain for these stocks. Using TipRanks’ database, we found out what makes both so attractive, even with the risk involved in these games.
Trevi Therapeutics (TRVI)
The first stock we’ll be looking at is Trevi Therapeutics, a clinical-stage biopharmaceutical company conducting in-depth studies of nalbuphine ER (branded Haduvio), for the treatment of chronic neurologically mediated disorders. Specifically, Trevi studies the effects of Haduvio on chronic itchy skin associated with underlying conditions such as prurigo nodularis (PN), as well as chronic coughing caused by idiopathic pulmonary fibrosis (IPF). In short, Trevi seeks to treat some of the quality of life symptoms associated with serious, chronic conditions that are themselves treatment-resistant.
The company’s only drug candidate, Haduvio, is described as an extended-release tablet form of nalbuphine, a dual-action opioid derivative, and it is a patented product. The clinical data presented on Haduvio in recent months has been generally positive. Trevi achieved a favorable statistically significant efficacy result from the interim analysis in Haduvio’s phase 2 study (CANAL) in chronic cough associated with IPF, where treated patients showed a 77.3% reduction in cough frequency compared to 25.7% with placebo. The next expected update is Haduvio’s phase 2b/3 study in severe pruritus associated with PN (PRISM), expected at the end of June.
Finally, while Trevi still has pre-earnings, it has a solid cash base. The company completed a private equity placement in April of this year, generating gross proceeds of $55 million.
With stocks switching hands for $2.05 each, Oppenheimer analyst Leland Gershell sees an attractive entry point for investors.
“Following recent positive interim Phase 2 data, we are excited about oral candidate Haduvio’s prospects to address chronic cough associated with idiopathic pulmonary fibrosis – a highly disabling and disturbing trait that has no effective therapy. We are also excited about Haduvio’s prospects for severe chronic itching, an often unruly manifestation of several conditions, including prurigo nodularis… We believe Haduvio has more than $750 million in sales potential for both opportunities in the US alone… With TRVI trading At an enterprise value of only ~$75 million and ample cash from a recent financing, we believe Haduvio’s continued development will support the stock’s outperformance,” Gershell said.
To this end, Gershell rates TRVI as an outperform (i.e. buy), and sets a price target of $10 to imply a robust upside potential of 388% over the next 12 months. (To view Gershell’s track record, click here†
All in all, with 3 buy ratings and no holds or sales allocated in the past three months, word on the street is that TRVI is a strong buy. The average price target of $9.33 puts the upside potential at 340%. (See TRVI stock forecast on TipRanks)
Provention Organic (PRVB)
Provention is another clinical-stage biopharmaceutical researcher. It takes an interesting position on the treatment of autoimmune diseases, with the aim of diagnosing, detecting and ‘intercepting’ these conditions before they can develop into lifelong, chronic diseases. This necessarily involves work with pediatric patients, as many autoimmune diseases develop in infancy or early childhood. Since autoimmune diseases are typically long-lasting and often have high unmet medical needs, the overall addressable market here is significant.
Provention has an active drug pipeline, with four clinical trial programs, one preclinical program and one drug scheduled for a regulatory decision by the FDA next August. All in all, it’s an impressive lineup, with plenty of catalysts to look forward to over the next 18 months.
The company’s three leading research avenues include potential treatments for type 1 diabetes (T1D), the most severe form of the disease, lupus and celiac disease. Each of these, while not usually terminal, related to long-term quality of life problems. Provention’s lead program, teplizumab, is under investigation as a treatment for diabetes, and the company’s Biologics license application for the drug was resubmitted for approval last year; the PDUFA date is set for August 17.
As for the other emerging catalysts, Provention is still in the PROTECT Phase 3 trial, a trial of teplizumab in newly diagnosed T1D patients, and expects to release the highest data in 2H23. The PREVAIL-2 Phase 2a trial is studying drug candidate PRV-3279 as a treatment for lupus. This investigation started in January this year and the company is on track to release topline data in 1H24. And finally, the Phase 2b dose-finding placebo-controlled trial of PRV-015, a potential treatment for celiac disease, is underway, with a target enrollment of 220 patients. Provention plans to release data before the end of next year.
According to Oppenheimer analyst Justin Kim, the potential commercialization of teplizumab will be the most important event for this company. He writes: “We are working on three key areas that could be critical to a successful launch: patient identification, physician responsiveness and payer access. In our view, successful implementation in these areas could drive successful commercialization of the product in the initial target audience of high-risk T1D patients.”
“With the PDUFA several months away, we believe equities may be approaching a pliable turning point… Despite the challenging path taken prior to the August 17 PDUFA, we believe the magnitude of this catalyst for equities is broad. could come into the picture and warrant another look at the stock given the general evidence supporting the risk/benefit of the drug and the potential for PK considerations to have been addressed with the agency,” the analyst added. .
With that background, Kim’s Outperform (ie Buy) rating on the stock makes sense. Its price target, set at $16, suggests strong upside potential of 304% for the stock over one year. (To view Kim’s track record, click here†
Overall, Provention has received 6 analyst reviews in the past few months, and these are 5 out of 1 in favor of Buys over Holds, for a Strong Buy consensus rating. The stock’s current selling price is $3.97, and the average price target of $15.40 implies upside potential of ~289%. (See PRVB stock forecast at TipRanks)
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Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.