If you’re looking for penny stocks to buy, you might want to get a second opinion. You could go to places like Fintwit or Reddit to discover what the mom-and-pop investors are speculating on. Another way to see varying perceptions of companies is to find out what analysts think.
Using analyst sentiment can be a tool to identify companies that have the potential to grow in the future. By using this approach, traders can create a watch list of penny stocks that could be profitable.
The first step to using analyst ratings is researching various databases that provide ratings. Once traders have identified a database, they can filter the stocks by ratings and compare them to current events for the target company. Traders can identify penny stocks with analysts expecting strong growth potential. This is where to begin building a watch list.
Once you have a list of penny stocks, the next step is to evaluate things like financials, industry trends, and other relevant information. It’s important to remember that cheap stocks are high-risk, high-reward investments. As such, traders must consider the context of the analyst ratings when making investment decisions.
That means knowing a rating from 5 months ago may not be as relevant as it was at the time. Things can change quickly when it comes to low-priced stocks. It only takes one headline to shift sentiment, leading to significant price fluctuations. Here is a handful of penny stocks that could be on the radar following recent analyst updates.
Penny Stocks To Buy According to Analysts
Aravive Inc. (ARAV)
Shares of Aravive have been moving since the beginning of the fourth quarter of last year. One of the most significant catalysts for the biotech company was news on cash milestones. One was a $6 million development milestone from 3D Medicines. It was based on the initiation of the global Phase 3 platinum-resistant ovarian cancer clinical trial in China to develop Aravive’s batiraxcept.
The second cash milestone was a $41.5 million capital raise with proceeds earmarked for funding to get beyond the topline readout of the pivotal Phase 3 trial in PROC. The capital will also go toward incremental data readouts from the Phase 1b/2 trial in clear cell renal cell cancer and expanded Phase 1b pancreatic adenocarcinoma studies expected this year.
The company recently presented data from its ongoing Phase 1b/2 trial of batiraxcept at the American Society of Clinical Oncology (ASCO) Genitourinary (GU) Cancers Symposium. Around the same time as the ASCO symposium, a new 13G filing came out from Baker Bros Advisors, showing a 7.5% stake in the company. Artal International also filed an amended 13G showing an increased stake, bringing its holdings to 9.9% of the company.
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What do analysts think about ARAV stock? If you look at EF Hutton’s latest update, the firm has high hopes for Aravive. It maintains a Buy rating on the penny stock and a price target of $10, roughly 400% higher than current levels.
Sangamo Therapeutics Inc. (SGMO)
Another one of the biotechnology penny stocks on the list is Sangamo Therapeutics. It hasn’t experienced the same trend as Aravive. However, new developments have put it on the radar of analysts this year.
One of the most recent developments came this week when Sangamo announced evidence of the clinical benefit in a Phase 1/2 STAAR study of its Fabry Disease drug candidate, isaralgagene civaparvovec, or ST-920.
“Fabry is a debilitating disease with life-long impact,” said Dr. Robert Hopkin, MD, Cincinnati Children’s Hospital Medical Center, and investigator of the Phase 1/2 study. “The combination of the first kidney biopsy results and the associated urine podocyte data are highly encouraging and compelling. As a whole, this exciting dataset shows that ST-920 has the potential to improve the lives of patients without the need for burdensome ERT treatment.”
Preparations for a potential Phase 3 trial are actively progressing. Sangamo expects a trial to start by the end of 2023, depending on regulatory interactions. In addition, dosing in a Phase 3 AFFINE trial is expected to be complete by the end of this quarter. The pivotal data read-out is then anticipated in the first half of 2024, with a BLA submission expected in the second half of 2024.
Are analysts optimistic or pessimistic about Sangamo? The latest from RBC Capital could shed some light on the subject. Right now, the firm has an Outperform rating on the penny stock. However, it lowered its $22 target to $13. Even with that as the case, RBC’s target remains roughly 336% higher than current trading levels.
Spruce Biosciences Inc. (SPRB)
Rounding out this list of penny stocks is Spruce Biosciences. Yes, it is another biotech company that has experienced a big move in the stock market over the last few months. One of the most significant catalysts came in January. The company announced a licensing pact with Kaken Pharmaceutical to develop and commercialize Spruce’s tildacerfont in Japan. This is its drug candidate for treating congenital adrenal hyperplasia. Spruce will get $15 million upfront and is entitled to more payouts based on milestones and royalties on sales in Japan.
Since then, Spruce has continued releasing news-driven catalysts. In a clinical program update and milestone outline, management discussed several near-term events to keep track of. Javier Szwarcberg, M.D., MPH, & CEO of Spruce Biosciences, said, “2022 was a year of clinical execution across the board, which puts us in a strong position to report topline data for a number of our clinical programs this year, particularly our CAHmelia-203 study for adult classic CAH in the second half of 2023. We also continue to make progress in our Phase 2 P.O.W.E.R. study for the treatment of PCOS and anticipate reporting topline proof-of-concept data in the first half of 2023.”
In addition to that, a financing round for more than $53 million is expected to give much-needed capital. The company said it will “fund operating and capital expenditures into the first half of 2025, including the completion of CAHmelia-203, with topline results anticipated in the second half of 2023, and topline results for CAHmelia-204 anticipated in the second half of 2024.”
Analysts at RBC Capital recently weighed in on the penny stock. The firm maintains an Outperform rating and has an $8 target set. Based on current trading levels of around $2.36, that target is roughly 239% higher.
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List Of Penny Stocks To Watch
- Aravive Inc. (NASDAQ: ARAV)
- Sangamo Therapeutics Inc. (NASDAQ: SGMO)
- Spruce Biosciences Inc. (NASDAQ: SPRB)