There are no sure things in the stock market, and stocks with the highest upside often have the greatest amount of risk as well. Cobalt International Energy, Inc. (CIE), Globalstar, Inc. (GSAT) and Celldex Therapeutics, Inc. (CLDX) are three risky stocks with at least 40% average analyst upside.
Cobalt International Energy (CIE)
As oil prices have plummeted, high-cost North American operations were the first to be shut down. Offshore activities have some of the highest costs in the business.
As an investor or a company, you never want to put all your eggs in one basket. Unfortunately, that is exactly the position that CIE finds itself in. CIE’s only production currently comes from its 9.4% stake in the Anadarko Petroleum Corporation (APC) Heidelberg project in the Gulf of Mexico.
In the current oil price environment, CIE’s situation seems precarious at best. But if it can survive the downturn, shareholders could be rewarded with huge upside. The average price target of the 11 analysts currently covering CIE is $6.71, roughly a 220% upside from its current price.
GSAT provides communications services via satellite to under-served areas of the world. GSAT’s stock recently popped more than 12 percent following the company’s announcement that it expects to gain FCC approval for its terrestrial low-power service (TLPS). The program would convert a portion of the company’s satellite spectrum into a private Wi-Fi channel that GSAT could then market.
Back in November, Odeon Capital analyst Jason Bernstein valued GSTR’s spectrum at $4.4 billion if it were to be converted to Wi-Fi. That’s a 95% upside from its current $2.26 billion valuation.
The two analysts that currently cover the stock see roughly 28% and 174% upside, respectively. However, the TLPS plan is far from complete. In the meantime, GSTR’s 2.7 debt-to-equity ratio suggests plenty of risk to counter the potential reward.
Celldex Therapeutics (CLDX)
If a trial of a small-cap biotech company’s primary drug falls flat, the stock can get wiped out overnight. CLDX bears assumed that that’s how the story would play out when the company’s Phase III brain cancer trial with Rintega fell flat. However, CLDX has several other cancer projects in the works and nearly $300 million in cash and marketable securities on its balance sheet.
CLDX is now exploring the potential for its new lead drug candidate, glembatumumab vedotin, in treatment of triple-negative breast cancer. Unfortunately, roughly one out of every eight women will develop breast cancer. With up to 15% of those cancers of the triple-negative variety, the potential market for glembatumumab vedotin is huge. CLDX is also exploring the efficacy of glembatumumab vedotin in treatment of skin and lung cancer as well.
Positive trial data for the company could send the stock skyrocketing. The nine analysts that cover CLDX stock have a median price target of $9/share, or upside of 98%.
For now, CLDX seems to have enough wiggle room to breathe comfortably. But if the company whiffs on another lead drug candidate, it could be all over but the crying.
Disclosure: As of this writing, Wayne Duggan had no positions in any of the stocks mentioned.