Sometimes penny stocks are penny stocks for a reason — they are out of favor. And many times, there is a good reason for it. A high percentage of stocks that are very low priced will not survive. They are destined for bankruptcy and oblivion.
Many times these penny stocks are not followed by Wall Street. In other words, none of the big broker dealers analyze and provide research about them. The penny stock companies just aren’t big enough to make it worth the analysts’ time. They are off the radar screen of the institutional money-management funds.
But the following seven companies are different. They are followed by The Street. And they all have buy recommendations on them. They are also trading well below their average target prices.
Their stocks may be penny stocks now, but the Wall Street firms that follow them believe that they won’t be for long.
Analysts believe these companies are undervalued. They think the stocks will eventually rally and trade at much higher prices. Then they will become mainstream and no longer trade as penny stocks.
That means that the time to get in is now. Here are seven penny stocks to consider:
- Allena Pharmaceuticals (NASDAQ:ALNA)
- Aileron Therapeutics (NASDAQ:ALRN)
- Obseva (NASDAQ:OBSV)
- Rewalk Robotics (NASDAQ:RWLK)
- Marchex (NASDAQ:MCHX)
- Mustang Bio (NASDAQ:MBIO)
- Mediwound (NASDAQ:MDWD)
Penny Stocks: Allena Pharmaceuticals (ALNA)
Chart by TradingView
Allena Pharmaceuticals is a late-stage clinical biopharmaceutical company. It develops medicine used to treat patients with rare and severe metabolic and kidney disorders in the United States. It has a market capitalization of $91 million. The company was founded in 2011, and it is based in Newton, Massachusetts.
Five of the big Wall Street firms follow Allena. They include B. Riley, Cowen, H.C. Wainwright, Ladenburg Thalman and Wedbush securities. Even though Allena has lost money over each of the past four years, the firms all have it rated as a buy or strong buy. The average target price is $6.67.
This is the red line on the above chart. As you can see, the current share price is well below it. If ALNA was to rally to that price, it would be an increase of about 270%.
Aileron Therapeutics (ALRN)
Aileron Therapeutics is a clinical-stage biopharmaceutical company. It develops and sells drugs that are used for oncology and other therapeutic areas. Its customers are in the United States. The company was was founded in 2001, and its headquarters are in Watertown, Massachusetts.
Two of the big Wall Street research firms follow Aileron. Both H.C. Wainwright and William Blair cover it, and they each think the stock is a buy. Their average target price is $4 per share.
As you can see on the above chart, three years ago shares were trading around $12. Since then they have been in a long downtrend.
But these brokers think that now is a good time to buy. The red line is the target price. Aileron’s shares are currently trading at about 50% of it.
ObsEva is a clinical-stage biopharmaceutical company. It develops and sells therapeutics and medicines for reproductive health and pregnancy. The company was founded in 2012 and is based in Geneva, Switzerland.
In late 2018, shares of OBSV reached levels around $16. Then they went into a long downtrend before finding a bottom around $2. The have recovered somewhat, and the current price is about $3.80 per share. But they could have significant upside potential.
This company is widely followed by Wall Street. Five companies follow ObsEva, and they all love it. H.C. Wainwright, Jeffries & Company, JP Morgan, SVB Leerink and Wedbush Securities all have either buy or strong buy ratings on its stock.
The average price target is $11.67. This is the red line on the above chart. If OBSV was to rally to this level, it would be a gain of more than 200%.
ReWalk Robotics (RWLK)
ReWalk Robotics is a medical device company with very cool products. It designs and develops robotic exoskeletons for individuals with mobility impairments.
RWLK is currently a micro-cap stock. With the price at its current level, the valuation is about $56 million. It was founded in 2001, and the headquarters are in Israel.
The company has lost money over the past four years, but the size of the loss has been getting smaller. In 2016, it reported a loss of $32.5 million. In 2017, it was $24.7 million. The loss in 2018 was $21.7 million, and the loss for 2019 was $15.6 million.
As you can see on the above chart, in June 2019 the price almost reached $7 a share. It trended lower through last April and found a bottom around the $1.25 level. Since then, it has recovered some of its losses.
H.C. Wainwright is the only broker that covers RWLK. They have given it a buy rating with a $2.50 target price. That is about 10% higher than where its shares are currently trading.
Marchex operates as a call-analytics company. It’s products are meant to be used by businesses to understand customer conversations in phone calls and text messages.
Before Covid-19, shares of MCHX traded above the $4 level. But then in the sell-off last March, they went into a steep decline before finding a bottom around $1.25. Since then they have rallied and are currently trading around the $2.80 level. But if the brokers that cover Marchex are right, this rally could still have a long way to go.
Two boutique firms follow Marchex. Northland Capital and Roth Capital each have buy ratings on the stock. The average price target is $3.75. As you can see on the above chart, this is significantly higher than the current price. If MCHX was to get there, it would be a gain of about 34%.
Mustang Bio (MBIO)
Mustang Bio is a clinical-stage biopharmaceutical company. It’s products include cell and gene therapies. The company was incorporated in 2015 and is based in New York City.
As you can see on the above chart, in the first half of 2018, shares of MBIO traded above $12. Then they went into a steep decline and closed out the year around $3. Since then they have traded in a range between $3 and $5 per share.
But that may be about to change. The brokers that follow Mustang are all predicting a breakout.
The are four firms that follow MBIO, and they all have it rated as a buy — B. Riley, Cantor Fitzgerald, H.C. Wainwright and Oppenheimer. The average target price is $11.20. If the shares rallied that high, it would be a gain of more than 145%.
Chart by TradingView
MediWound is an integrated biopharmaceutical company. It develops, manufactures and sells therapeutics products that are used to treat severe burns and other hard-to-heal wounds. The company was founded in 2000 and is headquartered in Israel.
After three years of losing money, in 2019 MediWound turned a profit. That could be why the stock has performed so well.
As you can see on the above chart, MDWD staged a significant rally since last May. Back then, shares were trading around the $2 level. Now they are trading around $5. And there is a chance that the rally continues.
The three firms that follow MediWound all believe it is a strong buy at current levels. They are H.C. Wainwright, Oppenheimer and Cowen. The average target price is $6.17. That’s more than 21% higher than current levels.
At the time of this publication, Mark Putrino did not have any positions (either directly or indirectly) in any of the aforementioned securities.