It’s tempting to buy only big names and rely on the wisdom of the herd to achieve market returns. And it can work – there’s no question that shareholders of companies like Apple or Microsoft are happy with their long-term interests. But those stocks come with baggage, in the form of high stock prices. Investors looking for an easier entry point should look elsewhere.
Smaller capitalization companies bring other benefits in addition to lower initial buy-in costs. Simple math dictates that a smaller company can grow in value faster than a large company. Think of the magnitude of the surge it would take for Apple — with a market cap of $2.4 trillion — to double in value, for example. However, a company with a valuation of $240 million will have a much easier time reaching that milestone, and the investors will reap the rewards.
With this in mind, we have the TipRanks Database to identify three stocks that fit a profile: a market cap of less than $2 billion and a share price of less than $10. In fact, these small-cap tickers have Strong Buy consensus ratings from the analyst community and offer strong upside potential . We are talking about more than 80% here.
EV technology isn’t new – it’s been around since the dawn of the automobile – but it has matured in recent decades, turning from a curiosity to a viable system. Batteries have improved and combined with modern digital technology, electric cars are now achieving the range, charging times and reliability to compete with today’s combustion engine vehicles.
Xos is an electric truck manufacturer specializing in all-electric medium and heavy trucks optimized for last mile commercial operations. This is a niche particularly suited to EVs, especially larger, heavier models with charging ranges between 100 and 200 miles. That is sufficient for day-to-day operations in urban areas, with the last deliveries taking place in the ‘last mile’ of a supply chain operation. Xos currently has electric truck platforms working with the likes of Loomis and Wiggins Lift Co.
The company is one of many that took advantage of rising market conditions this year to go public and entered the NASDAQ through a SPAC merger that completed this month. The XOS ticker began trading on August 20, and the merger raised $216.7 million in cash for the company.
Michael ShliskyAnalyzing inventory for DA Davidson, notes that Xos has vehicles in service and under construction contract, unlike many speculative EV companies that have “pre-orders.” Speaking about the company’s progress, he writes: “Xos has more than 2,000 vehicles under contract today; this backlog covers the whole of 2021 and a large part of 2022 as well.”
Shlisky also points out that Xos occupies a critical niche in the trucking industry and is well positioned to expand its orders.
“Xos just happens to be entering the Class 8 truck market in a good year, at the start of what appears to be a multi-year up-cycle amid shortages and delays at key ICE manufacturers. This can only help the company, as a substantial need for new truck capacity of any type and high diesel prices should at the very least lead to more applications. Subsidies and upcoming regulations are creating additional tailwinds. The need for new capacity in class 5-6 walk-in vans may be even more pressing, and the openness to trying out EVs may be even greater,” explained Shlisky.
In line with these comments, Shlisky rates XOS as a buy, and its $19 price target implies an upward trend of ~215% for the coming year. (To view Shlisky’s track record, click here)
Overall, it’s clear that Wall Street likes what it sees here. The stock has 3 recent reviews and they all agree to buy, making the Strong Buy consensus unanimous. The stock is selling for $6.04 and the average price target of $20 suggests it has room to grow ~231% over the next year. (See XOS stock analysis on TipRanks)
Taboola is a name that you have probably seen while surfing the web. The company is a recommendation engine, which collects data about the sites you visit and provides side banner links in your web history. Clicks generate revenue – paid by the advertisers to Taboola. It’s a big online business, and while this type of targeted advertising has caused a lot of controversy over data privacy issues, we all know it won’t go away.
A look at some numbers will show how big the company is. Taboola had sales of $1.2 billion last year, partners with 9,000 digital property owners and 13,000 advertisers, and boasts of enabling some 500 million “advertising reach” per day. The company went public in June of this year through a SPAC merger, realizing $526 million from the transaction. The TBLA ticker started trading on June 29.
Taboola has balanced its strong performance on a foundation of solid advertising relationships, with big names such as Bloomberg, Business Insider, CBS News and MSN. The company continues to deliver results, as evidenced by its recently released Q2 21 data, Taboola’s first quarterly report as a public entity. Second quarter revenue was $329.07 million, up 22% year over year. Gross profit grew more than $16 million to $100.2 million, and the company grew its cash and cash equivalents from $152.7 million to $585.2 million. The latter reflects the cash infusion of the completed SPAC merger.
The good results prompted management to raise full-year 2021 guidance to $1.316 billion to $1.323 billion; the previous expectation was $1.308 billion on the upside. Achieving the new guideline will deliver revenue growth of approximately 11% year-on-year.
At the end of July, Taboola acquired Connexity, an e-commerce platform with more than 1 million monthly transactions. The acquisition allows Connexity’s corporate clientele to work with Taboola’s platform.
5 star analyst Ronald Josey, from JMP, writes of Taboola: “We remain focused on Taboola’s core business, which we view as highly defensive given the company’s exclusive, multi-year publishing relationships and ever-active ROI-based advertiser spend. With significant optionality with Connexity, accelerating Taboola’s eCommerce offering and improving revenue, high-impact ads attracting more video budgets, and more non-traditional placements (such as Taboola’s Samsung Brazil partnership), we believe Taboola can move faster. than the general digital advertising in mid-to-high teens. That’s why we think Taboola is undervalued…”
Unsurprisingly, Josey rates TBLA as outperforming (ie, buying), along with a price target of $17. Investors could reap a 94% gain should Josey’s forecast come true over the next 12 months. (To check Josey’s track record, click here)
The unanimous Strong Buy consensus rating on TBLA is based on 5 ratings since the stock entered the public markets. The shares are currently priced at $8.75 each, and their average price target of $16.40 suggests one-year upside potential of ~87%. (See TBLA stock analysis on TipRanks)
Viking Therapeutics (VKTX)
Last but not least is Viking Therapeutics, a clinical-stage biopharmaceutical researcher developing new treatments for metabolic and endocrine disorders. Viking focuses on orally dosed, premium therapies for the treatment of a range of problems, from the liver disease non-alcoholic steatohepatitis (NASH) to diabetes. The company also has a line of research for the medial treatment of hip fractures and related muscle breakdown. Viking’s drug candidates are small molecule compounds.
The company’s pipeline contains several tracks in ongoing clinical trials. The VOYAGE trial is evaluating VK2809 for the treatment of NASH. The phase 2b study has produced clinically significant results, with 88% of patients experiencing a reduction of more than 30% in liver fat levels. The drug also showed an acceptable safety and tolerability profile. The first data from this study are expected next year.
The other important recent clinical trial news came from the phase 1 trials of VK0214, a drug under investigation for the treatment of X-linked adrenoleukodystrophy (X-ALD). VK0214 has passed its Phase 1 study on safety and tolerability after oral dosing for 14 days. No adverse events have been reported and VK0214 has been initiated in a Phase 1b study in the US. Data from this trial is expected to arrive in 2022.
Stand squarely in the bull camp, BTIG analyst Justin Zelin rates VKTX a Buy along with a price target of $20. This target puts the upside potential at a whopping 221%. (To view Zelin’s track record, click here)
Supporting his position, Zelin writes: “We reiterate our position on Viking’s VK2809, a thyroid hormone receptor beta agonist (THRβ or THβ), which is the best-in-class of Madrigal’s Resmetirom, which is currently in Phase 3 development. While MDGL has a 2-3 year lead in development, we expect ‘2809 to have a cleaner safety profile with equally efficacious effects on key NASH endpoints and believe that the next 12-week MRIPDFF interim data from Phase 2b VOYAGE will be a catalyst for the company in 2022. Given the similarities in assets with added benefit to Viking, we see great upside potential for inventory value…”
Overall, Viking has the unanimous approval of the Wall Street analysts, and the Strong Buy consensus rating is supported by 7 recent positive reviews. The stock is priced at $6.23 with an average price target of $15, representing ~141% upside potential over a year. (View VKTX Stock Analysis on 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.