While biotech stocks offer some of the most pertinent ideas available in the market, they can be awfully risky. One bad clinical result and boom – there goes your hard-earned money in the toilet. To mitigate the downside risks, it may be better to consider undervalued enterprises.
Of course, specifically targeting biotech stocks that trade below their intrinsic or perceived value offers no guarantee of success. Still, given the sometimes extreme mobility that the ecosystem facilitates, it may pay to have calculated exposure to the unheralded entities. In many cases, these ideas are already beaten down so in theory, they’re likelier to be trading near their bottom price ranges.
Combined with endorsements from top Wall Street analysts, these biotech stocks just might surprise you.
Incyte (INCY)
A multinational pharmaceutical firm, Incyte (NASDAQ:INCY) specializes in multiple therapeutic areas, including oncology, inflammation, and autoimmunity. Although one of the underappreciated ideas among biotech stocks, it does receive a moderate buy assessment from Wall Street analysts. As well, the average price target lands at $73.94, implying 22% upside potential. The highest target reaches $92, projecting nearly 52% growth.
Even better for speculators, INCY in its point-and-figure (P&F) chart prints a low pole reversal. Essentially, this pattern indicates that after falling for a significant amount, the bulls may be ready to bounce shares higher. It’s not an unreasonable assumption either. Since late October, INCY stock has been printing a series of higher lows.
On a fundamental note, Incyte offers relevancies across several viable subsectors. For example, Future Market Insights points out that the global autoimmune disease therapeutics space could reach a valuation of $123.5 billion by 2033.
Lastly, INCY trades at only 12.81X forward earnings, below the sector median 20.5X. If you’re looking for a solid deal, it’s one of the biotech stocks to buy.
United Therapeutics (UTHR)
Headquartered in Silver Spring, Maryland, United Therapeutics (NASDAQ:UTHR) develops novel, life-extending technologies for patients in the areas of lung disease and organ manufacturing. Analysts love UTHR stock, pegging shares a consensus strong buy. Overall, the average price target lands at just under $300, implying 32% upside potential. The high side soars to $375 or 68% up.
On a technical level, UTHR is just below parity against the January opener. However, it’s been on the move, suggesting significant bullish interest. In the business week ending Feb. 23, UTHR stock swung up over 6%.
Fundamentally, InvestorPlace contributor Chandler Capital noted that recently, the company’s artificial heart called UHeart was successfully transplanted into a human. Even more encouraging, management estimates that human clinical studies for seven of its artificial organs programs could launch in 2025. To Chandler’s point, that would address a burgeoning market.
Plus, UTHR stock is undervalued, trading at only 10X forward earnings at last count. With organ transplant representing a massive need, United is one of the top biotech stocks to buy.
Jazz Pharmaceuticals (JAZZ)
One of the more intriguing ideas for biotech stocks, Jazz Pharmaceuticals (NASDAQ:JAZZ) released Epidiolex, a cannabis-based drug for the treatment of childhood epilepsy. Therefore, it’s a top-tier idea if you’re interested in cannabis plays, as InvestorPlace’s Joel Lim points out. Analysts are quite enthralled with JAZZ stock, rating it a consensus strong buy with a $185.91 price target. That comes out to an upside potential of almost 41%.
Nevertheless, Lim warns that JAZZ stock suffered a significant drop in market value over the past year. The red ink coincides with the company’s considerable research and development as management looks to roll out drugs to enhance cancer therapy. Additionally, Jazz is undergoing Phase 2 trials for its post-traumatic stress disorder (PTSD) medications.
Because of the red ink, JAZZ is looking at a subterranean forward earnings multiple of 6.83X. In addition, shares trade at only 2.43X trailing-year sales, even though the company posts a robust three-year revenue growth rate of 15.9%. It’s worth investigating if you’re seeking a bargain idea among biotech stocks.
Veracyte (VCYT)
Based in San Francisco, California, Veracyte (NASDAQ:VCYT) is a global diagnostics company that focuses on cancer. Essentially, the company’s high-performing tests enable clinicians to make more confident diagnostic, prognostic, and treatment decisions for challenging diseases. Analysts peg shares a consensus moderate buy with a $34 price target, projecting over 53% upside potential. Over the past year, the highest target was $37, representing a 67% lift.
Fundamentally, Veracyte plays an important role among biotech stocks because of the underlying pertinence. A cancer diagnostic is not something to mess around with – people need to know for sure. And that means bare minimum metrics for false positives and false negatives. Additionally, the global cancer diagnostics market is a massive one, featuring a valuation of $107.45 billion last year.
Notably, Veracyte posted a three-year revenue growth rate of 16.7%, beating out almost 63% of its peers. Yet shares trade at only 4.77X trailing-year sales, below 65.5% of the competition. In closing, the company features a cash-to-debt ratio of nearly 15X, positioning it for confident growth.
Arcturus Therapeutics (ARCT)
A global late-stage clinical messenger-RNA medicines and vaccines company, Arcturus Therapeutics (NASDAQ:ARCT) focuses on the discovery, development, and commercialization of therapeutics for rare diseases and vaccines. Per its website, Arcturus features proprietary technologies along with key partnerships to help deliver innovative solutions to patients.
While ARCT stock itself is a choppy affair, it’s also enticing for its recent upward mobility. Since the beginning of the year, shares gained 13%. In the past 52 weeks, they’re up over 131%. Subsequently, analysts rate shares a unanimous strong buy. Moreover, they assigned on average a price target of $74.80. That’s practically double where the stock trades right now.
Given much attention to mRNA thanks to the Covid-19 crisis, Arcturus has the opportunity to convert that interest into meaningful therapeutics. Even better, the company enjoys a gargantuan three-year revenue growth rate of 64% yet ARCT trades at only 3.56X trailing-year revenue. That’s noticeably under the sector median 9.83X.
It’s worth researching further if you want undervalued biotech stocks to buy.
Voyager Therapeutics (VYGR)
Based in Lexington, Massachusetts, Voyager Therapeutics (NASDAQ:VYGR) is a healthcare innovator dedicated to leveraging the power of human genetics to modify the course – and ultimately cure – neurological diseases. The company’s pipeline includes treatments for various debilitating conditions, including Alzheimer’s, Parkinson’s, and amyotrophic lateral sclerosis (ALS).
However, the sector presents a binary big-risk, big-reward ecosystem. According to Precedence Research, the global central nervous system (CNS) therapeutics market size reached a valuation of $98.56 billion in 2022. Further, analysts project that the space could expand to over $230.1 billion by 2032. Naturally, the intense focus is encouraging for patients.
Still, CNS drugs generally feature higher failure rates than non-CNS drugs. In that sense, it’s not shocking that VYGR’s P&F chart prints a bearish double bottom breakdown pattern. This formation implies that the buyers who were supporting the price are no longer able to foster enough demand that exceeds supply.
On the positive side, analysts peg shares a unanimous strong buy with a $16.67 price target, implying 104% upside potential.
Ocuphire Pharma (OCUP)
Headquartered in Farmington Hills, Michigan, Ocuphire Pharma (NASDAQ:OCUP) is a late-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of retinal and refractive eye disorders. Currently, its pipeline features an oral pill called APX3330, which features an indication for diabetic retinopathy. This disease affects an estimated 9.6 million people in the U.S., with 1.84 million living with a vision-threatening form of the condition.
Currently, JonesTrading’s Sean Kim rates OCUP stock a “buy” with an $18 price target, implying 620% upside potential. Between August through November last year, the three analysts who covered Ocuphire all rated shares a buy. Notably, the lowest price target within the trio was from Cantor Fitzgerald at $17.
Nevertheless, Ocuphire isn’t for the faint of heart. Since the beginning of the year, shares stumbled almost 19%. In the trailing one-year period, it’s off the pace by 28%. On the plus side, OCUP is undervalued against several benchmark metrics. With zero debt in its balance sheet, the company stands on surprisingly solid ground.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
