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2 “Strong Buy” Penny Stocks That Could Go Boom

Arguably the most controversial on the Street, penny stocks are a hot-button issue. Usually, there isn’t a lot of middle-ground with respect to these tickers priced for less than $5 apiece. Dividing market watchers into two distinct groups, both sides present valid arguments laying out the pros and cons. Sure, there is reason enough to be skeptical. Often, a cheap stock is cheap for a reason, with the low share price potentially reflecting an underlying problem with the business, whether it be poor fundamentals or unbeatable headwinds. That said, a bargain price tag isn’t always indicative of a lost cause. For some, better days are on the horizon, and for very little money, investors can control a lot more shares. Therefore, even minor upward movements could result in massive percentage gains, and thus, significant returns. As the nature of these investments makes it difficult to gauge the strength of their long-term growth prospects, one effective stock selecting strategy is to follow the analysts’ advice. Using TipRanks’ database, we locked in on two penny stocks that have garnered glowing reviews from the Street, enough to earn a “Strong Buy” consensus rating. Not to mention each offers massive upside potential. Savara, Inc. (SVRA) We’ll start with Savara, a biotech company focused on orphan lung diseases. Savara’s main focus is on autoimmune pulmonary alveolar proteinosis (aPAP), a rare condition in which protein material builds up in the lungs and prevents effective breathing. Current treatment involves a patient admission to intensive care, full anesthesia, and a literal ‘washing out’ of the lungs – an invasive and difficult procedure. Savara is researching medical alternatives. The company’s lead drug candidate, molgradex, is an inhalant medication designed as a granulocyte-macrophage colony-stimulating factor; in short, it is targeted on the autoimmune flaw that prevents the body’s natural self-cleansing of the lungs. Molgradex has an Orphan Drug designation from the FDA, and has completed its Phase 3 IMPALA clinical study, with some mixed results. It missed the primary endpoint, but met a key secondary endpoint, and the company in December stated that it planned to meet with regulatory authorities to discuss further studies. Those discussions led to an open-label follow-up period, a study that focused on long-term safety in the use of molgradex for patients with aPAP. The study followed 128 patients over periods between 48 and 72 weeks, and showed improvements on two independent measures of gas exchange in the lungs. Considering these positive results, the company is starting molgradex on the IMPALA 2 study, an additional Phase 3 clinical trial, to begin in 2Q21. Currently going for $1.71 apiece, some members of the Street believe Savara’s share price reflects an attractive entry point. Among the bulls is Piper Sandler analyst Yasmeen Rahimi who believes SVRA is an “ideal value pick.” “We believe that Molgradex has the potential to be a game-changing therapeutic for autoimmune pulmonary alveolar proteinosis (aPAP)… With a compelling MOA at its back, we have strong conviction in the clinical POS for Molgradex in a Phase 3 study (IMPALA 2), which we believe can improve upon its existing dataset in the 24-week double-blind Phase 2b/3 IMPALA 1 study in 138 aPAP patients that showed favorable safety… Therefore, we have a strong conviction that SVRA shares have the potential to make a comeback in valuation with Molgradex in IMPALA 2,which is expected to commence in 2Q21,” Rahimi opined. “Importantly,” the analyst added, “Molgradex has already received Orphan Drug Designation in the U.S. (with eligibility for seven years exclusivity) and EU (potential for 10 years exclusivity) as well as FDA Fast Track Designation and FDA Breakthrough Therapy Designation, building up validation for Molgradex in aPAP.” To this end, Rahimi rates SVRA an Overweight (i.e. Buy), while setting a $7 price target. This target suggests shares could soar 309% in the next year. (To watch Rahimi’s track record, click here) Overall, SVRA has 3 recent analyst reviews, and all are Buys, making the analyst consensus rating a Strong Buy. The average price target stands tall at $4.67, which suggests the stock has room for 173% upside in the next 12 months. (See SVRA stock analysis on TipRanks) Aquestive Therapeutics (AQST) Next up, Aquestive Therapeutics, is a diversified biotech firm with a range of products in all stages of the development pipeline, from pre-clinical to fully approved and on the market. Aquestive uses a unique film-based delivery mechanism for its medications. It has adapted the film delivery system for dosing through several locations in the mouth, including inside the cheek, under the tongue, and on the tongue. This company’s major news item in the past few months was the FDA rejection of the New Drug Application (NDA) for Libervant buccal film. This medication is a formulation of diazepam, a well-known tranquilizer frequently used to treat seizures. Libervant, dosed through a buccal (inside the cheek) film, was designed to treat seizure clusters. In response to the NDA, the FDA sent Aquestive a Complete Response Letter (CRL) outlining issues with the drug. The CRL specifically cited lower drug exposure levels in patients in certain weight groups. However, there were no other safety or clinical issues cited. After meeting with the FDA, Aquestive revised the weight-based dosing regimen, and is preparing a new NDA for Libervant. The company does not believe that further clinical studies are necessary, and expects to complete the NDA submission in 2Q21. Once the application is sent, the company anticipates a six month process of review. Analyst Jason Butler, in his coverage of this stock for JMP Securities, points out that the key driver here is the resubmission of the Libervant NDA. “[The] company recently gained clarity from the FDA on the acceptability of the company’s revised proposed weight-based dosing regimen, in combination with new modeling and simulations, in a Type A meeting in October 2020 and the company’s subsequent submission of the planned dosing regimen and modeling in December. In the past few weeks, the agency has asked for formatting changes for the safety section of the resubmission and for the company to show the predictive nature of the PK model vs. the observed data from the cross-over study. We view these activities as readily accomplishable…” Butler noted. Butler summed up, “We remain confident in the regulatory path for Libervant and anticipate approval this year, maintaining our 85% probability of approval.” Looking forward to a successful resubmission, Butler rates Aquestive’s shares an Outperform (i.e. Buy), and his $17 price target implies an upside of 315% in the next 12 months. (To watch Butler’s track record, click here) Turning now to the rest of the Street, other analysts are on the same page. With 100% Street support, or 5 Buy ratings to be exact, the message is clear: AQST is a Strong Buy. The $15 average price target brings the upside potential to ~266%. (See AQST stock analysis on TipRanks) To find good ideas for penny stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.