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Value investors look for opportunities to buy stocks that are trading at significant discounts to their fair value, with the assumption that they’ll move up to their fair value in the near future. One proxy for fair value is analyst target price.

We ran a screen on the biotech industry for stocks trading at steep discounts to their analyst target prices, which may indicate that they are undervalued.

But because target prices are notoriously inflated, we only used the most pessimistic (the lowest) target prices, and for stocks with sufficient analyst coverage we only screened for stocks with five or more analyst ratings.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬


We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Click to enlarge

Do you think the market is undervaluing these stocks? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by target price.

1. BioCryst Pharmaceuticals, Inc. (BCRX): Designs, optimizes and develops small-molecule pharmaceuticals that block key enzymes involved in infectious diseases, cancer and inflammatory diseases. Market cap of $121.61M. Of the five analysts that have set a target price on the stock, the lowest price target stands at $3.50. This implies a current upside of 33.08% from current levels around $2.63. This is a risky stock that is significantly more volatile than the overall market (beta = 2.19). The stock is a short squeeze candidate, with a short float at 10.23% (equivalent to 20.49 days of average volume). The stock has performed poorly over the last month, losing 17.99%.

2. ZIOPHARM Oncology, Inc. (ZIOP): Focuses on the development and commercialization of in-licensed cancer drugs in North America. Market cap of $328.56M. Of the seven analysts that have set a target price on the stock, the lowest price target stands at $6.00. This implies a current upside of 31.0% from current levels around $4.58. The stock is a short squeeze candidate, with a short float at 14.31% (equivalent to 17. days of average volume). The stock has had a couple of great days, gaining 6.9% over the last week.

3. XOMA Ltd. (XOMA): Engages in the discovery, development and manufacture of therapeutic antibodies to treat inflammatory, autoimmune, infectious and oncological diseases. Market cap of $54.46M. Of the five analysts that have set a target price on the stock, the lowest price target stands at $2.00. This implies a current upside of 29.87% from current levels around $1.54. The stock has lost 30.26% over the last year.

4. Ariad Pharmaceuticals Inc. (ARIA): Focuses on the discovery, development and commercialization of small-molecule drugs for the treatment of cancer. Market cap of $1.53B. Of the 10 analysts that have set a target price on the stock, the lowest price target stands at $14.00. This implies a current upside of 29.27% from current levels around $10.83. The stock is a short squeeze candidate, with a short float at 12.66% (equivalent to 5.05 days of average volume). The stock has had a couple of great days, gaining 12.73% over the last week.

5. Exelixis, Inc. (EXEL): Engages in the discovery, development and commercialization of small molecule drugs for the treatment of cancer, metabolic and cardiovascular disorders. Market cap of $535.62M. Of the six analysts that have set a target price on the stock, the lowest price target stands at $5.00. This implies a current upside of 26.58% from current levels around $3.95. This is a risky stock that is significantly more volatile than the overall market (beta = 2.17). The stock is a short squeeze candidate, with a short float at 10.43% (equivalent to 7.47 days of average volume). The stock has performed poorly over the last month, losing 47.12%.

6. Achillion Pharmaceuticals, Inc. (ACHN): Engages in the discovery, development and commercialization of treatments for infectious diseases. Market cap of $414.95M. Of the 11 analysts that have set a target price on the stock, the lowest price target stands at $7.00. This implies a current upside of 25.0% from current levels around $5.60. The stock is a short squeeze candidate, with a short float at 8.9% (equivalent to 8.99 days of average volume). The stock has gained 107.32% over the last year.

7. Halozyme Therapeutics, Inc. (HALO): Engages in the development and commercialization of recombinant human enzymes that transiently modify tissue under the skin to facilitate injection of other therapies or correct diseased tissue structures for clinical benefits. Market cap of $906.68M. Of the eight analysts that have set a target price on the stock, the lowest price target stands at $10.00. This implies a current upside of 23.46% from current levels around $8.10. The stock is a short squeeze candidate, with a short float at 6.98% (equivalent to 8.83 days of average volume). The stock has had a couple of great days, gaining 5.8% over the last week.

8. Vertex Pharmaceuticals Incorporated (VRTX): Engages in the discovery, development and commercialization of small molecule drugs for the treatment of serious diseases worldwide. Market cap of $5.68B. Of the 19 analysts that have set a target price on the stock, the lowest price target stands at $32.00. This implies a current upside of 20.30% from current levels around $26.60. The stock is currently stuck in a downtrend, trading 15.18% below its SMA20, 31.33% below its SMA50, and 41.29% below its SMA200. The stock has performed poorly over the last month, losing 36.03%.

9. Exact Sciences Corporation (EXAS): Focuses on developing a molecular diagnostic screening technology for the early detection and prevention of colorectal pre-cancer and cancer. Market cap of $419.73M. Of the 11 analysts that have set a target price on the stock, the lowest price target stands at $9.00. This implies a current upside of 19.52% from current levels around $7.53. The stock is a short squeeze candidate, with a short float at 13.18% (equivalent to 11.06 days of average volume). The stock has gained 36.02% over the last year.

10. Nektar Therapeutics (NKTR): Engages in developing a pipeline of drug candidates that utilize its PEGylation and polymer conjugate technology platforms. Market cap of $533.24M. Of the six analysts that have set a target price on the stock, the lowest price target stands at $5.00. This implies a current upside of 18.20% from current levels around $4.23. The stock is a short squeeze candidate, with a short float at 13.73% (equivalent to 13.36 days of average volume). The stock has had a couple of great days, gaining 7.87% over the last week. The stock has performed poorly over the last month, losing 15.73%.

*Target price data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 10 Biotech Stocks Trading At The Deepest Discounts To Target Price