Growth stocks are often shares of companies in rapidly evolving and innovative sectors, such as technology, artificial intelligence (AI), biotechnology, cannabis, or clean energy, which have the potential to disrupt existing industries or create entirely new markets. These stocks can benefit investors by offering the opportunity for capital appreciation as the underlying business grows.
Investors who focus on growth stocks often aim to build long-term wealth by holding onto shares for years, or even decades. Here we have two such biotech stocks, Alto Neuroscience (ANRO) and Trevi Therapeutics (TRVI), which are still in their early stages. Wall Street analysts believe these stocks have the potential to increase by more than 200% if they meet their high price estimates. Let's find out how.
#1. Alto Neuroscience
Alto Neuroscience (ANRO) is a clinical-stage biopharmaceutical company focused on developing therapies that treat mental health conditions by tailoring them to individual brain activity. The company has received attention for its novel approach to combining neuroscience and AI for the development of personalized treatments for mental health disorders.
Alto went public on Feb. 2 via an initial public offering (IPO). Since then, the shares have fallen 31%, compared to the 17.8% gain in the S&P 500 Index ($SPX) over the same period.
Alto Neuroscience's pipeline includes promising clinical trials for depression, anxiety, schizophrenia, post-traumatic stress disorder (PTSD), and other conditions. ALTO-100, its most advanced program, is designed to help patients with treatment-resistant depression. Early trial results have shown promising efficacy, potentially paving the way for future FDA approval.
Alto has completed enrollment in the Phase 2b study of major depressive disorder (MDD) and begun the Phase 2b study of bipolar depression with ALTO-100. In addition to ALTO-100, the company is developing several drug candidates for cognitive impairment associated with schizophrenia, MDD with anhedonia, and a few others. The company had a cash position of $194 million in the second quarter, which it expects to fund its operations until 2027.
The mental health market is large and growing. The global depression treatment market is expected to be worth $16.8 billion by 2032. Most existing treatments for depression and anxiety have been around for decades, and their efficacy varies greatly between patients. This presents a significant opportunity for a company like Alto Neuroscience, which strives for a more personalized approach.
If Alto's personalized treatments are successful, they could capture a sizable portion of the multibillion-dollar mental health drug market, making this an appealing opportunity for investors looking for exposure to cutting-edge biotech.
What Does Wall Street Say About Alto Neuroscience Stock?
Overall, Alto stock is a “strong buy” on Wall Street. All seven analysts in coverage rate as a “strong buy.” The average target price of $33.80 suggests that ANRO stock can rally 134.2% over the next 12 months. Further, the high target price of $43 implies a stock gain of nearly 200% over current levels.
Alto's personalized therapies place it at the forefront of mental health treatment. However, the company is still in the clinical trial stage, and none of its treatments have been approved. Furthermore, it may take years or decades for Alto to emerge as the dominant player in this field. I believe investors with a long investment horizon should start with a small stake and monitor the company's progress.
#2. Trevi Therapeutics
Trevi Therapeutics (TRVI) is a clinical-stage biotech company focused on developing treatments for serious neurological conditions, primarily those that are related to chronic pruritus (itching) and central nervous system (CNS) disorders.
Since going public, Trevi’s stock has caught the attention of investors due to the company’s unique approach and promising clinical pipeline. The stock has surged an impressive 140%, outperforming compared to the broader market. Yet, Wall Street believes there is more upside to come.
With its lead product candidate, Haduvio, the company aims to treat chronic cough in idiopathic pulmonary fibrosis (IPF) and refractory chronic cough (RCC). The Phase 2b CORAL trial for the treatment of chronic cough in IPF patients is still ongoing, with topline results expected in the first half of 2025. Similarly, the Phase 2a RIVER trial for the treatment of RCC is ongoing, with topline results expected in the fourth quarter of 2024.
Trevi had $69.5 million in cash, cash equivalents, and marketable securities at the end of the second quarter, which it plans to use to fund its pipeline through 2026. The company has no approved product, and reported a net loss of $12.4 million in Q2. However, if Trevi's clinical trials are successful, things may improve for the company.
There is also a significant market opportunity for chronic cough, particularly in IPF patients. In 2023, IPF affected approximately 193,000 people in the United States alone, with chronic cough being a debilitating symptom in the majority of these cases. If Haduvio proves to be effective, it has the potential to close a significant treatment gap.
As a clinical-stage biotech company, Trevi is pre-revenue, and relies on capital raises and partnerships to fund pipeline development. Investors should be aware that biotech stocks at this stage are typically volatile, with price movements influenced by clinical trial results and regulatory decisions. For those willing to take these risks, Trevi can be an intriguing opportunity, making it a stock to watch in the biotech sector.
What Does Wall Street Say About Trevi Therapeutics Stock?
Overall, Trevi stock is a “strong buy” on Wall Street. Out of the nine analysts in coverage, seven rate it a “strong buy,” and two rate it a “moderate buy.” The average target price of $9.00 suggests that the stock can rally 188.5% over the next 12 months. Further, the high target price of $21 implies a stock gain of 573% over current levels.
