Penny stocks are best reserved for investors with a healthy risk appetite, since these shares are often tied to companies that are unprofitable or even pre-revenue. However, for those who can stomach the heightened volatility and potential downsides, the prospect of uncovering the next Apple (AAPL) or Amazon (AMZN) from the sea of sub-$5 stocks holds tremendous appeal, with these speculators hoping to cash in on the next big multi-bagger opportunity.
For investors in search of potentially overlooked penny stock investing ideas, here's one biotech stock that Wall Street isn't giving its due credit, according to a recent analyst note.
About Nektar Therapeutics Stock
Valued at $239.2 million, Nektar Therapeutics (NKTR) is a biopharmaceutical company whose primary goal is to discover and develop novel immunotherapy medicines. The company produces drugs for autoimmune disorders, chronic inflammatory conditions, and cancer using its advanced polymer conjugate chemistry technology platform.
Incorporated in 1990, the company is based in San Francisco, and is a component of the small cap-focused Russell 2000 Index (RUT).
NKTR stock has surged considerably in 2024, gaining 136% YTD, and 152% over the past year. However, NKTR is down 30% from its 52-week high, set in May - and longer term, the shares have shed nearly 99% from their November 2018 highs.
Nektar Posts Mixed Q2 Results
Nektar Therapeutics released its second-quarter results on Aug. 8, with revenue of $23.5 million easily outperforming analyst’s $17.2 million estimate. During the quarter, product sales grew 42.5% YoY to $6.6 million, easily beating the $4.6 million estimate. Non-cash royalty revenue rose 6.1% to $16.8 million, again beating analysts' $14.8 million estimate.
“We continue to make excellent progress advancing rezpegaldesleukin in Phase 2 studies in patients with atopic dermatitis and alopecia areata. We are particularly pleased that enrollment is on track for topline data in the first half of 2025 for atopic dermatitis and topline data in mid-2025 for alopecia areata,” said CEO Howard W. Robin.
However, the company reported a loss of $52.4 million, or $0.25 per share, which was wider than Wall Street’s average $0.21 per share consensus. Nektar noted non-cash restructuring and impairment charges of $13.3 million during Q2 related to its real estate leases in the declining San Francisco commercial market.
Total operating costs and expenses were little changed year over year, arriving at $73.3 million in Q2 from $71.1 million last year.
Nektar ended the second quarter with cash and investments in marketable securities of $290.6 million, down from $329.4 million at year-end 2023. Management expects the current cash balance to support development and operations into the third quarter of 2026.
What's the Analyst Rating on NKTR Stock?
Analysts are cautious on NKTR stock at the moment, with a consensus “Hold” rating among the six in coverage.
However, the number of NKTR bulls just doubled when BTIG initiated coverage of the stock with a “Buy” rating, alongside a new Street-high price target of $4.
In a note, analyst Julian Harrison cited the potential for Nektar's pipeline drug rezpegaldesleukin, a first-in-class regulatory T-cell simulator for the treatment of chronic inflammatory diseases and autoimmune disorders - and the same drug that CEO Robin called out at the top of the Q2 press release.
In particular, the analyst noted a “broad disconnect” between the company’s stock price and the drug’s potential ahead of upcoming trial data expected in 2025, writing that “we see a clear path to upside unlocked through additional clinical data."
The average price target for NKTR now stands at $2.43, which is an 80% premium to current prices. BTIG's new Street-high target implies expected upside of more than 196%.
On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
