What happened

Shares of Cardiff Oncology (NASDAQ:CRDF) were skyrocketing 21.1% higher as of 3:07 p.m. EDT on Thursday. The big jump came after Piper Sandler analyst Joseph Catanzaro initiated coverage on the stock with an overweight rating. Catanzaro also set a price target for Cardiff of $25, which reflects an 85% premium over the stock's closing price on Wednesday.

So what

Analysts may or may not be right with their ratings and price targets. However, it's prudent for investors to learn why an analyst is optimistic or pessimistic about a given stock.

Scientist looking through a microscope

Image source: Getty Images.

In this case, Catanzaro thinks Cardiff's lead pipeline candidate, onvansertib, offers differentiation compared to other Polo-like Kinase 1 (PLK1) inhibitors. The company is currently evaluating the experimental drug in two phase 2 clinical studies, one in combination with Zytiga and prednisone targeting prostate cancer and the other in combination with decitabine targeting acute myeloid leukemia. In addition, onvansertib in combination with chemotherapies Folfiri and Avastin is being evaluated in a phase 1b/2 clinical study as a second-line treatment for KRAS-mutated metastatic colorectal cancer.

Cardiff's shares were already up nearly 990% year to date before today's big jump. Catanzaro believes that the biotech stock has more room to run as more results become available from Cardiff's clinical studies.

Now what

Investors won't have to wait too long to learn how onvansertib fared in clinical testing. Cardiff's phase 2 study targeting prostate cancer and its phase 1b/2 study targeting colorectal cancer are scheduled to wrap up by May 2021, with its phase 2 study targeting AML concluding later next year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.