Are you looking for growth stocks that could put up huge gains over the next 12 months? If so, Wall Street analysts think there are two healthcare stocks that you need to take a look at.
The investment bank analysts who follow these stocks are pounding the table right now, announcing 12-month price targets that suggest enormous gains up ahead.
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Before buying any stock just because an investment bank analyst gave it a lofty price target, however, it's important to realize the analyst will simply adjust the target up or down if things don't work out as expected. Unfortunately, your portfolio's performance isn't so easily managed. Let's look at what the experts have to say about these stocks before taking any chances.
1. Caribou Biosciences
Caribou Biosciences (CRBU -1.33%) is developing experimental new drugs, and expectations are high. According to investment bank H.C. Wainwright, the rest of the market is undervaluing this stock by a wide margin. The bank's $25 price target suggests it can climb 233% in about a year.
Caribou is using CRISPR-based gene editing technology to develop one-size-fits-all cellular cancer therapies. Today's cell-based cancer treatments -- called autologous therapies -- can be incredibly effective, but a new batch must be manufactured for each patient from the individual's own stem cells.
The stock recently shot up after the company reported clinical trial results for its lead candidate, CB-010. This off-the-shelf cell therapy shrank tumors for 15 out of 16 patients with severe cases of lymphoma that had returned after previous treatment options. Six months following treatment with a single dose of CB-010, seven of those patients were disease-free.
So far, Caribou's results appear in line with autologous cellular cancer therapies such as Yescarta from Gilead Sciences, and CB-010's convenient manufacturing method could be a huge advantage.
It will take time for Caribou to prove that the responses its treatments produce last as long as the competition's results, but it could get a helping hand. Earlier this month, Pfizer made a $25 million equity investment in Caribou, which suggests continued success with CB-010 could result in a big collaboration deal or a juicy buyout offer.
Caribou has a fairly modest $589 million market cap that could swell to several times its size if clinical trials with CB-010 keep succeeding. This stock looks like a smart buy, but only for investors who can tolerate a heavy loss if the next clinical trial readout for CB-010 makes investors question its ability to compete with entrenched rivals.
2. Alignment Healthcare
The large number of baby boomers still reaching the age of Medicare eligibility bodes well for Alignment Healthcare (ALHC 0.97%). Expectations of an enrollment surge convinced J.P. Morgan to set a $10 price target on this stock, which implies an 81% gain up ahead.
Alignment is one of several health-insurance benefits managers trying to outperform industry giants like UnitedHealth Group with a proprietary technology platform. Alignment's Virtual Application (AVA) uses data and predictive algorithms designed to deliver personalized care for people on its Medicare Advantage plans.
More-personalized care should lower overall costs by reducing unnecessary hospital admissions and expenses. Unfortunately, Alignment has a long way to go to prove its business model functions as intended. First-quarter membership at Alignment rose 16.5% year over year, but its operating loss shrank slightly from $36.5 million last year to $32.5 million.
Alignment Healthcare and its larger peers earn a living in the margin between monthly premiums received and medical expenses paid. This insurance technology pioneer's medical loss ratio of 89.7% in the first quarter wasn't necessarily bad, but it was significantly worse than its larger peers.
It's probably best to wait for proof that its technology platform can deliver profits before risking any of your hard-earned money on this stock.
