We recently compiled a list of the 10 Best One-Dollar Stocks To Buy Now. In this article, we are going to take a look at where Adaptimmune Therapeutics plc (NASDAQ:ADAP) stands against the other one-dollar stocks.
The upward trend in the stock market has resumed, supported by strong first-quarter and second-quarter results that have relieved investor concerns about inflation. The US economy had a very strong year in 2023. Economic activity increased steadily, job creation was high, unemployment was low, real earnings rose, and inflation declined. Furthermore, the Federal Reserve maintained high interest rates throughout this time in an attempt to control inflation. June recorded a market increase of more than 10%. The large-cap market of the 500 biggest companies has already surged over 17% so far this year as analysts look forward to reduced interest rates in the second half of 2024, along with higher earnings growth and lower inflation.
Historically, since 1928, July has been the strongest month of the year for stocks in terms of performance. The market rose by 1.7% in July. Given that the market posted gains in May and June despite notable economic uncertainty, investors remain bullish that the market can sustain its positive trend.
In a May speech to the Foreign Bankers’ Association, Federal Reserve Chair Jerome Powell recognized the difficulty of bringing inflation down to the desired level. Powell stated that it could be essential to keep interest rates at their present levels for a longer period of time. Interest rates have been fluctuating between 5.25% and 5.5% since July 2023.
Amid concerns over an impending recession brought on by higher interest rates, the US labor market still remains stable. According to the Labor Department, the US economy created 175,000 new jobs in April, although this was less than the 240,000 jobs that economists had predicted. The US labor market maintains a low unemployment rate of 3.9%, while US wages have risen 3.9% YoY. Nonetheless, recession fears are maintained by the historical recession predictor, the inverted U.S. Treasury yield curve, and the New York Fed’s model, which projects a 50% chance of a recession within the next 12 months.
The second quarter of 2024 saw a gain of more than 3% in the US stock market. Under the hood, tech companies continued to lead the artificial intelligence trade, which showed no signs of slowing down throughout the quarter. One striking trend in the stock market this year has been the outperformance of the biggest companies. The large-cap market of the 500 biggest companies gained 4.4% in Q2, bringing its 2024 return to more than 15%. By comparison, the small-cap market had a decline of 3.3%, resulting in a reduced 2024 return of 1.6%.
With over half of 2024 already gone, the US stock market is expected to see significant increases for the second year in a row.
According to DataTrek Research co-founder Nicholas Colas, the 2024 stock market surge is about more than just this year; it also includes the outlook for 2025 and 2026. Colas stated:
“Markets are convinced that U.S. large cap companies will see many years (not just one) of improving earnings. Earnings for 2024 only have to come through slightly better than last year, and nothing occurs on the macro side (economic growth, geopolitics) to derail further earnings growth in 2025 and 2026.”
Investor confidence is supported by historical trends and recent earnings performance. The stock market does well in election years, according to historical statistics, especially when the president is serving his first term, as is the case with Joe Biden.
Methodology:
In this article, we first used a stock screener, Finviz, to list down all stocks trading under $1.5 and above $0.85 (as of the writing of this article) with over 40% institutional ownership. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested. We only considered stocks that received “buy” or “strong buy” recommendations from analysts.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A research scientist studying cells through a microscope in a laboratory.
Adaptimmune Therapeutics plc (NASDAQ:ADAP)
Number of Hedge Fund Investors: 14
Adaptimmune Therapeutics plc (NASDAQ:ADAP) is a biotechnology company. It develops treatments for cancer. Their pipeline includes Afami-cel, which has demonstrated positive results in solid tumors, as well as Lete-cel, which targets soft tissue sarcoma. ADAP is one of the best one-dollar stocks to buy now, since ADAP has received a “buy” recommendation from analysts. Adaptimmune Therapeutics plc (NASDAQ:ADAP) has an average Wall Street analyst price target of $4.29, indicating a possible 253.09% upside from the company’s current $1.22 price. As of the end of the first quarter of 2024, 14 hedge funds out of the 920 funds reported having stakes in Adaptimmune Therapeutics plc (NASDAQ:ADAP). The company’s main investor is Matrix Capital Management which is managed by David Goel and Paul Ferri and has 38,974,185 shares worth $61.58 million.
Afami-cel, the flagship product of ADAP, is an engineered cell treatment guided by MAGE-A4 that targets soft tissue sarcomas. The FDA is now reviewing its application for a biologics license, and an action deadline of August 4, 2024, is set. Clinical evidence demonstrates notable action in a range of solid tumors, indicating a critical juncture for ADAP. Second, at an ASCO presentation, Lete-cel, a NY-ESO1-targeted T-cell therapy, showed a 40% response rate in 45 patients with synovial sarcoma and myxoid/round cell liposarcoma. Concerns about cytokine release syndrome and toxicity persist despite the encouraging operations. Thirdly, phase 2 trials for Uza-cel are targeting platinum-resistant ovarian cancer, while phase 1 trials are still underway for malignancies of the bladder and head/neck. The big news is that its development is supported by a partnership with Galapagos that might be valued at $500 million.
In cash and equivalents, ADAP has $140.7 million as of the most recent earnings report. Due to the end of the Astellas cooperation and $55 million in operating expenses, the firm recorded $5.7 million in revenue, an 88.07% decline from the same quarter last year. This translated into a $48.5 million net loss. A runway of around three quarters is implied by the cash burn rate of 12.34% from the same quarter the previous year. Nevertheless, the Galapagos agreement extends the runway until late 2025 with an upfront payment of $100 million and a $125 million loan from Hercules Capital to assist with the successful launch of the lead asset, afami-cel for synovial sarcoma.
The diverse ADAP pipeline, including lete-cel, uza-cel, and afami-cel, lessens reliance on a single product and highlights the company’s strong development approach. Its strategic partnership with Galapagos expedites product development and fortifies its financial position even further.
However, approval from authorities is still pending, especially for afami-cel. Stock value may be greatly impacted by a negative FDA ruling. Even with recent financial gains, as seen by its annual revenue growth over the years, long-term viability still depends on successful product launches, mainly because of the high cash burn rate over the years. Hence, the company’s strong cash burn indicates how much its financial health depends on favorable regulatory decisions.
The company is confident in the approvability of the lead assets, afami-cel and lete-cel, as well as the timely authorization of afami-cel on/by the 8/4 PDUFA. If the FDA’s impending ruling on Amfami-cel is favorable, the value might rise dramatically. Regulatory and financial hazards persist despite advancements in clinical practice and business alliances. Investors should evaluate the possible benefits against these risks, keeping in mind the large negative impact if regulatory permission is not received. If the FDA rules in favor of ADAP, the stock would become more competitive, and risk-averse investors would be justified in maintaining a “Strong Buy” rating.
Overall ADAP ranks 8th on our list of the best one-dollar stocks to buy. You can visit 10 Best One-Dollar Stocks To Buy Now to see the other one-dollar stocks that are on hedge funds’ radar. While we acknowledge the potential of ADAP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ADAP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
