Editorial StaffInvestors are always looking for the right signal, something that will indicate where a stock is likely to move. These can be positive or negative – what matters most is accuracy. The stock market is an expression of the collective will and opinions of millions of traders, investors, and corporate execs. The most successful stock players are those who learn to read what the signals are saying.
One of the clearest signals comes from the corporate insiders. These company officers get an inside view of the company and industry they represent – and can use that to inform their stock trades. Federal regulators require them to regularly publish their trades, keeping the field level for those without that sort of inside knowledge.
Using TipRanks’ Insiders’ Hot Stocks tool, we’ve found three stocks that have been flashing the insider signal – in brilliant neon, with letters four feet high. The insiders haven’t just bought up blocks of shares here, they’ve made purchases in excess of $2 million in their company stock.
No one drops over $2 million on a weak play, and a look at the analyst consensus backs that up. These are Strong Buy stocks, with upside potential that starts at 60% and works up from there. Let’s find out what else investors should look for here.
Sarepta Therapeutics (SRPT)
We’ll start with Sarepta, a biotech firm researching new treatments for genetic disorders, with a particular focus on muscular dystrophy. Sarepta, based in Massachusetts, has several approved gene therapy drugs on the market, giving the company an advantage relative to many peers – it has a strong revenue stream to help fund the development program. That program is extensive, with 39 separate research tracks, at stages ranging from early pre-clinical to late-stage trials.
The approved products are Exondys 51, Vyondys 53, and Amondys 45, all RNA technology based gene therapies for the treatment of Duchenne muscular dystrophy. In Q3, these drugs brought in total product revenues of $166.9 million, up 37% year-over-year. Total revenue for the quarter came in at $189.4 million, beating the $168 million expected by a 12% margin.
The biggest news on the pipeline front is from the ongoing studies of drug candidate SRP-9001. This is an investigation gene transfer therapy, designed to deliver its micro-dystrophin-encoding gene directly into the muscle tissue, promoting targeted production of the micro-dystrophin protein. The drug candidate is the subject of EMBARK, a global pivotal Phase 3 trial, with several subsidiary studies. In October, the company released clinical data showing significant benefit to treatment in Study 101, 102, and 103. The studies are of pediatric patients at various ages, from 4 to 7 years, and all showed consistent, acceptable tolerability profiles for SRP-9001.
This is the background to the insider trading on this stock. Douglas Ingram, President and CEO of Sarepta, recently made a purchase of 25,026 shares in the company, paying out a shade over $2 million.
JPMorgan analyst Anupam Rama appears to echo the CEO’s sentiment. The analyst rates SRPT an Overweight (i.e. Buy) along with a $130 price target. Investors could be sitting on gains of 66%, should Rama’s forecast play out as anticipated.
Rama highlights SRP-9001 as the key point for Sarepta shares, and writes: “Post a round of recent key opinion leader (KOL) calls, we have become increasingly confident in the potential of SRP-9001 and believe the company has taken appropriate steps to control for heterogeneity in the phase 3 EMBARK study… We see an attractive valuation entry point in SRPT shares on the potential of SRP-9001, as well as the commercial franchise, helping to provide a valuation backstop and broader pipeline having the potential to drive upside.”
Wall Street is in broad agreement with the JPMorgan view on this stock. There are 12 recent reviews on Sarepta shares available, and they break down 10 to 2 in favor of Buy over Hold, making a Strong Buy consensus rating. The stock is selling for $78.34 and its $123.20 average target indicates room for a solid 57% upside in the year ahead.
Chinook Therapeutics (KDNY)
The next stock that insiders are snapping up is Chinook, a clinical-stage biopharmaceutical company focuses on rare diseases of the kidneys and associated organs. The company’s pipeline features precision medication candidates for severe kidney problems that currently lack effective treatments. The usual medical course, when one is available, is dialysis, which is difficult, costly, and invasive. Chinook is working to commercialize more cost-effective treatments for the benefit of patients and providers both.
Chinook’s development pipeline features two major programs, atrasentan and BION-1301. Atrasentan, the leading candidate, is an endothelin A receptor antagonist, a potent and selective drug with potential for providing multiple benefits to patients with chronic kidney disease. The drug has been shown to reduce proteinuria and provide anti-inflammatory and anti-fibrotic effects, preserving kidney function. Atrasentan is the subject of the Phase 3 ALIGN trial, in which enrollment is ongoing, and the Phase 2 AFFINITY basket trial. Six-month interim endpoint analysis from ALIGN is expected in 2023, and data from the AFFINITY trial is expected throughout 2022 with the first patient cohort data to be reported in 1H22.
BION-1301 is a novel treatment, an anti-APRIL monoclonal antibody. This mode of operation, blocking APRIL, is potentially a disease modifying approach for patients with IgA nephropathy (IgAN), offering a new way of treating the condition. On November 4, the company presented new data from its BION-1301 Phase 1/2 clinical trial. The data showed that the drug candidate was well tolerated by patients – and resulted in clinically significant >50% reduction in proteinuria after 3 to 6 months treatment, and further improvement up through one year of treatment.
Also in early November, Chinook moved to improve its liquidity situation through a public offering of stock. The original announcement was for 6 million shares; the actual event saw the company upsize the offering, with 9.538 million shares put up for sale. The shares were priced at $14, and the share price was up to $16.22 when the offering closed on November 15. Chinook raised approximately $183.5 million in gross proceeds from the offering.
For investors following Chinook’s insider moves, the stock sale was the key point. Company director Srinivas Akkaraju put down just over $17 million to buy up 1.215 million shares in the new offering. It was a clear sign on confidence in Chinook’s future.
KDNY has scored fans within the analyst community as well. Covering the stock for Wedbush, analyst Laura Chico sees BION-1301 and the recent stock sale as salient points for investors.
“KDNY priced a $184M secondary offering, on the heels of positive BION-1301 data. The deal pushes out cash runway and alleviates a prior financing overhang… The IgAN space remains an increasingly competitive area and is one in which we anticipate the standard of care will migrate towards a combination-focused treatment paradigm,” Chico noted.
“With KDNY holding multiple assets, they hold a favorable position and scarcity value. We look ahead towards additional subcutaneous BION-1301 data in FY22, as well as preliminary Phase 2 AFFINITY data for atrasentan in 1H22 – likely from the preliminary IgAN cohort,” the analyst summed up.
It should be unsurprising, then, that Chico rates KDNY an Outperform (i.e. Buy). Not to mention the $22 price target puts the upside potential at 78%.
Chico, while bullish on the stock, is somewhat conservative compared to the general Wall Street view here. KDNY has a Strong Buy analyst consensus rating, based on a unanimous 5 Buys set in recent weeks. The average price target is higher than Chico’s, at $34.50, and implies a stronger upside potential of ~120% from the $15.7 share price.
Playtika (PLTK)
Last up is Playtika, a marketing and social gaming company. This inhabitant of the digital world has a large and varied portfolio of online and mobile gaming titles, with over 36 million monthly active users. The company has offices worldwide, and offers an online social experience for a wide range of poker and slots games.
In the first week of November, the company released its 3Q21 results – and the results spooked investors. Playtika share fell some 25% after the release, which missed expectations in both the top line revenue and the EPS, and the share have slipped more since then. What happened?
In short, the company reported $635.9 million at the top line, below the $662.4 which has been forecast. Net income fell year-over-year, from $119.9 million to $80.5 million. And, management revised its full-year revenue down, from $2.6 billion to $2.57 billion.
The main cause for the poor quarterly showing, however, was not necessarily due to faults or flaws with Playtika. The mobile gaming sector generally saw a slowdown in Q3, as much as 5% sequentially from Q2. The causes of this general slowdown are not so clear, but delays in the government’s tranches of stimulus funds cutting into gamers’ budgets, or a return to work cutting into gamers’ time, are both possible.
What it means is, PLTK shares are now priced low, and at least one insider took note. Robert Antokol, of the company Board of Directors, bought $3.24 million worth of the stock, 150,000 shares in all.
On the analyst front, Cowen analyst Doug Creutz, rated 5-stars at TipRanks, sees this stock as undervalued, and priced at a far more attractive point of entry, with positive long-term outlook.
“Playtika reported Q3:21 top-line results that missed both our estimates and consensus; we believe a primary culprit was a slowdown in mobile consumer spending in Q3. We believe shares declining 23% on a 2% FY EBITDA guidance cut was a gross overreaction,” Creutz opined.
“We expect the company to continue to grow its existing titles, begin launching new titles in 2022, and continue to engage in value-creating acquisitions,” the analyst added.
Taking all of this into consideration, Creutz stays with the bulls. Along with his Outperform (i.e. Buy) call, the analyst gives the stock a $35 price target, which implies ~70% upside from current levels.
Overall, this stock has 5 positive ratings on record, for a unanimous Strong Buy consensus from the Street. PLTK is selling for 18.46, and its $31 average target suggests ~68% upside by the end of next year.
Source: Yahoo Finance
