2 Growth Stocks That Could Rocket 88% to 99% Higher According to Wall Street | The Motley Fool (2024)

Investors looking for stocks that can put up dramatic gains in a short amount of time naturally flock to biotech stocks. Hardly a week goes by without at least one drugmaker stock surging in response to clinical trial results, regulatory decisions, or buyout offers.

Up and down Wall Street, the investment bank analysts have been telling anyone who'll listen to buy these biotech stocks before they soar. The average price target on these stocks suggests some dramatic gains could be up ahead.

Beginning investors often learn the hard way that buying stocks simply because they've attracted lofty price targets from Wall Street is a dangerous game. If things don't work out, analysts can simply adjust their targets, but that won't help you recover any losses.

Let's take a closer look at two stocks Wall Street expects to rocket higher to see if they're right for your portfolio.

Recursion Pharmaceuticals

Shares of Recursion Pharmaceuticals (RXRX 1.78%) have fallen by nearly half from the peak they reached in July. Investment bankers who follow the biotech company expect a big rebound in its near-term future. The average price target on the stock suggests an 88% gain from recent prices.

Rather than discover new drug candidates the old-fashioned way, Recursion uses heaps of computing power and large data sets to predict clinical outcomes of new drug candidates in very early-stage development.

Instead of developing new drugs entirely on its own, Recursion licenses very early-stage drug candidates and intends to sell access to its discovery platform. As a decade-old company with very little evidence its platform works as intended, though, selling access has been an uphill battle.

Recursion reported top-line revenue of about $50 million over the past 12 months from development partners such as Roche and Bayer. Sadly, it also had to spend $49 million to generate that revenue, leading to a gross profit of just $1 million over the past 12 months and heavy losses.

Recursion finished June with about $406 million in cash and cash equivalents after losing $142 million in the first half of 2023. The lead candidate it's been developing since at least 2015, called REC-994, is finally in a fully enrolled, placebo-controlled trial, but top-line results aren't expected until the second half of next year.

Despite a lack of clinical evidence its discovery platform works and with no approved products to sell, this company sports a huge $1.7 billion market cap at recent prices. If REC-994 produces disappointing results next year, the stock could get beaten to a pulp. It's probably best to keep this stock on a watchlist until we see more proof its drug-discovery platform can produce successful clinical trial results.

bluebird bio

Shares of bluebird bio (BLUE 1.41%) are down around 48% this year, but Wall Street analysts who follow the company expect better times ahead. The average price target on the stock implies a 99% gain.

Last year, bluebird bio became a commercial-stage business again with not one but two new gene-therapy approvals from the U.S. Food and Drug Administration (FDA). Zynteglo is a single-administration treatment for patients with severe beta-thalassemia who also require frequent blood transfusions. Skysona is a treatment for patients ages 4 through 17 in the early stages of a rare brain-wasting disease called cerebral adrenoleukodystrophy.

Bluebird bio's market cap is a sprightly $382 million at recent prices, which seems far too low for a company with two approved therapies. Expectations for the U.S. launch of Zynteglo and Skysona are not very high thanks to these therapies' disastrous European tour.

Zynteglo earned conditional marketing approval from the European Medicines Agency in 2019, and Skysona followed a couple of years later. Sadly, bluebird bio couldn't convince any of the European Union member states to cover Zynteglo's $1.8 million price tag. Without any sales to record, bluebird bio withdrew from the European market in 2021.

As of Aug. 8, a combined 16 patients in the U.S. have started treatment with Zynteglo and Skysona. Uptake so far is too low to suggest these drugs will ever achieve blockbuster sales. While these treatments probably won't cross the $1 billion per-year threshold, there's still a reasonable chance they could go on to bring in more than $250 million in combined annual sales by 2027.

If Zynteglo or Skysona meet modest future-sales expectations, investors who buy the stock at its presently low valuation could realize huge gains. Of course, there are no guarantees, and new drug launches can be unpredictable.

Zynteglo's U.S. launch will be extra difficult to forecast because its strategy involves returning up to 80% of its $2.8 million price if the treatment fails to prevent patients from eliminating their dependence on costly blood transfusions. This stock looks like a buy now, but only for investors with a high tolerancefor risk.