Let’s not beat about the bush too much. At the end of the day every investor wants to see a strong return on their outlay. The stronger, the better.
The thing is, the markets are predicated on a simple equation. Go with the safer bets, i.e. the mega-caps, and you will probably make bank, although less likely to see enormous gains. On the other hand, take a chance on a smaller, less established name and the rewards could be far grander. However, there’s a catch; this is a risky play and you are far more likely to see the investment evaporate when placing a bet on the wrong horse.
This is where Wall Street’s analysts enter the frame; diving into the TipRanks database we have homed in on two small-cap stocks which not only qualify as Strong Buys according to the analyst consensus, but they are also expected to double, or more, in the year ahead. Let’s take a closer look.
AdTheorent Holding (ADTH)
Love it or hate it, the digital world will still run forward on advertising. It’s the essential ingredient that provides the bread and butter of so much digital activity. AdTheorent lives in that digital advertising space. The company, which was founded back in 2012, offers customers a digital media platform that uses machine learning to deliver custom solutions and real-world value to advertisers and marketers.
This is just one of many companies that jumped on the SPAC bandwagon last year. AdTheorent went public in December, through a merger with MCAP Acquisition Corporation. The move was approved by MCAP shareholders on December 21, and the ADTH ticker started trading on December 23. The move created a joint company with an enterprise value of $775 million; since then, the stock has slipped, and AdTheorent now shows a market cap of $468 million.
Prior to the SPAC transaction, AdTheorent released its 3Q21 earnings. The results showed solid growth, with revenue and adjusted gross profit both up 36% year-over-year. The top line reached $39.5 million, adjusted gross profit came in at $25.5 million, and net income was up 87% yoy to reach $1.4 million.
This newly public stock has caught the eye of Canaccord's 5-star analyst Maria Ripps, who notes its aversion to cookies and describes that as “becoming increasingly important given the heightened industry focus on consumer privacy.”
Ripps goes on to say of AdTheorent, “The company serves over 300 advertiser clients spanning major advertising holding agencies, smaller independent ad agencies, and brands seeking to move their advertising capabilities in-house, with an increasing focus on independent agencies and brands, which today drive about threequarters of company revenue. With the stock down from its SPAC price, largely reflecting the broader tech sell-off, we think the current valuation creates an attractive entry point…”
Ayala Pharmaceuticals (AYLA)
The second stock we’ll look at is a clinical stage biopharma company researching new treatments for cancers. Ayala is pioneering a novel approach to cancer treatment that will provide specific therapies for patients with aggressive, rare diseases. The company’s treatment technology is based on gamma secretase inhibitors, as a way to disrupt the growth of tumors by activating the Notch pathway. This clinical-stage researcher is solidly in the small-cap segment, with a market cap of just $92 million.
The company’s development pipeline features two drug candidates. AL101 is the first, and last September, Ayala presented preliminary clinical data from the 6mg dose cohort of the Phase 2 ACCURACY trial. This trial is evaluating the drug candidate as a treatment for R/M ACC (recurrent/metastatic adenoid cystic carcinoma); the prelim data showed 70% disease control rate in this dose cohort.
Also about AL101, the company released pre-clinical proof of concept data showing that the drug demonstrated enhanced activity when in combination with already approved cancer therapies for ACC.
Ayala’s most advanced clinical trial is with AL102. The company recently reported that it is on track to release the initial interim data from Part A of the Phase 2/3 RINGSIDE trial. This pivotal trial is testing the drug as a treatment for desmoid tumors and the interim data is due out in the middle of this year. Part B will commence following the Part A dose selection.
The clinical studies and the novel therapeutic approach are the key points in the view of H.C. Wainwright’s Raghuram Selvaraju.
“In our view, Ayala represents an underappreciated story within the precision oncology arena, given its focus on gamma-secretase inhibition—a scientifically validated mechanism in the context of modulation of Notch pathway activation—and its deployment of two lead candidates (AL101 and AL102) across five hitherto-intractable cancer types with limited existing treatment options…. All the indications that Ayala is targeting constitute recurrent or metastatic disease; the patients being studied are considered relapsed or refractory, with track records of limited or non-existent impact achieved with existing approved drugs. Thus, we believe that Ayala is focusing on delivering differentiated impact in areas of high unmet need,” Selvaraju opined.