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Alberto Abaterusso
Alberto Abaterusso
Articles (2624) 

2 Falling Knives to Catch

They have a buy recommendation rating in Wall Street

December 21, 2020 | About:

Wall Street recommends buying shares of Sonnet BioTherapeutics Holdings Inc. (NASDAQ:SONN) and Sigma Labs Inc. (NASDAQ:SGLB), which you would not expect after these 2 stocks performed so poorly over the prior 52 weeks through Friday, and lost more than 59%. As a result of the sharp decline in the share price, these stocks are known as "falling knives."

The acquisition of falling knives is the investment strategy of traders who, in the attempt to catch these stocks at prices close to their lowest levels, target impressive capital gains out of their assets as a consequence of an expected strong share price rebound. These investors are taking a high risk with falling knives as the sharp decline in the share price could be a predictor of permanent financial issues.

Sonnet BioTherapeutics Holdings Inc

Based in Princeton, New Jersey, Sonnet BioTherapeutics Holdings is a biotechnology developer of a platform for biologic medicines of single or bispecific action. These treatments target several illnesses such as chemotherapy-induced peripheral neuropathy, diabetic peripheral neuropathy, solid tumor, cancer, tumor and bone metastases.

Shares of Sonnet BioTherapeutics Holdings were trading at around $2.36 per share at close on Friday following a 62.61% decline in the share price over the past 52 weeks.

The stock has a market capitalization of $40.54 million, a 52-week range of $2.20 to $16.20 and a 14-day relative strength index of 41, which indicates the stock is still trading far from oversold levels despite the downturn.

GuruFocus assigned a rating of 3 out of 10 for the company's financial strength, which means that this business could likely be in a financial distress, determining a significant likelihood for bankruptcy to materialize before 2023.

In addition to one recommendation rating of buy, the stock has a target price of $8 per share on Wall Street, which represents almost 240% upside from Friday's closing price.

Sigma Labs Inc

Based in Santa Fe, New Mexico, Sigma Labs develops and provides advanced manufacturing technologies and related engineering consulting services to several companies operating in the aerospace, defense, oil and gas, bio-medical, and power generation industries.

Shares of Sigma Labs were trading at around $2.68 per unit at close on Friday following a decline of 72.51% over the past 52 weeks.

The stock has a market capitalization of $15.63 million, a 52-week range of $1.95 to $11.20 and a 14-day relative strength index of 50, with the last indicator signaling that the share price has not reached oversold levels yet despite the tumble.

GuruFocus assigned a score of 8 out of 10 for the financial strength rating and of 1 out of 10 for the profitability rating of the company.

A Piotroski F-Score of 5 out of 9 and an Altman Z-Score of 8.52 tells that the probability the business fails within 2 years is extremely low. Also, the balance sheet has not been charged with any debt so far.

In addition to one recommendation rating of buy, the stock has a target price of $17 per share on Wall Street, which is almost 6.5 times Friday's closing price.

Disclosure: I have no positions in any securities mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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