Akebia Therapeutics Inc. (AKBA, Financial) and Adverum Biotechnologies Inc. (ADVM, Financial) have performed so poorly over the past 52 weeks through May 5, with the shares losing more than 59%, that their stocks are now considered "falling knives." Sell-side analysts on Wall Street, however, recommends buying these stocks.
It is not unusual to see some investors trying to catch falling knives close to their lowest levels, as they target the highest return possible following an expected rebound in the share price. These investors should also be aware of the remarkable risk implied with falling knives, as the share price tumble could indicate permanent issues.
Akebia Therapeutics
Based in Cambridge, Massachusetts, Akebia Therapeutics (AKBA, Financial) is a biopharmaceutical company engaging in the development and commercialization of renal therapeutics for patients with kidney diseases.
Shares of Akebia Therapeutics were trading at around $3.05 at close on Wednesday following a 73.87% decline over the past 52 weeks.
The stock has a market capitalization of $487.72 million, a 52-week range of $2.09 to $13.71 and a 14-day relative strength index of 45, which indicates the stock is still far from oversold levels despite the share price tumble.
GuruFocus assigned a score of 4 out of 10 for the financial strength rating of the company. A Piotroski F-Score of 3 out of 9 and an Altman Z-Score of -2.79 indicate there is a possibility the company could go bankrupt within two years as business operations are poor and the financial condition is not stable.
With regard to the profitability of the company, the return on total assets, return on equity and return on capital ratios are all negative. While the operating profit margin and the net profit margin are also performing poorly, these two financial indicators are still above their industry median.
On Wall Street, the stock has a median recommendation rating of moderate buy and an average price target of $6.71 per share.
Adverum Biotechnologies
Based in Redwood City, California, Adverum Biotechnologies (ADVM, Financial) is a biotechnology developer of therapies for the treatment of chronic retinal diseases, including wet age-related macular degeneration and diabetic macular edema.
Shares of Adverum Biotechnologies were trading around $3.66 at close on Wednesday after an 81.42% gain over the past 52 weeks.
The stock has a market capitalization of $358.41 million, a 52-week range of $3.46 to $26.98 and a 14-day relative strength index of 21, which suggests the stock surpassed oversold levels.
GuruFocus assigned a score of 5 out of 10 for the financial strength rating of the company.
A Piotroski F-Score of 3 out of 9 indicates the balance sheet of the company is not robust, meaning the capital has not always been well managed.
With regard to the profitability of the company, many financial indicators have shown poor performance, but there is a detail that is worth mentioning: the ROE, ROA and ROC ratios, though also negative, are still yielding better than their industry median.
On Wall Street, the stock has a median recommendation rating of moderate buy with a price target of $8.38 per share.
Disclosure: I have no positions in any securities mentioned.
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