2 Falling Knives to Catch

ORIC Pharmaceuticals Inc. and Ondas Holdings Inc. have positive ratings despite falling more than 59% over the past year

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Feb 22, 2022
Summary
  • Sell-side analysts have issued positive recommendation ratings for ORIC Pharmaceuticals Inc. and Ondas Holdings Inc,, even though they have been underperforming.
  • Investors seeking success amid falling knives should be aware that a strong decline in the share price could indicate permanent issues.
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Wall Street recommends purchasing shares of ORIC Pharmaceuticals Inc. (

ORIC, Financial) and Ondas Holdings Inc. (ONDS, Financial). That sounds surprising given that these two stocks haven't performed well over the past 52 weeks ending Feb. 18. With positive recommendations despite share prices tumbling more than 59%, these two stocks have earned the status of "falling knives."

Typically, investors are interested in falling knives because they want to earn significant returns after an expected stock price rebound. However, investors must be cautious with falling knives as these kinds of holdings carry a remarkable risk. The sharp drop in the stock's price could be a sign of ongoing problems - after all, investors have been selling them for a reason.

ORIC Pharmaceuticals Inc.

ORIC Pharmaceuticals Inc. (

ORIC, Financial) is a San Francisco, California-based clinical-stage biopharmaceutical developer of various solid tumor therapies and precision medicines targeting cancer resistance mechanisms.

Shares closed at $8.32 on Friday after falling 76.81% over the past 52 weeks.

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The market capitalization is about $327.66 million, the 52-week range is $8.14 to $37 and the 14-day relative strength index is 33, suggesting the stock isn't that far from oversold levels after the fall.

Regarding its financial strength, GuruFocus assigned a score of 8 out of 10 to the company, which means that the financial conditions are solid. As of Sept. 30, 2021, the company had $290 million in cash and cash equivalents, far exceeding the total debt of $12.54 million, while the current ratio was 24.6.

In terms of profitability, all financial metrics are negative as the clinical-stage company is not yet generating income from sales.

The company continues to expand its treatment pipeline, with lead drug candidate ORIC-101 delivering promising data on antitumor activity in prostate cancer patients. Also, the treatment has a safe and tolerable profile when used in combination with nonsteroidal antiandrogens, which is a specific treatment for the disease.

At the same time, the company is investigating ORIC-114 as an inhibitor of factors that cause solid tumors. In January, Oric received approval from the South Korean regulatory agency to explore the potential of ORIC-114 as a treatment for patients with advanced solid tumors.

The company said five clinical updates are on the way to be announced in the coming months through June 30, 2023. If these reflect significant advances across the product pipeline, the stock price could trend upwards again.

On Wall Street, the stock has a median recommendation rating of buy with an average target price of $32.14 per share.

Ondas Holdings Inc.

Ondas Holdings Inc. (

ONDS, Financial) is a Nantucket, Massachusetts-based provider of base stations and remote radios to critical infrastructure providers and defense markets. This equipment is used to create wide-area wireless communication networks.

Shares closed at $4.65 on Friday after falling 65.3% over the past 52 weeks.

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The market capitalization is about $189.67 million, the 52-week range is $3.92 to $14.7 and the 14-day relative strength index is 42, suggesting the stock is still far from oversold levels despite the tumble.

GuruFocus gave the company a 6 out of 10 financial strength rating, meaning financial conditions are solid. As of Sept. 30, 2021, the company had $47.6 million in cash and cash equivalents, which could cover the total debt of $1.27 million by more than 35 times, while the current ratio was 11.85.

GuruFocus has given the lowest score of 1 out of 10 for the company's profitability, as all the main financial indicators are negative. This is because the transition from the development stage to generating revenue was only recently completed. The placement of the first commercial order for the 900MHz rail communications network was received in the third quarter of 2021 from Siemens Mobility.

The August 2021 acquisition of American Robotics, a commercial developer of the first Federal Aviation Aministration-approved fully automated drone system, is intended to support Onda's long-term strategy of bringing its technology to multiple markets. The company said that American Robotics received its first order from a Fortune 100 oil and gas operator.

Looking ahead, Ondas Networks anticipates increasing demand from North American and overseas customers. This could potentially propel the stock price well above current levels.

On Wall Street, the stock has a median recommendation rating of buy with an average target price of $13.50 per share.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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