We recently compiled a list of the 10 Best One-Dollar Stocks To Buy Now. In this article, we are going to take a look at where CytomX Therapeutics, Inc. (NASDAQ:CTMX) stands against the other one-dollar stocks.
The upward trend in the stock market has resumed, supported by strong first-quarter and second-quarter results that have relieved investor concerns about inflation. The US economy had a very strong year in 2023. Economic activity increased steadily, job creation was high, unemployment was low, real earnings rose, and inflation declined. Furthermore, the Federal Reserve maintained high interest rates throughout this time in an attempt to control inflation. June recorded a market increase of more than 10%. The large-cap market of the 500 biggest companies has already surged over 17% so far this year as analysts look forward to reduced interest rates in the second half of 2024, along with higher earnings growth and lower inflation.
Historically, since 1928, July has been the strongest month of the year for stocks in terms of performance. The market rose by 1.7% in July. Given that the market posted gains in May and June despite notable economic uncertainty, investors remain bullish that the market can sustain its positive trend.
In a May speech to the Foreign Bankers’ Association, Federal Reserve Chair Jerome Powell recognized the difficulty of bringing inflation down to the desired level. Powell stated that it could be essential to keep interest rates at their present levels for a longer period of time. Interest rates have been fluctuating between 5.25% and 5.5% since July 2023.
Amid concerns over an impending recession brought on by higher interest rates, the US labor market still remains stable. According to the Labor Department, the US economy created 175,000 new jobs in April, although this was less than the 240,000 jobs that economists had predicted. The US labor market maintains a low unemployment rate of 3.9%, while US wages have risen 3.9% YoY. Nonetheless, recession fears are maintained by the historical recession predictor, the inverted U.S. Treasury yield curve, and the New York Fed’s model, which projects a 50% chance of a recession within the next 12 months.
The second quarter of 2024 saw a gain of more than 3% in the US stock market. Under the hood, tech companies continued to lead the artificial intelligence trade, which showed no signs of slowing down throughout the quarter. One striking trend in the stock market this year has been the outperformance of the biggest companies. The large-cap market of the 500 biggest companies gained 4.4% in Q2, bringing its 2024 return to more than 15%. By comparison, the small-cap market had a decline of 3.3%, resulting in a reduced 2024 return of 1.6%.
With over half of 2024 already gone, the US stock market is expected to see significant increases for the second year in a row.
According to DataTrek Research co-founder Nicholas Colas, the 2024 stock market surge is about more than just this year; it also includes the outlook for 2025 and 2026. Colas stated:
“Markets are convinced that U.S. large cap companies will see many years (not just one) of improving earnings. Earnings for 2024 only have to come through slightly better than last year, and nothing occurs on the macro side (economic growth, geopolitics) to derail further earnings growth in 2025 and 2026.”
Investor confidence is supported by historical trends and recent earnings performance. The stock market does well in election years, according to historical statistics, especially when the president is serving his first term, as is the case with Joe Biden.
Methodology:
In this article, we first used a stock screener, Finviz, to list down all stocks trading under $1.5 and above $0.85 (as of the writing of this article) with over 40% institutional ownership. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested. We only considered stocks that received “buy” or “strong buy” recommendations from analysts.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
A researcher in a lab coat observing a microscope, studying molecules in the companys antibody therapeutics.
CytomX Therapeutics, Inc. (NASDAQ:CTMX)
Number of Hedge Fund Investors: 24
Based in San Francisco, CytomX Therapeutics (NASDAQ:CTMX) is a biotechnology company that uses its patented Probody platform to produce advanced cancer treatments. This technology reduces adverse effects and increases therapeutic efficiency by producing biologics that are conditionally activated.
Analysts have recommended a “buy” based on the average price objective of $5.77, implying that investors may potentially profit by 303.50% from the current stock price of $1.43. In the first quarter of 2024, there were 24 hedge funds for CytomX Therapeutics, Inc. (NASDAQ:CTMX) in IM’s database. The company’s biggest shareholder is Mark Lampert’s Biotechnology Value Fund / BVF Inc with 6,595,801 shares worth $14.38 million.
Among the drugs in its pipeline is CX-904, a bispecific antibody created in collaboration with Amgen that targets CD3 on T cells and EGFR on tumor cells. Due to the unsatisfactory Phase 1a trial findings for their cancer medication CX-904, which showed few favorable responses among patients with pancreatic cancer, CytomX’s shares fell by 72% in May 2024. However, Phase 1a is underway, and dosage escalation findings are anticipated by year’s end in 2024. Second, CX-2051 is a drug-antibody combination that targets EpCAM in malignancies such as prostate, breast, and colorectal. The first data should be available by early 2025. Recently, CTMX confirmed that it has partnered with Merck on a supply agreement and will be testing CX-801 in combination with pembrolizumab for various kinds of solid tumors.
With a market value of $113.75 million, CTMX has $151 million in accessible cash, consisting of $114.1 million in short-term investments and $36.2 million in cash and equivalents. The company’s balance sheet is comparatively strong, with $216.4 million in total liabilities (mainly delayed sales) but no significant financial debt. Nevertheless, CTMX has a cash runway of around 1.4 years, indicating a possible need for further capital and dilution concerns in the near future. This is due to a quarterly cash burn rate of 26.39% since 2023.
CYMX’s annual revenue grew by 90.38% YoY from $53.16 million to $101.21 in 2023. In Q1 FY2024, CTMX announced a net income of $13.8 million, or $0.17 per share, which exceeded the forecast of $0.01 per share due to higher-than-expected revenue recognition, including $10 million of milestones obtained from the Astellas collaboration. The stock rose by approximately 200% in May when CTMX announced the release of early Ph1a ‘904 results sooner than previous guidance.
The company’s strength is that the Probody platform has the potential to develop safe and efficient cancer therapies. Even though the early data is inconsistent, it shows promise, particularly when working with top pharmaceutical companies.
The risk is associated with the limited financial runway and the possibility of future dilution. Its pipeline is still in its early stages, so real results and revenue growth remain a cause for concern.
Although CytomX Therapeutics is a promising biotech company with a revolutionary Probody platform, investors should be aware of the risks associated with its short financial runway and the possibility of dilution. Investors are optimistic about the stock, even if the company’s valuation seems low. It is worthwhile to keep an eye on CTMX for any future developments.
Overall CTMX ranks 3rd on our list of the best one-dollar stocks to buy. You can visit 10 Best One-Dollar Stocks To Buy Now to see the other one-dollar stocks that are on hedge funds’ radar. While we acknowledge the potential of CTMX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CTMX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.