COMPASS Pathways (CMPS) is a mental healthcare business based in London, UK. However, CMPS principally operates in New York. CMPS is down nearly 30% year to date, presenting a potentially lucrative entry point for investors who have been waiting to establish a position in the stock.

CMPS was trading in the mid-$30s in April, then jumped up to $39 on April 27. Profit-taking caused the stock to drop to $35 the next day. However, CMPS bounced right back to life, returning to $38.96 one day later. Unfortunately, CMPS has stagnated in the weeks since, trading between $36 and $32.

Is CMPS a Buy now that it has declined more than 25% since the start of the new year? Let’s find out.

CMPS Points of Note

CMPS is trading well below its 52-week high of $61.69. The stock’s 52-week low is $22.51. Those who have been patiently waiting for CMPS to pull back to a more attractive entry point finally have their opportunity. However, investing in this beaten-down stock might not be a prudent use of your investing dollars, as explained below.

CMPS is garnering attention from investors far and wide as it is emerging as an important player in the psychedelic therapy industry. CMPS also has the potential to be a popular growth stock in the months and years ahead as that much more money is poured into the psychedelic stocks.

The company’s top program, dubbed COMP360, consists of psilocybin therapy designed to treat depression. COMP360 has progressed to phase 2b of the all-important clinical trials. The United States Food and Drug Administration (FDA) has awarded CMPS’s COMP360 with the breakthrough therapy designation. This means COMP360 might not be mired in lengthy clinical development as sometimes occurs with other medicinal products.

It is estimated that more than 100 million individuals across the globe can benefit from COMP360. There is also the potential for CMPS psychedelics to help individuals with maladies aside from depression. It is interesting to note CMPS will not strictly provide patients with only COMP360. Rather, the drug will be provided in unison with the assistance of mental health professionals.

The bottom line is no one knows for sure exactly how the general public will react to micro dosing psychedelics to overcome depression. However, if psychedelics end up going mainstream, CMPS will be in the catbird seat as its early entry in this space provides a significant competitive advantage in the context of capturing the bulk of market share.

What Are Analysts Saying About CMPS?

Analysts believe good things are in store for CMPS. The average target price for the stock is $65, meaning it has 89% upside potential. The highest target price for the stock is $80. The lowest target price for CMPS is $50.

CMPS’s upside potential is 80% higher than the rest of the stocks traded in the United States. Furthermore, the average analyst price target for CMPS is greater than 93% of all small-cap stocks.

CMPS POWR Ratings

CMPS has an overall grade of D, which translates into a Sell Rating in the POWR Ratings. The stock has grades of D in the Momentum, Quality, and Stability components. For investors curious about how CMPS fares in the Sentiment, Value, and Growth components can find out by clicking here.

Out of 227 publicly traded companies in the Medical – Pharmaceuticals industry, CMPS is ranked 147th. Click here to find the top stocks in this industry. 

Is CMPS Worthy of Your Investing Dollars?

CMPS is rated a Sell in the POWR Ratings system, indicating potential underperformance in the months ahead. The recent drop in the stock is justified, and investors would be better off waiting until the company is rated a Strong Buy or Buy in the POWR ratings.

CMPS shares were trading at $35.00 per share on Wednesday morning, down $1.00 (-2.78%). Year-to-date, CMPS has declined -26.53%, versus a 9.04% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...

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