The discovery of COVID-19 vaccines and drugs, the development of integrated medical diagnostic devices and solutions, virtual consultations, and treatments and therapies for other critical diseases have all helped the healthcare industry grow significantly and garner investor attention. This is evidenced by the Health Care Select Sector SPDR ETF’s (XLV) 20.3% returns over the past year.
Furthermore, while the historically high inflation and ongoing volatility in the broader market could lead to loss of value by many large-cap stocks, the inelastic demand for healthcare products and services should help shares of many industry participants perform steadily.
Given this backdrop, Wall Street analysts are optimistic about the upside potential of budding low-priced stocks in this space—22nd Century Group, Inc. (XXII), UpHealth, Inc. (UPH), and Talkspace, Inc. (TALK). These stocks are expected to rally in price by more than 35% in the near term.
22nd Century Group, Inc. (XXII)
With a market capitalization of $519.17 million, XXII is a Clarence, N.Y.-based biotechnology company that develops plant-based solutions for the life science, consumer product, and pharmaceutical markets. The company produces very low nicotine content (VLNC) tobaccos and cigarette products under the Moonlight and Moonlight Menthol names and SPECTRUM research cigarettes in independent clinical studies.
On August 30, 2021, XXII announced its entry into the global specialty hops market, its third and newest plant franchise. The company plans to build a new subsidiary in the Netherlands to open new revenue opportunities in the specialty hops market and serve its tobacco and hemp/cannabis plant franchises through an expanded global footprint. As a critical input for the $500 billion global brewing industry and a growing source of medically-important molecules, this entry into the hops market is expected to benefit XXII substantially in the long term.
On July 22, 2021, XXII secured a new contract manufacturing agreement with a prominent tobacco industry partner that specializes in exporting cigarettes to foreign countries. The company will make investments to optimize margins, install new equipment at its tobacco manufacturing facility in North Carolina, and increase and establish additional distribution channels to launch its VLN reduced nicotine content (RNC) cigarettes. XXII is currently awaiting FDA authorization for MRTP designation for its VLN cigarettes.
For its fiscal third quarter, ended September 30, 2021, XXII’s revenues increased 6.9% year-over-year to $7.81 million. The company’s gross profit came in at $449,000 for the quarter, marking a 24% year-over-year improvement. XXII had cash and cash equivalents of $1.63 million as of September 30, 2021.
Analysts expect XXII’s revenue to improve 20.1% year-over-year to $33.74 million in the current year. Over the past month, the stock has gained 7.2% in price and closed yesterday’s trading session at $3.11. The $7 average price target for the stock indicates a potential 125.1% upside.
UpHealth, Inc. (UPH)
UPH operates as a digital health services company that offers a patient-centric digital health platform and tech-enabled services to manage health and integrate care. The Delray Beach, Fla., company empowers providers, health systems, health plans and governments, employers, and educational institutions. It has a market capitalization of $494.78 million.
On October 26, 2021, UPH and Mazars USA LLP, a global leader in the healthcare sector providing advice, guidance, and solutions, partnered to develop an integrated compliance roadmap for UPH. Mazars will support UPH’s continued efforts to lead compliance in operations, governance, security, and privacy.
On October 13, 2021, UPH announced the expansion of its NUTRAscriptives Direct product line of clinical-grade supplements distributed online, in retail stores, and directly by providers. NUTRAscriptives Direct provides an easy-to-support business model to offer patients high-quality supplements to augment their care plans. The new service further extends UPH’s leadership in the management of health with personalized protocols.
UPH’s total revenue for the third quarter, ended September 30, 2021, increased 53.9% sequentially to $49.07 million. The company’s gross profit came in at $19.78 million for the quarter, up 70.5% from the prior-year period. Its net income came in at $32.59 million, compared to a $32.78 million loss in the second quarter. Its EPS was $0.28, versus a $0.35 loss per share in the prior quarter. UPH had $67.88 million in cash and cash equivalents as of September 30, 2021.
Over the past month, UPH has gained 77.7% in price and ended yesterday’s trading session at $3.43. Analysts’ average price target of $7.50 represents a 118.7% upside potential.
Talkspace, Inc. (TALK)
TALK operates as a virtual behavior healthcare company. The company offers treatment options for psychiatry or adolescent, individual, or couples therapy. The members can send text, video, and voice messages to their therapists and engage in live video sessions. It has a market capitalization of $325.83 million.
On November 10, 2021, TALK was awarded a $3 million grant from the National Institute of Mental Health (NIMH) to study the effectiveness of Cognitive Processing Therapy (CPT), a well-established treatment for post-traumatic stress disorder (PTSD), in a virtual setting. This study will build on TALK’s preliminary research, which found that combining CPT with virtual tools could reduce trauma symptoms by twice as much as the usual treatment in less time. TALK is looking forward to helping find innovative and effective avenues for treating trauma and PTSD.
For its fiscal third quarter, ended September 30, 2021, TALK’s total revenue increased 22.6% year-over-year to $26.36 million. The company’s net income came in at $1.51 million, compared to a $2.69 million loss in the prior-year period. Its EPS was $0.01 for the quarter versus a $0.20 loss per share in the year-ago period. TALK had $222.87 million in cash and cash equivalents as of September 30, 2021.
TALK has lost 37.3% in price over the past month and ended yesterday’s trading session at $2.29. Analysts expect the stock to hit $3.17 in the near term, representing a potential 38.4% upside.
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XXII shares were trading at $2.89 per share on Thursday afternoon, down $0.22 (-7.07%). Year-to-date, XXII has gained 31.36%, versus a 26.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...
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