We recently published a list of 10 Worst Performing Mid Cap Stocks to Buy According to Analysts. In this article, we are going to take a look at where Viking Therapeutics, Inc. (NASDAQ:VKTX) stands against other worst performing mid cap stocks to buy according to analysts.
Market analysts are increasingly highlighting mid-cap stocks as a potentially attractive investment opportunity, particularly in the current economic climate. These stocks offer a balance between the stability of large-cap companies and the growth potential of small-cap firms. In February, Global Investment Strategist at ProShares Advisors Simeon Hyman also shared that he sees mid-cap stocks as a current market “sweet spot.” We covered his sentiment earlier in our 10 Best Performing Mid Cap Stocks to Buy According to Analysts article. Here’s an excerpt from it:
“Currently, mid-caps are undervalued, offering investors about $0.50 on the dollar, a situation that hasn’t occurred with small caps despite their underperformance… mid-caps also have a strong domestic focus, with about 75% of their revenues coming from domestic sources… mid-caps generally offer higher quality than small caps, lacking the losses and negative earnings often seen in small-cap companies.”
Earlier on January 25, Jill Carey Hall, BofA global research head of US small and mid-cap strategy, joined CNBC’s ‘Closing Bell’ to discuss small-cap headwinds and the opportunity in domestic mid-caps. She noted that the backdrop for the Russell 2000 remains challenging, with the profit growth recovery story that many investors were optimistic about last year continuing to be revised downward and pushed further into 2025. As a result, small-cap profits have continued to disappoint, with negative year-over-year earnings growth still prevalent in this segment. In contrast, mid-caps have shown better fundamentals, making them a more attractive option for investors seeking a favorable risk-reward balance, especially in an environment where multiple rate cuts have been priced out of the market.
Hall highlighted that interest rates still play a crucial role in market dynamics. Bank of America’s economists expect the Fed to maintain its current stance without further cuts, which could pose refinancing risks for small caps. Mid-caps, on the other hand, have better balance sheets and fundamental trends, which positions them more favorably. Despite the optimism around economic policies and potential deregulation, Hall noted that small caps face a high bar for investor confidence after a decade of underperformance. Historically, small caps are due for an outperformance cycle, and relative valuations suggest they could offer the best price returns over the next decade. However, for this year, investors are cautious about reentering the small-cap space without a more convincing profit turnaround. Stabilizing or potentially lower interest rates could be beneficial for small caps, as these factors have significantly influenced rallies and sell-offs in the Russell 2000.
She suggested focusing on smaller mid-caps with profits, less leverage, and less refinancing risk, or those that are economically sensitive.
Methodology
We used the Finviz stock screener to compile a list of the worst-performing mid-cap stocks that were trading between $2 billion and $10 billion. We then picked the top 10 stocks with 6-month declines higher than 50% and an average upside potential of over 30%. The stocks are ranked in ascending order of their upside potential. We have also added the hedge fund sentiment for each stock, as of Q4 2024, which was sourced from Insider Monkey’s database.
Note: All data is as of February 26.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Viking Therapeutics Inc. (VKTX) the Worst Performing Mid Cap Stock to Buy According to Analysts?
A microbiologist in protective gear studying samples in a laboratory.
Viking Therapeutics, Inc. (NASDAQ:VKTX) is a clinical-stage biopharmaceutical company that develops novel therapies for metabolic and endocrine disorders. With a diverse pipeline featuring oral drug candidates like VK2809 for NASH and NAFLD, VK5211 for hip fracture recovery, and VK2735 for weight loss, it’s advancing treatments across a range of significant medical needs.
The company made progress in 2024 with positive data from several clinical trials. For obesity, its VK2735 program showed promising results. In a Phase 2 trial, subcutaneous injections led to a 14.7% average weight loss after 13 weeks. It also tested an oral version, which resulted in a 5.3% weight loss in 28 days. It’s planning a Phase 3 trial for the injectable and a Phase 2 for the oral version.
Its NASH drug, VK2809, also showed positive results in a Phase 2b trial. After 52 weeks, 63-75% of patients saw NASH resolution, compared to 29% in the placebo group. Fibrosis improvement was seen in 44-57% of patients, compared to 34% in the placebo group. The company is working with the FDA to plan a Phase 3 trial.
Viking Therapeutics, Inc. (NASDAQ:VKTX) ended Q3 2024 with $930 million in cash. R&D expenses for the first nine months of 2024 were $70.7 million. Another one of its recent drugs is the VK0214, for X-ALD, which showed positive results in a Phase 1b trial and a new preclinical program for obesity.
The company’s successful weight-loss drug trials, particularly the promising oral version, have driven substantial stock appreciation and positioned Viking Therapeutics, Inc. (NASDAQ:VKTX) as a strong acquisition candidate. Wasatch Micro Cap Growth US Strategy stated the following in its Q1 2024 investor letter:
“Viking Therapeutics, Inc. (NASDAQ:VKTX) also contributed during the quarter. A clinical-stage biopharmaceutical company, Viking develops therapies for metabolic and endocrine disorders. Shares of the company soared in February after its injectable weight-loss drug demonstrated best-in-class efficacy in a mid-stage clinical trial. A separate, early-stage trial testing the safety and tolerability of an orally administered version of the drug also yielded positive data. A successful oral treatment would be a game changer in a multibillion-dollar industry. We believe these results make Viking a potentially attractive target for acquisition by a larger organization.”
Overall, VKTX ranks 1st on our list of worst performing mid cap stocks to buy according to analysts. While we acknowledge the potential of VKTX as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than VKTX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
