Stock laggards to buy: NDLS -58%
Noodles & Co (NASDAQ:NDLS) had its IPO at the peak of Chipotle’s power, at a time when every investor was seeking the next great fast-casual restaurant. Well, NDLS revenue will reach $500 million this year, about 2% higher than 2016. Its become clear that NDLS is not going to become the next Chipotle.
Still, NDLS is a legitimate business, and it is worth far more than $115 million. Currently, its price/sales ratio of 0.24 is far below the industry average, driven lower by the fact that margins have collapsed. In other words, it has been a perfect storm of hard truths and unrealistic ideas that have crushed NDLS stock.
Nonetheless, any college kid in America can vouch for the fact that noodles are in no way expensive. Thus, Noodles & Co could control costs better, and generate peak profits as a $500 million business. The big question is will management realize sooner or later that NDLS will never be a multi-billion dollar business. If so, multiple expansion alone could cause this beat down restaurant to double many times over.
Stock laggards to buy: CLDX -77%
Celldex Therapeutics Inc (NASDAQ:CLDX) is the classic tale of two halves. In 2012 and 2013, CLDX stock surged from $2.5 to nearly $40/share after surprisingly strong data from its drug Glenbatumaumab in treating a very sick breast cancer patient population. This population had previously failed several other treatments. However, in the last 16 months CLDX stock has fallen from over $25 to its current price of $3.50. It has been a truly epic roller coaster ride.
What’s important is that CLDX stock rallied because of Glenbatumaumab, but fell because of failed Rintega data. The two drugs don’t relate. And importantly, Celldex has been testing Glenbatumaumab in several ongoing trials ever since its data back in 2012. The most significant of which is a 300-patient randomized study that begun in December 2013.
Celldex will complete enrollment sometime this year for its 300-patient trial. Investors can expect interim data shortly after, and a steady stream of catalysts relating to Glenbatumaumab in the years to follow.
Given the history of CLDX stock, and realizing what caused it to rise and fall, one has to believe that Glenbatumaumab data can once more cause CLDX stock to rise. The downside is that investors have a “show me” mentality after its flunk with Rintega, which means CLDX stock is likely to remain dead money for quite some time. The upside is that Glenbatumaumab is a billion dollar drug if successful, and its data back in 2012 was truly amazing.