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TheStreet Open House

Top 10 Buy-Rated Stocks Under $5

Stocks in this article: C ARTG RFMD

5. Ariad Pharmaceuticals (ARIA - Get Report) is a biotech company focused on development of targeted oncology therapies. The company's lead compound ridaforolimus is currently in a Phase III trial for sarcoma. Ariad shares have surged 62% in 2010 and are up more than 150% over the last 12 months.

Consensus: Of the analysts covering Ariad, eight, or 80%, recommend purchasing its shares and two recommend holding them.

Closing Price: $3.74 (June 2)

Bullish Case: Leerink Swan analysts have a buy rating and $6 valuation on Ariad, noting that the current ridaforolimus trial has a "good chance to be ultimately positive." The firm says that Ariad's partnership with Merck (MRK) "will supply a potentially significant royalty stream," even though "further financing may be needed to support the remaining pipeline before reaching profitability."

Bearish Scenario: Oppenheimer analysts have an outperform rating and price target of $6 for Ariad, arguing that it expects a "good probability of a positive outcome from the trial at the final analysis." The firm does note that "there could be some disappointment that the second interim analysis did not yield a positive result," although the analysts view any weakness in the stock as a buying opportunity.

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