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TheStreet Open House

10 Top Stocks Under $5 for 2012 Picked by Analysts

Stocks in this article: SIRISMHRPWERHTHEROLCC

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7. Abraxas Petroleum (AXAS)

Company Profile: Abraxas is engaged in the exploration and production of crude oil and natural gas along the Texas Gulf Coast, in the Permian Basin of western Texas and in Wyoming.

Share Price: $3.73 (Dec. 2)

2011 Stock Performance: -18%

Analyst Consensus: Abraxas is a far smaller oil exploration and production company ($344 million market cap) than counterparts like Exxon Mobil (XOM) ($383 billion market cap). However, Abraxas shares are down this year along with the company's production and, as a result, revenue. Still, analysts are behind the stock, with nine of 10 researchers following Abraxas recommending its stock as a "buy." The average price target of $5.50 implies upside of about 47%.

Bullish Case: Canaccord Genuity analyst Marcus Talbert reiterated his "buy" call and $5.50 price target on Abraxas last month following the company's third-quarter earnings report and outlook.

"We remain constructive on AXAS' transformation progress and growing exposure to an oil-weighted production base," Talbert wrote in the Nov. 14 research report. "The company's execution in each of its core plays continues to exceed our early expectations. In addition to the Bakken development program, we see material catalysts (Eagle Ford/Pekisko monetization) that should unlock embedded value in 2012."


6. MEMC Electronic Materials (WFR)

Company Profile: MEMC Electronic Materials manufactures and sells wafers for use in the solar industry.

Share Price: $4.28 (Dec. 2)

2011 Stock Performance: -62%

Analyst Consensus: Before 2011 began, MEMC Electronic Materials wasn't even close to penny-stock land, with shares trading in the low teens. But what a difference a few months makes. Shares have been on a steady slope downward along with most other solar-related stocks. Like other companies, MEMC is dealing with oversupply issues that have resulted in a weaker earnings outlook than analysts expected.

Still, MEMC remains a favorite of analysts in the under $5 world. Nine analysts have a "buy" rating on the stock, although that's only 35% of the total number of researchers following the stock. On the positive side, the average price target of $7.43 implies potential upside of 73% over the next 12 months.

Bullish Case: Deutsche Bank analyst Vishal Shah is a believer in MEMC despite the rapid drop in share price this year. In November, Shah reiterated a "buy" rating with a $10 price target after MEMC reported quarterly results.

"We acknowledge limited near term catalysts for outperformance but believe semis/solar weakness is already priced into shares," Shah wrote in a Nov. 3 research report. "Bottom line: Q3 results were not ideal, but the worst was likely in the shares. Management is taking the right actions and overall execution seems to be improving - the company generated positive cash flow/free cash flow even in a tough operating environment."

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