2 Small-Cap Stocks With Far More Upside Than Any "Magnificent Seven" Stock, According to Wall Street

The "Magnificent Seven" stocks, a group of (mostly) tech giants, are among the most covered companies on Wall Street. The general sentiment about these corporations is that they boast attractive long-term prospects. But what if there were lesser-known, much smaller businesses with significantly more upside?

That's apparently the case with Iovance Biotherapeutics (NASDAQ: IOVA) and Intellia Therapeutics (NASDAQ: NTLA), two small-cap drugmakers. Judging by Wall Street's current average price targets, these two small biotech companies have far more upside than any of the Magnificent Seven.

Should investors rush to buy shares of Iovance Biotherapeutics and Intellia Therapeutics? Let's find out.

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1. Iovance Biotherapeutics

Iovance Biotherapeutics' current stock price is about $2, but it boasts an average price target of $8 by analysts (according to Yahoo! Finance). Could the stock soar by 300% in the next 12 months? On the one hand, some might argue that Iovance does, in fact, look undervalued. Its most important product, Amtagvi, received approval last year for the treatment of advanced melanoma and is already generating decent sales.

The company expects revenue of between $250 million and $300 million for the full year 2025, almost all of which will be from Amtagvi -- a strong performance for a medicine that only earned the green light last year. Furthermore, there's plenty more potential for Amtagvi. It recently earned approval in Canada, and Iovance also plans to launch the medicine in other countries, including some European nations and Australia.

In the U.S. alone, the company estimates that 8,000 people die from melanoma every year; Iovance treated over 100 patients in the second quarter. Clearly, there's more room to grow -- and because Amtagvi is undergoing clinical trials in other indications, it could win label expansions down the road.

However, there are significant risks involved. Amtagvi's administration process requires physicians to collect patients' cells, manufacture the medicine, and then infuse it after chemotherapy. The manufacturing process alone takes 34 days and is done only in specialized centers. This severely limits Amtagvi's commercial opportunity and will make it difficult for Iovance to turn a profit, even as the medicine's sales grow at a good clip.

These factors make Iovance Biotherapeutics a rather risky bet, which is why its stock has plunged significantly over the past two years.

2. Intellia Therapeutics

Intellia Therapeutics focuses on gene-editing medicines for rare diseases. The company's leading candidates look somewhat promising. One is called lonvoguran ziclumeran (lonvo-z) and is being developed to treat patients with hereditary angioedema, a disease that causes painful swelling across the body. The other is nexiguran ziclumeran (nex-z), which targets transthyretin (ATTR) amyloidosis, an abnormal buildup of protein around certain organs that can cause a range of respiratory (and other) symptoms.

Both are in phase 3 studies, and Intellia has big hopes for them. By 2028, it predicts sales of $5 billion for lonvo-z and $12 billion for nex-z. True, it would have to share that hypothetical $12 billion with Regeneron Pharmaceuticals, a biotech giant with which it's developing nex-z. But given that Intellia Therapeutics has a market cap of just $1.4 billion, those predictions make the stock look too good to pass up.

However, Intellia recently announced that the U.S. Food and Drug Administration (FDA) has paused its phase 3 studies of nex-z, after a patient who received the medicine suffered from severe liver problems. It's not clear that nex-z is responsible, but things aren't looking too good for one of the company's leading candidates. Still, Wall Street is expecting big things. The average price target for the stock is $29.25, which implies an upside of 124% from its current levels.

That said, given the recent clinical setback, Intellia's prospects look increasingly dicey. Even putting that aside -- the FDA could eventually allow the late-stage trials of nex-z to proceed -- sales projections for its two leading investigational medicines look too optimistic. The company could still face additional regulatory setbacks, and perhaps never get the opportunity to launch either of them. In other words, Intellia Therapeutics is a risky stock.

Stick to the Mag Seven

Iovance Biotherapeutics and Intellia Therapeutics have plenty of potential upside -- provided they can execute their plans nearly flawlessly while avoiding clinical and regulatory problems. However, these companies could also destroy shareholders' wealth in the next few years if things don't go their way. Only investors comfortable with significant volatility should even consider initiating a small position in these stocks. For most other investors, any one of the members of the Magnificent Seven is a better buy.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intellia Therapeutics, Iovance Biotherapeutics, and Regeneron Pharmaceuticals. The Motley Fool has a disclosure policy.