3 Wall Street Analysts Think Viking Therapeutics Stock Will Roughly Triple Over the Next 12 Months. Here's Why I Think They're Wrong

Viking Therapeutics (NASDAQ: VKTX), a clinical-stage biotech, is slightly in the red year-to-date. But the good news is that it has important catalysts over the next year or so that could send its share price soaring. How much will Viking Therapeutics gain in the next 12 months? That depends on which analysts you ask, and some are particularly bullish on the stock.

For instance, Steven Seedhouse, an analyst at Cantor Fitzgerald, has a $100 price target on the stock, implying it could roughly triple from current levels. At least two others, Jay Olson at Oppenheimer and Joseph Pantginis at HC Wainwright, also have price targets in the same range. Could Viking Therapeutics really triple in the next year? I don't think so. Here is why.

Image source: The Motley Fool.

Everything would have to go right

Viking Therapeutics is developing weight loss medicines. The company's leading candidate, VK2735, has already begun phase 3 studies in a subcutaneous (SC) formulation, while an oral version of the therapy should also start late-stage trials by year-end. Viking Therapeutics will likely release results from its phase 3 studies for SC VK2735 in the second half of next year. Obviously, strong results will send the stock price soaring. But how good does the data need to be for Viking's shares to double (or more)?

Here's what we can say for sure. Since SC VK2735 posted a mean weight loss of up to 14.7% in a 13-week phase 2 study, it needs a much higher average in its 78-week phase 3 studies for SC VK2735 to impress the market. A 15% weight loss in these trials would be a major disappointment, especially for patients who aren't diabetic. The most impressive result the market can reasonably hope for is SC VK2735 matching retatrutide, a medicine that delivered a best-in-class 28.3% mean weight loss over 80 weeks in a phase 3 trial.

VK2735 could exceed retatrutide in theory, but considering no other anti-obesity medication has even come close to that -- and the fact that retatrutide has a unique mechanism of action that helps explain its outstanding results -- investors shouldn't count on that. I'd estimate that the market would be genuinely impressed by mean weight-loss data between 23% and 26%, and if the results fall toward the upper bound of that range, the stock would rise substantially overnight.

Under that scenario, the stock tripling by next year may not be impossible. Here's why. Viking Therapeutics' current market cap is $4 billion. So, let's say it is worth $12 billion by the end of next year. Suppose Viking Therapeutics can generate $4 billion in sales by 2032, which, if SC VK2735 can achieve a 26% mean weight loss, is entirely possible. And let's assume the company has a price-to-sales ratio of 5 by then, which is also fairly reasonable in the biotech industry. Under this scenario, the stock would be worth $20 billion by 2032, for a compound annual growth rate of 10.8% over the five years starting in 2027.

But that's an optimistic case that doesn't even account for potential safety and tolerability issues in the phase 3 data Viking Therapeutics will release. True, the company is also conducting a study testing various doses of VK2735 for weight-loss maintenance. It should release data from this trial by year-end. Together, strong results from this study and Viking's phase 3 trials for SC VK2735 could send the stock up substantially, but that's assuming near-flawless data across these trials. Investors shouldn't bet on that.

Is Viking Therapeutics stock a buy?

There is still a lot to like about Viking Therapeutics. VK2735 looks like a genuinely strong contender in the rapidly growing weight-loss market. It is a dual GLP-1 and GIP agonist, the same category as Zepbound, currently the best-selling anti-obesity medicine. Further, Viking Therapeutics is developing an oral formulation of this therapy, which could make it even more competitive, as recently launched oral anti-obesity treatments have proved popular. That said, a clinical setback to its leading pipeline candidate would sink the stock, and it would be hard for Viking Therapeutics to recover. So, this stock isn't for the faint of heart. Only investors comfortable with heightened risk and volatility should consider initiating a small position.

Prosper Junior Bakiny has positions in Viking Therapeutics. The Motley Fool recommends Viking Therapeutics. The Motley Fool has a disclosure policy.