Recession fears are rising, with the U.S. witnessing inflation of 9.1% in June, hitting a four-decade high. Amid these challenging times, looking at stocks that have insider trading activity could help investors in making informed decisions. TipRanks Insiders’ Hot Stocks tool enables investors to identify stocks that have seen strong insider trading activity recently. Using this tool, we picked two companies – Noodles & Company and Seres Therapeutics, which have seen notable recent insider trades.   

Noodles & Company (NASDAQ: NDLS)

Noodles & Company is a fast-casual restaurant chain with over 450 restaurants in 30 states, including 93 franchise locations. The disruption caused by Omicron impacted the company’s first quarter’s results. Revenue increased 2.7% to $112.6 million, and comparable restaurant sales were up 6.4%. Rising costs hurt Noodles’ profitability, with the company reporting a loss per share of $0.14. However, the company fared better than analysts’ loss per share estimate of $0.17.

With the COVID-led store closures in the rear-view mirror, the company believes that it is poised to accelerate growth throughout the remaining part of Fiscal 2022 and beyond.

While Noodles shares have plunged 48% year-to-date, insiders see the pullback in the stock as an opportunity to accumulate NDLS shares.

In a recent SEC filing, a major shareholder of NDLS, Mill Road Capital III, L.P., disclosed stock purchases made on June 30, July 1, and July 5. Overall, Mill Road Capital III, L.P. bought 304,719 shares for $1.42 million. On TipRanks, the Insider Confidence Signal is Positive for Noodles based on this insider transaction.

Meanwhile earlier this month, Truist Financial analyst Jake Bartlett lowered his price target for NDLS stock to $11 from $13, but maintained a Buy rating as part of a broader research note on Restaurants that discussed store reopening data from recent information on the web.

Bartlett continues to expect Noodles to deliver 35 net store openings in Fiscal 2022. That said, the analyst sees the store openings to be “more backend loaded.”  The analyst cited growing macro risks as the reason for his price target cut.

Overall, the Street is cautiously optimistic on the stock, with a Moderate Buy consensus rating based on one Buy and one Hold rating. At $9, the average Noodles price target suggests 91.9% upside potential from current levels.

Seres Therapeutics (NASDAQ: MCRB)

Seres Therapeutics is a late-clinical-stage biotechnology company, developing treatments for a wide range of diseases by modulating the function of the human microbiome.

On June 30, Seres announced securities purchase agreements with new and existing investors, as well as certain directors and officers in a registered direct offering of 31,746,030 shares, for an aggregate amount of $100 million.

On July 5, major shareholder Nutritional Health LTP Fund General Partner LLC purchased 8,738,243 shares at $3.15 per share, for an aggregate amount of $27.5 million. Dr. Noubar B. Afeyan is the sole member and manager of Nutritional Health LTP Fund General Partner LLC. The Insider Confidence Signal is Positive on Seres based on this single transaction.   

Last month, Oppenheimer analyst Mark Breidenbach reiterated a Buy rating on Seres stock with a price target of $13, after the company reported positive results from the ECOSPOR IV study of SER-109, an oral microbiome therapeutic for the prevention of recurrent C. difficile infection (rCDI).

Breidenbach stated, “In the 263-patient open-label study, SER-109 demonstrated an impressive clinical profile with a 91.3% sustained (8-week) clinical response rate that we believe compares favorably with published results from the company’s pivotal ECOSPOR III study.”

Breidenbach believes that the combined study populations from ECOSPOR III and IV could be sufficient to meet the U.S. Food and Drug Administration’s (FDA) safety database requirements. Further, he believes that with the recent favorable results, Seres is on track to complete a rolling Biologics License Application (BLA) submission by mid-2022, in line with the management’s guidance.

Breidenbach concluded, “We continue to see SER-109 as a substantial improvement over SoC antibiotic re-treatment in rCDI. Given SER-109’s Breakthrough Therapy Designation, we anticipate FDA approval in 1H23, which could trigger a $125M milestone from Nestlé Health Sciences.”

Overall, like insiders, the Street is also bullish on Seres with a Strong Buy consensus rating based on six unanimous Buys. The average Seres price target of $16 implies 326.67% upside potential from current levels. Shares are down 55% year-to-date.

Conclusion

Insiders are seeing the significant sell-off in Noodles and Seres stocks as opportunity to build their positions. Insider buying signals strong confidence in the company’s long-term opportunities. Insiders seem to be optimistic about the ability of Noodles to further expand its footprint and boost its sales. Meanwhile, Seres is working towards the FDA approval of its major drug candidate, making it an attractive pick for insiders as well as Wall Street analysts.  

Disclosure