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Why one broker thinks Mesoblast limited shares could soar 171% from here

Credit: U.S. Army RDECOM

The share price of Mesoblast limited (ASX: MSB) might be in a steep downtrend, but if the analysts at Bell Potter are right it has plenty of upside from here.

The regenerative medicine hopeful has suffered from a lack of investor confidence after an IPO in the US failed to attract investor interest at the planned offer price.

The biotech was forced to issue its American depositary shares at around a one third discount to the hoped for offer price and subsequently the value of the local scrip plummeted, alongside the credibility of some of Mesoblast’s capital markets advisers.

Today the ASX-listed shares sell for $1.68 around half the price they were before the Nasdaq listing and broker Bell Potter has a $4.50 price target on the company.

The broker stating: “We continue to believe in MSB’s technology and expect it to rebuild from here by delivering on its announced clinical and commercial milestones over the next 12 months which should help the sentiment for the stock to improve and for it to re-rate.”

If the stock were to hit the broker’s target over the next few months that would equal a climb of around 170% and given the fact that this would be due to positive catalysts it may also mean a bright outlook.

Mesoblast’s regenerative stem-cell medicine reportedly has some blockbuster potential to be a whole new frontier in medical treatments.

It’s in the process of developing a range of therapies for common diseases and medical complaints, the science being to develop stem cells that regenerate ageing or diseased body parts such as cartilage, bone and muscle.

Indeed, Bell Potter’s optimism pales in comparison to that of some of the company’s retail shareholders who bullishly talk of the company’s potential to become the next CSL Limited (ASX: CSL), which is a business valued around $47 billion.

However, Mesoblast remains a high-risk bet, with its high cash burn and lack of revenues meaning there’s plenty of risk to the downside as well.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

You can find Tom on Twitter @tommyr345

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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