Despite the incredible market rally since the election of Donald Trump, not all sectors have responded with the same gusto. One that has lagged some is biotech, and while the potential for volatility is always higher in there, the big risk/reward factor can also drive gains and make the volatility risk well worth it.
In this week’s top stock picks from Jefferies, three very prominent biotechnology stocks are featured, including one that is a large cap leader, on which the analysts raised their price target. We cover the three biotech stocks, and an energy drink company that posted huge numbers.
This company had two positive catalysts go their way recently. Akorn Inc. (NASDAQ: AKRX) is a specialty generic pharmaceutical company that develops, manufactures and markets generic and branded prescription pharmaceuticals, as well as private-label over-the-counter consumer health products and animal health pharmaceuticals in the United States and internationally.
The company had two very positive announcements last week, and the analyst noted in the report:
The company announced the FDA approval for ephedrine, removing an overhang and combined with the Decatur facility being back on line, increasing the likelihood for additional approvals for injectables in the near-term. Management has discussed the potential for 10 additional product approvals near-term. Low leverage also gives them the ability to conduct mergers and acquisitions. Our 2018 EPS is 8% ahead of consensus.
The Jefferies price target for the shares is a surprising $24, as the Wall Street consensus is higher at $26.58, and the shares closed last Friday at $24.11, up almost 5% on the day.
This is a top large cap pick with big upside potential. Celgene Corp. (NASDAQ: CELG) is a very profitable biopharmaceutical company that develops and markets therapies for the treatment of hematologic malignancies, solid tumors and inflammatory conditions. The company’s key growth driver and contributor to the top line is Revlimid for the treatment of multiple myeloma and myelodysplastic syndromes.
Pomalyst sales also continue to be solid, and cancer drug Abraxane is growing at a respectable rate. So the company continues to have a strong lineup of top-selling drugs. Top Wall Street analysts feel that Celgene is best large-cap de-risked growth story, with possible 15% to 20% earnings growth over the next five years, two new growth drivers (new oral pills for UC and Crohn’s), and the large pipeline of more than 35 partnerships of early-stage next-generation cancer drugs.
The Jefferies analysts noted this in the report.
We found considerable potential to drive long-term growth, even post Revlimid. We take up our probability adjusted forecast for partnered programs to $4.7 billion and believe much of the pipeline is being overlooked by the Street. We note that there are data points from 16 of these partnered programs due over the next 12 months.
Jefferies raised its price target to $155 from $142, and the consensus target is $140.67. The stock closed last Friday at $123.66.
This stock has been on a roller-coaster for years and traded up sharply on good news recently. Pacira Pharmaceuticals Inc. (NASDAQ: PCRX) is a specialty pharmaceutical company that develops, commercializes and manufactures proprietary pharmaceutical products primarily for use in hospitals and ambulatory surgery centers in the United States.
The company develops pharmaceutical products based on its proprietary DepoFoam drug delivery technology. Its lead product includes, Exparel, a liposome injection of bupivacaine, an amide-type anesthetic indicated for infiltration into the surgical site to produce postsurgical analgesia. The company also markets DepoCyt(e), a liposomal formulation of the chemotherapeutic agent cytarabine indicated for the intrathecal treatment of lymphomatous meningitis, a life-threatening complication of lymphoma, a cancer of the immune system.
Its development pipeline comprises DepoMeloxicam, a long-acting non-steroidal anti-inflammatory drug, which is in preclinical development for the treatment of acute postsurgical pain, and DepoTranexamic Acid, a pre-clinical development product for the treatment or prevention of excessive blood loss during surgery by promoting hemostasis.
The analysts cite the strong earnings report and positive results on the TKA trial, which they feel could help the company fight the payer pushback at hospitals. They also expect the relationship with Johnson & Johnson to show up in revenues in the last half of 2017.
Jefferies raises its price target to $60. The consensus target is $57.33, and shares closed Friday at $50.45.
Jefferies has liked this top consumer discretionary stock for some time. Monster Beverage Corp. (NASDAQ: MNST) is an alternate beverage company focusing primarily on the energy drink segment. Approximately 75% of sales are in the United States, and the company has two primary operating segments focused on finished goods and concentrates.
Coca-Cola owns 16.7% of the company and is the primary distributor in the United States, which gives Monster Beverage access to the company’s distribution system in international markets.
The company reported strong fourth-quarter results, which featured better-than-expected organic sales growth. The analyst remains confident in the stock and feels the stronger international growth may help to offset the lowered U.S. outlook. The shares also are trading at a lower premium to the big soft drink giants than the historical figure.
Jefferies has a $60 price target, and the consensus target is $54.73. Shares closed Friday at $48.04.
Four solid stocks to buy, including three hot biotech companies. While all are more suited for aggressive growth accounts, investors may want to scale in capital and see if we don’t see some pull back.