When companies see their shares rise almost 50%, most investors probably just assume the news is from a buyout or a merger. In the case of Tuesday’s massive gain in shares of Protagonist Therapeutics Inc. (NASDAQ: PTGX), it was that the company announced a key worldwide licensing and collaboration agreement with Janssen Biotech, a subsidiary of Johnson & Johnson (NYSE: JNJ). While this pact was covered in-depth, the reality is that it could end up bringing close to $1 billion spread out over many years, if milestones and other targets are achieved.
Tuesday’s closing price of $11.82 generated a final gain of almost 44% in Protagonist’s shares. Still, the stock opened at $12.28 on Tuesday and traded as high as $14.85. Many speculative biotech investors had to be scratching their heads trying to figure out if this was the beginning of great things for the company or whether all the good news is now baked into the cake.
According to the analysts tracking Protagonist Therapeutics, investors might even see much larger upside ahead. Investors will want to consider several key issues about the company before they decide whether to trust analysts calling for exponential upside. These are some of the top considerations:
- The company had a market cap of only about $140 million prior to this big move, and that market cap was $192 million on Wednesday morning.
- This company raised close to $90 million in an initial public offering in August of 2016 after selling 7.5 million shares at $12 per share.
- Trading volume on Tuesday was 3.23 million shares — well over 100 times normal daily trading volume.
- Protagonist Therapeutics has a 52-week trading range (actually less than a year) of $8.00 to $26.36, showing just how volatile this company’s stock has been.
- The May 15 short interest may look small at 237,623 shares, but that was the second highest since the IPO and was over 22 days to cover.
Three different analyst calls have been highlighted here, two of which were either updated or made after Tuesday’s monumental move. As a reminder, these are outside analyst views, and investors should only use analyst research reports in speculative biotech stocks for information rather than blindly following the calls. Just because they have “outperform” ratings and are calling for upside of 100% or more doesn’t assure that the outcomes will be achieved.
One last note for investors to consider is that analysts often ratchet up expectations and targets after news creates a big move in the stock. It is very common for stocks to give back some of their instant profits due to profit taking and to new short sellers betting against the move.