The biotech industry has made a splash in 2017, outperforming practically all the broad markets. With this incredible display, it’s no wonder that investor interest in this particular industry has grown, and one analyst sees this continuing even further.
Jefferies is fundamentally positive on the biotech sector, considering that the group has been primarily a laggard and underweight by institutional investors. Not to mention this group is not expensive compared with other subgroups and the market. Also with the biotech and pharma witch-hunt that we saw over the past couple of years firmly in the rear view, it seems that these stocks have a clear runway for growth.
The iShares Nasdaq Biotechnology ETF (NASDAQ: IBB) has been locked in a 15% to 20% trading band ($240 to $300) for more than a year. As a result, the brokerage firm believes that the sector will sustain a breakout move over $300 and continue to grind higher for the year due to:
- Health care rotation and reversion from other groups/sectors along with biotech playing catch-up (huge sell-off in 2016 and slow repair in 2017).
- Low-expectation set-ups in biotech (beaten down and pretty negative sentiment).
- Consensus earnings estimates are beatable for Amgen, Celgene and Vertex.
Shares of this exchange traded fund were last trading at $310.65 on Tuesday, with a 52-week range of $246.71 to $323.45. Over the past 52 weeks, shares are up 14%, while year to date the stock is up 17%.
With such a bright future for the industry, Jefferies issued these calls for its favorite picks in the biotech space:
- Acorda Therapeutics Inc. (NASDAQ: ACOR) has a Hold rating with a $22 price target.
- Amgen Inc. (NASDAQ: AMGN) has a Buy rating with a $195 price target.
- Axovant Sciences Ltd. (NYSE: AXON) has a Buy rating with a $40 price target.
- Biogen Inc. (NASDAQ: BIIB) has a Hold rating with a $310 price target.
- Celgene Corp. (NASDAQ: CELG) has a Buy rating with a $160 price target.
- Esperion Therapeutics Inc. (NASDAQ: ESPR) has a Hold rating with a $55 price target.
- FibroGen Inc. (NASDAQ: FGEN) has a Buy rating with a $50 price target.
- Gilead Sciences Inc. (NASDAQ: GILD) has a Hold rating with an $80 price target.
- Intercept Pharmaceuticals Inc. (NASDAQ: ICPT) has a Buy rating with a $275 price target.
- Prothena Corp. PLC (NASDAQ: PRTA) has a Buy rating with a $100 price target
- Spark Therapeutics Inc. (NASDAQ: ONCE) has a Buy rating with an $85 price target.
- Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) has a Buy rating with a $155 price target.