With earnings season about to kick off, investors are being forced into a different sort of earnings season. Investors love looking for companies that they believe will beat earnings expectations. The problem is that many of the companies will be posting much lower earnings due to the pandemic having much of the economy in various phases of lockdown for the better part of the past six months.
24/7 Wall St. has been reviewing many sectors for leadership heading into earnings. One area that can offer some defensive strategies is biotech and pharmaceuticals. With many companies seeking fortunes from COVID-19 vaccines and treatments, the investors who are looking beyond the current climate may focus on the companies that are already generating sales and are profitable.
Investors also are looking for opportunities in which Wall Street is increasing its expectations and targets heading into earnings. There are of course no assurances that every company will live up to its potential, but investors still look for that safety and upside that has been given upside ahead of earnings.
It is hard to imagine that many of the top biotech companies are valued at the same as some of the less favorable pharmaceutical stocks. Even value investors may find some attractive valuations at the current time.
We have used Refinitiv for consensus expectations, and additional color has been added on each company.
Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) recently saw its shares surge after a business update included increased guidance for 2020 and showed continued revenue growth expectations out to 2025. Alexion’s stock was considered an “underwhelming case of boredom” until that update, which sent the shares higher. One difficult situation here is that Alexion’s valuation is barely 11 times earnings, despite expected income and sales growth in 2020 and 2021.
Wedbush Securities has been consistently positive here, with an Outperform rating and a $156 price target. The firm believes that Alexion can diversify away from Soliris, and it sees up to 10 launches that will contribute to growth ahead. The firm even called out its drug pipeline as representing a call option with multiple upside levers. RBC also chimed in after the update and reiterated its Outperform rating and raised its target price to $139 from $136.
Alexion’s recent $124.00 stock price is within a 52-week range of $72.67 to $127.77. The company now has a $27 billion market cap, and its consensus price target is $142.16. For some added juice, note that many investors believe that Alexion is a potential buyout candidate.
Amgen Inc. (NASDAQ: AMGN) recently saw its stock take a hit after a pivotal heart failure drug study achieved its endpoint with statistical significance but still left investors with some concerns. While the stock suffered that disappointment, investors took notice that Amgen was added to the Dow Jones industrial average as Pfizer’s replacement. Some will interpret this to mean Amgen’s earnings expectations are manageable.