Sometimes after a stock has a good run, the analysts on Wall Street start to get a little gun-shy, especially if they made a good call on the stock and it went up smartly. Often they will cut the rating a notch, but keep the price target the same, or even move it a touch higher. Then they can have it both ways. They have cut the rating if it goes down, but they raised the price target if it goes higher.
A new Jefferies report focuses on three companies that could have some of the qualities that are matched in this thesis. They also are companies that for one reason or another took a shot as the sector they belong to got hit. All three are rated Buy at Jefferies.
This was one of the top biotech picks for 2016 at Jefferies. Celgene Corp. (NASDAQ: CELG) has an outstanding partnered pipeline. which most think is low risk and has the potential to yield several blockbuster drugs. Certain Wall Street analysts also think the company can grow earnings 15% on a compounded annual growth rate basis going forward.
Otezla, which treats psoriasis and psoriatic arthritis, had achieved considerable prescriptions among physicians but the scripts have slowed after a solid launch, showing the importance for sales outside of the United States. Celgene’s blockbuster blood cancer drug Revlimid continues to dominate. Pomalyst sales also continue to be solid. Cancer drug Abraxane is also growing at a respectable rate, so the company continues to have a strong lineup of top-selling drugs.
The company recently reported fourth-quarter financial results that showed year-over-year growth on the top and bottom lines but came in short of Wall Street’s consensus forecast. It is worth noting that the net negative impact of currency on net product sales was 1%.
The stock jumped when Celgene and Natco reached settlement over a patent, which removes a huge overhang on the stock that has been there for some time. Revlimid makes up over 60% of the company’s total revenue, and the analysts note that typically the first quarter is seasonally soft for the drug. The Jefferies estimates for the quarter are pretty much in line with the street, but a slowing of dollar strength would be a plus for the company.
Jefferies actually lowered its price target for the stock to $131. The Thomson/First Call consensus price target is higher at $137.95. The shares closed Wednesday at $108.22, up almost 6% on the day.
This is another top tech stock that reported outstanding earnings, and it is also a member of the Jefferies Franchise Picks list. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles. It is also moving into visual computing chips for cars, mobile devices and supercomputers. NVIDIA has a technology partnership with electric car maker Tesla.
The company has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.