Celgene Corporation (CELG) — In addition to Gilead Sciences, Inc. (GILD), the Dec. 29 Trade of the Day, Celgene continues to be one of my top picks in the biotechnology sector. This group sold off in the latter part of 2015 following criticism over the high cost of drugs, but that decline now appears to be resolved with minimal technical damage to CELG stock.
The firm specializes in small molecule drugs for the treatment of bloodborne and solid tumor cancers and inflammatory disease. S&P Capital IQ Equity Research emphasizes Celgene’s growth prospects, pointing out recent European and FDA approval of its best-selling drug, Revlimid, for maintenance use in earlier-stage multiple myeloma. It analysts expect Revlimid to be approved for additional uses and note the company has a strong inventory of drugs that should help accelerate sales and earnings. They predict 2015 gross margins around 95%.
Capital IQ rates CELG stock a “strong buy” with a price target of $166. Its analysts estimate earnings of $5.94 per share in 2016, which represents a 23% increase from its $4.82 estimate for 2015. The company has a strong cash position and generous stock buyback program.
Technically, CELG stock is consolidating at the top of a right triangle with a bearish resistance line at $120 and support just above $105. Although MACD is overbought, it could become more so if shares break through the bearish resistance line.
Buy CELG stock at $115, the 50-day moving average, or on a breakout above $120. The trading target is $140, which would result in a gain of at least 16%.
Long-term investors may want to buy CELG stock at the market as a cornerstone investment in the biotech sector. The long-term (one-year-plus) target is over $175.
