Amgen, Inc. (AMGN) — Like many companies in the biotech sector, AMGN stock has felt the pressure of government regulations and public outcry over high drug prices. But as I stated in Wednesday’s Daily Market Outlook, the beaten-down biotech group may be bargain hunters’ next target, and AMGN stock is a high-quality pick.
S&P Capital IQ Equity Research considers Amgen a medium-risk investment, as the leading biotech company operates in a highly competitive and regulated industry that is subject to government oversight on drug safety and reimbursement rates.
However, its analysts rate AMGN stock a “Buy” with a 12-month price target of $202, noting Amgen’s robust drug pipeline, history of strong cash flows and recent cost-cutting measures. They expect revenues will increase 3% in 2016, while earnings are projected to increase 4% to $10.80 per share this year and jump another 12% to $12.10 in 2017.
Turning to the chart, AMGN stock fell from an all-time high near $182 in late July to a low just above $130 in late September, a decline of nearly 30% in just two months.
A high-volume rally then popped AMGN stock to $165 within a month. From there, it began a consolidation that, until this year, hugged its major moving averages.
In January, shares began a decline that ended just above $139 on March 10. This bottom was accompanied by a buy signal from my proprietary indicator, the Collins-Bollinger Reversal (CBR).
Following that signal, AMGN stock began a climb that took shares back above their 20-day, 50-day and 200-day moving averages. The resistance line at $165 will probably block a sudden breakout. But I anticipate a pullback to just below the 200-day moving average at $154, which would be an excellent place to enter a limit order to buy AMGN stock.
My price objective is $200 within six months, which would result in a gain of 30%. Amgen also pays an annual dividend of $4 a share for a current forward yield of 2.5%, and the stock is expected to go ex-divided in mid-May.
