Celgene Corporation (NASDAQ:CELG) — After a year-long decline, CELG stock looks ready to complete a major reversal.
The biotech company specializes in small molecule drugs for the treatment of bloodborne and solid tumor cancers and inflammatory disease.
Analysts at S&P Capital IQ Equity Research note that Celgene Corporation has strong growth prospects and consider the shares to be undervalued. They expect sales to be up almost 19% in 2016 to $11 billion. This includes a more than 15% projected increase in sales of Celgene’s flagship multiple myeloma drug, Revlimid.
In December, Celgene settled a patent litigation for Revlimid, in which it licensed India-based Natco Pharma Ltd. and its U.S. partner, Arrow International Ltd., a unit of Allergan Plc (NYSE:AGN), its patents to begin selling the drug generically in March 2022, with volume restrictions through 2025. Analysts said this lifted a big overhang on shares. Plus, new approvals for the drug in Europe and the United States this year should boost sales.
Capital IQ has a “Strong Buy” on CELG stock with a 12-month target of $160, which is more than 50% above the current price.
Turning to the chart, CELG stock topped almost exactly one year ago at $140.72. Since then, it has been in a downtrend, but a recent triple-bottom and MACD buy signal alert us to a pending major reversal.
A break through the bearish resistance line at $105 on high volume could lead to a quick break of the 200-day moving average above $107.
Thus, there are enough positive signals to buy CELG stock on a break above $105 for a trade to $120. If successful, this would result in a gain of more than 14%. Long-term investors should consider buying shares as a cornerstone holding in the biotech sector for the chance at much higher capital gains.
