Amarin: There’s Still Time to Buy AMRN Stock

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Biotech stock Amarin Corporation plc (ADR) (NASDAQ:AMRN) has been quite the conversation piece lately, and for good reason. Following a major analyst upgrade from HC Wainwright a couple weeks ago, we saw tremendous gains in Amarin stock, followed by some pretty drastic losses.

amarin amrn penny stockAMRN stock leveled out near the end of last week, but the question facing Amarin investors is: What’s next?

Well, the recent action seems to be just a classic case of a stock becoming a victim of its own success. While AMRN has given up some of its early post-upgrade gains, it’s still a great option in the broader picture.

Then, early this week we saw some pretty drastic losses. However, today, the stock seems to be recovering and we seem to be on the right track. So, what’s going on with Amarin? This is a classic case of a stock being a victim of its own success. While the stock has given up some of the gains we saw last week, it still looks like a great option in the broader picture.

Highs and Lows for AMRN Stock

When the news broke March 12 that HC Wainwright upgraded AMRN stock from “neutral” to “buy” — increasing the target price from $2.50 to $10 — investors climbed over each other to push Amarin more than 20% higher by Thursday.

Amarin Chart 1

Following Thursday’s action, one would’ve expected AMRN to take a breather, but instead, we saw the opposite. Amarin stock skyrocketed again for a total two-day run of more than 50%.

And that’s when we got our swoon.

Amarin Chart 2

Monday and Tuesday saw AMRN stock fall by more than 10% each day, sparking quite a bit of conversation as to how long the declines would last.

Amarin Chart 3

Amarin found itself back on the uptrend Wednesday, gaining more than 10% from the previous close, and finished the week with a leveling out.

All told, though, AMRN stock is now nearly 30% ahead of where it was before the Wainwright upgrade.

Why This Is All Important

It’s easy to see why investors might be a little panicky after the selloffs from Friday’s peak. But investors should remember that corrections are healthy, especially after monstrous jumps like the one Amarin stock just enjoyed.

What we saw last week wasn’t, in fact, a red flag telling investors to abandon ship. Instead, it was just a sign that the gains were too much, too fast. But overall, AMRN stock actually finds itself in a strong short-term uptrend.

Amarin Chart 5

More Than Just a Short-Term Trend

While short-term price movement bodes well for Amarin, this biotech also has a decent fundamental story.

Amarin is the developer of a prescription drug, Vascepa, which reduces triglycerides (fats) in adults. Vascepa was approved in 2012, and now sales of the drug are at least starting to show some progress. The company is now hoping its REDUCE-IT cardiovascular study, upon completion, can further drive sales.

While AMRN currently is operating at a loss, those losses are declining — in fact, the past four quarters have seen losses cut by 35% or more. Analysts further expect losses to decline over the next couple of years, from 57 cents per share in 2014 to 39 cents this year and 17 cents in 2016.

Bottom Line

Enjoy the slower action while you can. In the short term, we’ll likely continue to see drastic moves in AMRN stock. And that’s exactly what you can expect out of small-cap biotech stocks, which are volatile in general as investors make their moves based on anticipations of drug trial results, rumors, and news that can all change in a flash.

Still, the trend for now is broadly Amarin’s trend, at least in the short term.

Joshua Rodriguez is the owner and and founder of CNA Finance. As of this writing, he did not hold a position in any of the aforementioned securities. To contact Joshua, email Joshua@CNAFinance.com or follow him on Twitter.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/amarin-buy-amrn-stock/.

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