Biopharma giant and NASDAQ 100 constituent Biogen Inc. (BIIB) reports earnings Wednesday morning, but in advance of the release are there clues as to how Biogen stock investors will react?
Let’s take a look at Biogen stock’s recent quarterly announcements, the Biogen price chart and what, if anything, BIIB’s options market are estimating to occur in front of the earnings report.
Biogen Earnings Picture
In front of Wednesday’s premarket Q4 earnings release, analysts are forecasting profits of $4.08 per share for Biogen stock with a range of $3.68 – $4.55. The consensus estimate compares to last year’s same-quarter result of $4.09.
Q4 is expected to reflect a slight downtick from last year’s result, but growth for Biogen stock’s current fiscal year is expected to still increase by nearly 20% based on analysts’ forecasts.
On the sales side, revenues are expected to climb to $2.7 billion compared to the year ago period’s $2.6 billion. That would contribute to yearly growth of about 10% for Biogen stock in 2015.
Over the past year, Biogen stock managed to top Street profit views in three of the four quarters. Trading immediately following the release has proven volatile and generated very mixed close-to-close moves of 3.96%, -22.08%, -6.64% and 10.17%.
The reactions yield an average move of -3.65% with a rather hefty one standard deviation of 14, given the large price swings in BIIB both down and up.
Biogen Stock Weekly Chart
For the past few years and up until the first half of 2015, BIIB stock had quite the bullish price run before quickly moving into a correction.
The good news — after nearly 11 months of downside pressure totaling a 44% price decline, Biogen stock could be forming a pattern bottom at key technical support.
Making the case for bulls, as part of the correction Biogen stock is testing the 50% Fibonacci retracement level from its 2011 cycle low as it carves out a potential double-bottom formation.
In conjunction with an undercut of the low of Biogen stock’s last fully formed weekly base and what constitutes a base count reset, there’s evidence an intermediate low is developing and a potential bullish trend change is at hand.
Biogen Stock Options Pricing
In midafternoon trading Monday with Biogen near $266, BIIB stock options traders are pricing in a 68% chance shares of BIIB will remain within a range of roughly $244 to $288 through this Friday.
The math behind the Biogen stock calculation uses the Weeklys January 29 $265 call and put, which are trading on implieds of 78%.
With expiration this Friday, the pricing in the BIIB straddle is the purest play on the earnings event and tells us what traders collectively expect from Biogen stock in the aftermath of its quarterly announcement.
The expected dollar move up or down in Biogen stock works out to about 8% by Friday’s close. While large, the pricing isn’t all that unusual, as the figure is larger than two of the last four event reactions in BIIB but well within the range established by the standard deviation of the past year.
Biogen Stock Bull Call Spread
Beyond the Weeklys pricing for the Biogen earnings event and traders being agreeable with positioning for a potential bottom in Biogen stock, the March $285 / $300 bull call spread for up to $3.50 is viewed favorably.
This Biogen stock vertical contains a trader’s dollar risk to $3.50 per spread while allowing for a potential max return of about 330% if shares of BIIB trade above $300 by March expiration.
By using this Biogen stock spread, the reduced cost also drastically cuts down the trader’s time decay and volatility risks and keeps the position focused on price direction.
Lastly, positioning in March allows a good deal of time for Biogen stock to move in the intended direction beyond the earnings event which we’d like to act as a catalyst for a bullish trend change.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
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