U.S. equities are rebounding from Wednesday’s weakness with a tepid rally on Thursday that suggests the bulls aren’t fully confident in their abilities to sustain the historic post-August uptrend. The catalyst for the rebound was a “dovish taper” decision by the European Central Bank, which promised to extend their bond buying program into 2018, albeit at a diminished rate.
But headwinds remain. President Trump has a big decision to make, on the verge of nominating a new Federal Reserve chairman. And his tax reform plans face an uncertain future in the Congress. Moreover, a persistent rise in interest rates (as Treasury bonds weaken) is putting the hurt on “risk parity” funds once again.
And a number of technical indicators are weakening or flashing warning signals, from breadth to fund positioning and investor sentiment. Large-cap “FANG” tech stocks remain weak, as are biotech stocks, one of the market’s recent areas of momentum interest.
Here are five biotech stocks that are breaking down badly:
Biotech Stocks Getting Battered: Celgene (CELG)
Celgene Corporation (NASDAQ:CELG) shares are getting wrecked down nearly 20% in mid-day trading after reporting weaker-than-expected quarterly results. Forward sales guidance was cut as well. Earnings grew 21% to $1.91-per-share, above estimates. But net product sales grew just 11% to $3.3 billion, about 4% below what the Street was expecting.
CELG investors were massively disappointed by the lowering of 2020 revenue guidance to $19-$20 billion from $21 billion previously, fueling concerns about the coming “patent cliff” for its Revlimid treatment. The disappointment resulted in a downgrade from analysts at Wells Fargo.
Biotech Stocks Getting Battered: Gilead Sciences (GILD)
Gilead Sciences, Inc. (NASDAQ:GILD) shares are down nearly 3% in trading, falling further away from their 50-day moving average and looking set for a return to the August consolidation range, which would be an 8% decline from here. Management recently presented positive results from the Phase 2 and Phase 3 studies of new drugs designed to treat liver aliments.
GILD will report earnings after the close today. Analysts are looking for earnings of $2.13-per-share on revenues of $6.4 billion. When the company last reported on July 26, earnings of $2.56-per-share beat estimates by 39 cents on a 8.2% decline in revenues.
Biotech Stocks Getting Battered: Biogen (BIIB)
Biogen Inc (NASDAQ:BIIB) shares, which have already gapped down 13% from their recent highs, look set to decline below their late September lows in a possible prelude to a drop to its August lows, which would be worth another 8% decline from here. Analysts at RBC Capital Markets recently lowered their price target in the wake of a mixed quarterly performance.
BIIB will next report results on Jan. 25 before the bell. Analysts are looking for earnings of $5.61-per-share on revenues of $3.1 billion. When the company last reported on Oct. 24, earnings of $6.31-per-share beat estimates by 58 cents on a 4.1% rise in revenues.
Biotech Stocks Getting Battered: Alexion Pharmaceuticals (ALXN)
Despite reporting better-than-expected results before the open, Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) shares are dropping another 3% in mid-day trading on Thursday, threatening a decline below their 200-day moving average for the first time since early July. This partially reversed the 50% rise off of the late May low. Watch for a possible fill of the June gap move near $110, which would be worth a 13% decline from here.
ALXN reported earnings of $1.44-per-share — 12 cents ahead of estimates — on a 7.5% rise in revenues from last year. Management also raised forward guidance. The results clearly weren’t good enough, unable to meet the “whisper” number on the Street.
Biotech Stocks Getting Battered: Vertex Pharmaceuticals (VRTX)
Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) shares are down more than 3% in trading on Thursday, falling unceremoniously out of a multi-month consolidation range and filling the gap from its post-earnings gap move in July.
With the stock up some 70% from its springtime lows, this is the first significant pullback for the stock.
The move comes after VRTX reported better-than-expected results on Wednesday, with earnings of 53-cents-per-share beating estimates by 16 cents on a near 40% rise in revenues. Forward guidance was raised as well. VRTX will next report results on Jan. 24 after the close.
Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.
