Speculators seeking a big pop over the next few months should consider a high-risk, high-reward position in Beam Therapeutics (NASDAQ:BEAM). According to its public profile, Beam specializes in precision genetic medicines, which is a growing and viable market.
Data from Precedence Research reveals that the global precision medicine market reached a valuation of $73.49 billion in 2022. Experts project that by 2030, the sector could be worth $175.64 billion. If so, that would imply a compound annual growth rate of 11.5%.
On Tuesday, H.C. Wainwright analyst Patrick Trucchio initiated coverage of BEAM stock with a “buy” rating. The expert forecasts a price per share of $80, implying a growth rate of nearly 164%. Currently, the consensus view among all experts is a moderate buy rating with a $45.56 average price target.
Given the expected growth of the precision medicine market plus Trucchio pounding the table on BEAM stock, it’s no wonder it shot up 12% yesterday. However, even more gains could be on the way.
Compelling Technicals and Options Activity Bode Well for Beam Therapeutics
BEAM stock enjoys several positive technical factors that warrant closer investigation. First, Barchart identified the biotech enterprise as a possible J-Hook pattern candidate.
The J-Hook is a sinusoidal chart pattern that has attracted attention recently in the field of technical analysis. Featuring an up-down, up-down cycle, at the end of the defined “J” pattern, there’s a solid possibility that the asset in question could shoot decisively higher. Barchart only identifies viable candidates after they meet a rigorous nine-step criteria.
Second, BEAM stock enjoyed bullish activity in the options market yesterday. According to another Barchart screener called options flow – which targets big block transactions likely placed by institutional or professional traders – the net trade sentiment landed in the bullish side of the spectrum.
Specifically, the aggregate premium of options with bullish sentiment (bought calls, sold puts) came out to $161,200. On the other end, the aggregate premium of options with bearish sentiment (sold calls, bought puts) totaled $140,100 below zero. Therefore, the net trade sentiment came out to $21,100, favoring the optimists.
Finally, BEAM stock features a short interest of 16.14% of the float, per Fintel. Also, the short interest ratio is moderately elevated at 9.25 days to cover. This framework may spark a short squeeze as panicked bears pull out of their positions. Of course, exiting a short position involves buying to close, which is net bullish for the contrarian.
Trade of the Day: Buy BEAM Stock Call Options
For those who want to take a highly speculative position, BEAM’s call options that expire at the end of the year seems tempting. Specifically, for the Trade of the Day, I’m looking at the 2024 Dec. 20 $40 call.
Why such a high strike price? In addition to a lower premium, the next major logical price target for BEAM stock is probably $40. Previously, a resistance barrier stood at the psychologically significant $30 level. With Tuesday’s move, that level has been breached.
Moving forward, the bulls will likely push for the next defined resistance barrier. That would be $40, which acted as support in 2022 before BEAM stock crumbled. Powered by new analyst coverage and a possible short squeeze, it’s not an impossible target.
Of course, we are talking about the often wildly unpredictable biotech space. Anything can happen, which includes the risk of severe downside. It’s important to recognize this risk-reward profile and wager accordingly.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
