Biogen (NASDAQ:BIIB) stock has looked so good at various times over the past nine months. But at the end of the day, Biogen stock continues to struggle. Shares hit a high of $374.99 in February.
We all know what happened then. The novel coronavirus began to wreak havoc around the world, sending equity markets into a tailspin. BIIB stock couldn’t dodge the massacre, suffering a peak-to-trough decline of 30%, bottoming near $262 in March.
The stock certainly isn’t bad, but it leaves investors wanting more. Shares are still down 10% over the past month and about 17% from the 2020 highs. That lags both the Nasdaq 100, down just 1% from its 2020 high, as well as the iShares Biotech ETF (NASDAQ:IBB), down 1.4%.
Breaking Down Biogen Stock
Biogen stock emphasizes the volatility investors can see in the biotech sector. When business depends on sales, marketing, production, and competition, on top of FDA clearance, volatility isn’t too surprising. But there’s a problem with Biogen that extends beyond simply being a biotech stock. Despite its $45 billion valuation, this company lags growth.
Analysts expect a 2.7% decline in sales this year and another 1.3% decline in fiscal 2021. The earnings front is equally disappointing. Analysts expect a 1.5% decline in profit both this year and next year.
In short, we just don’t have any growth here. Of course, that’s translated in the form of valuation. Biogen stock trades at just 8.5 times this year’s earnings estimates. That’s a dirt cheap valuation, but the stock is cheap for a reason. Investors don’t want to pay a premium for a stock when the company can’t generate positive earnings and revenue growth.
But that’s not to say Biogen is a bad company.
The company’s current revenue and net income vs. prior years shows solid growth, as does cash flow. In 2017 and 2018, free cash flow came in at $2.6 billion and $5.3 billion, respectively. In 2019, BIIB generated free cash flow of $6.4 billion.
At the end of the day though, a stock is valued at what it’s going to do, not what it has done.
Without better growth estimates, it’s hard to get too excited about this one. Its balance sheet is solid, with enough current assets ($8 billion) to cover all of its total debt ($6.3 billion). But again, it’s nothing that screams, “let’s pay a premium!”
Let’s turn to the charts.
Trading BIIB Stock
In 2019, Biogen stock plunged violently, falling about 30% in a single day. From there, it traded in a relatively tight range between $220 and $245 before eventually spiking higher.
Shares jumped in October on optimism for the company’s Alzheimer’s treatment. And while Biogen shares spiked again in early 2020, resistance near $370 smacked the stock back down.
The stock has continued to put in a series of low highs since, while failing to hold the 200-day moving average and struggling to hold the 50-day moving average.
Bulls who absolutely love this stock will notice support at $270. Below that and shares can drift back down to prior range resistance near $245. On a move back over $300, Biogen shares could climb back up into the mid-$300s.
If I’m being forced into a biotech stock, I’d rather own a stock like Regeneron (NASDAQ:REGN), which just hit new highs, or Gilead Sciences (NASDAQ:GILD), which is working on a coronavirus treatment but has alternative drugs and treatments to lean on as well.
For now, Biogen stock is cheap with no growth. Should that change by certain drug/treatment approvals or via M&A, then we can always re-evaluate the stock.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.