Celgene Corporation Easing Back After Run To New All-Time Highs - Is It Buyable Yet?
As Celgene shares pull back off the highs after a 300 percent move over the last two years, analysts are asking if there is more upside ahead or something more unpleasant on the downside.
Celgene Corporation (NASDAQ: CELG) shareholders have loved the last couple of years of owning CELG stock as it has moved from the 2012 low pivot of $29.26 to the recent highs above $96.
Spurred on by general bullishness surrounding the biotechnology sector as well as bullish fundamental developments for Celgene Corp. itself, CELG stock has been one of the true leaders in the biotechnology group. Can the company's pipeline and revenue/earnings growth continue to justify more upside?
The Bullish Take On Celgene…
The bulls love Celgene's price action as well as its healthy cash reserves, strong positive cash flow and relatively cheap PEG ratio. Here's a breakdown of the bullet points comprising the bullish thesis:
- Celgene makes gross profits of 28.96 percent and net profits of 20.92 percent, which translates to approximately $1.75 billion in annual levered free cash flow.
- The company has more than $6 billion in cash reserves and a current ratio of 5.44
- The stock seems cheap with a price-to-earnings ratio of just under 20, which is cheap when compared to estimated 2015 revenue growth of 21.6 percent and estimated EPS growth of 32.9 percent.
- CELG stock is sporting a beautiful long-term uptrend line and is further buoyed by multiple layers of horizontal line support not far below current price levels.
The Bearish Thesis On Celgene Stock…
- The bears would contend with the stock is not cheap with its price-to-book more than 13 and price-to-sales more than 10.
- They also note that the company carries an unusually high -– for biotech companies -– debt-to-equity ratio of 142.96 percent.
- Technically, the bears note that the stock is already off the highs and still has room to drop until first support at $90.19 is approached (as of this report, the stock was trading just under $94) and that the long-term uptrend line does not come into play until the low- to mid-$80s.
Technicians are on board with the idea that CELG shares can easily drop down to the $90.19 support but are unwilling to make a strong call for much more downside than that at this point.
Only a weak overall market condition where risk is being taken off the table in a big way would upset the current bullish condition of Celgene's chart. Upside resistance, meanwhile, comes in at the recent all-time high of $96.44. Above that, everything becomes an extrapolation -– but they say the next level of overhead resistance could come in at around $105.
As with any bull market or any stock in bull trend, the trick is to buy on weakness to support in conjunction with neutral/oversold momentum oscillators. The bulls should ready their cash and then take a look at the trading action as the stock nears support at $90.19 to verify that buying then is “ideal."
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