Biogen Idec Inc Still Showing Relative Weakness Compared To Biotech Peers

Biogen Idec Inc BIIB shareholders were rewarded for years for staying with their bullish bets in Biogen shares. Since the July 30 peak, however, the stock has been consolidating the most recent rally phase that started in April.

Does the company have the fundamentals to justify a move beyond the pesky resistance at $348.49? Take a look at the bulls' and the bears' arguments.

What The Bulls See

• Strong 25.64 percent net profit margins.
• Over $2.5 billion per year in positive levered free cash flow.
• A very strong balance sheet: over $1.57 billion in cash versus only $589 million in total debt, a current ratio of 2.05 and a debt-to-equity ratio of only 6.16 percent.
• Cheap valuation based on the PEG ratio under one (P/E of 20 and estimated EPS growth of 23.1 percent, both 2015 estimates).

What The Bears See

• Expensive valuation metrics: the market capitalization the enterprise value, a price-to-book ratio of 8.07 and a price-to-sales of 9.25.
• A stock that is struggling to keep up with its peers in the biotechnology space and that is on the verge of breaking down technically if much more downside occurs in the short-term.

The Technical Take

Technicians note that Biogen shares are trading at $330.16 (as of Monday's close) and have uptrend line and horizontal line support at $322.39. The bulls in Biogen get the benefit of the doubt as long as the uptrend is still in place. A break and close below that support should lead to a test of the next horizontal line support at $315.71.

On the other hand, if shares can maintain position above the uptrend line, there is still a possibility for the bulls to take the stock north of $400.