Alexion Pharma Brexit Selloff Creates An Entry Point: Trading At 'Dark-Sky' Valuation

Citi's Take

Citibank's Robyn Karnauskas upgraded Alexion Pharmaceuticals to Buy without changing her $154.00 price target, seeing Brexit as a "good entry point." Contrary to market perception, Karnauskas believes there will be no impact due to recent currency movements. Furthermore, the "current valuation assumes [the] worst for the stock."

Company Hedging Efforts

Part of Alexion's relative neutrality relied on the company's hedging strategy. "Even a big 10 percent adverse move in the currency would affect bottom-line by only 1.6 percent in that year," stated the analyst. Due to Alexion's relative FX neutrality Alexion's recent $11.00 drop "would make sense only if all global currencies moved down >15 percent vs USD," claimed the analyst.

Trading at 'Dark-Sky' Valuation

At the time of writing, Alexion traded below Karnauskas' "Dark-Sky" valuation of $122.00, which assumes "25 percent-volume/35 percent-price erosion due to biosimilar/completion and No-pipeline." Pipeline clarity in the next 6–12 months "should provide upside" to Alexion, said the analyst.

According to TipRanks.com, Karnauskas was among the better analysts covering Alexion having a success rate of 52 percent with an average rate of return per recommendation of +4.8 percent. The analyst is ranked 541 of 3,980 analysts.

At the time of writing, Alexion traded at $111.81, down 1.04 percent Monday.