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Amgen Analysts Sidelined After Q4 Report, Say Valuation Reflects Growth Potential

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Amgen Analysts Sidelined After Q4 Report, Say Valuation Reflects Growth Potential

Amgen, Inc.'s (NASDAQ: AMGN) disappointing 2020 EPS guidance issued Thursday spooked investors, leading to a pullback in the stock.

The Amgen Analysts

Wells Fargo analyst Jim Birchenough maintained an Equal-Weight rating on Amgen with a $220 price target.

Mizuho Securities analyst Salim Sayed maintained a Neutral rating and $215 price target.

Baird analyst Brian Skorney downgraded Amgen from Neutral to Underperform and lifted the price target from $173 to $185.

Wells Fargo: Amgen Shares Fully Valued Relative To Growth

Amgen's fourth-quarter results came in ahead of expectations, although product sales continued to remain sluggish, Birchenough said in a Thursday note.

The analyst said he continues to see headwinds for legacy products on competition and price erosion.

While commending the company on its focus on new products and pipeline, Birchenough expressed skepticism regarding the prospects for a durable response with the KRAS G12C inhibitor AMG510 and competitive positioning of bispecific T-cell engagers in cancer.

"Overall we continue to view Amgen shares as fully valued relative to growth," the analyst said.

Mizuho Eyes Reasons For Amgen's Disappointing Guidance

Amgen's 2020 EPS guidance of $14.85-$15.60 is significantly lighter than the consensus estimate of $16.19 despite revenue guidance of $25 billion-$25.6 billion surrounding the consensus estimate of $25.4 billion, Sayed said in a Thursday note.

Exploring the reasons for the underwhelming guidance, the analyst said Amgen typically guides conservatively at the beginning of the year. Conservatism is the key, especially with a new CFO at the helm, he said.

Amgen said it is reshaping its product portfolio with a focus on driving volume growth, according to Mizuho. 

The company may have to spend incrementally on SG&A, Sayed said. 

Finally, Mizuho said it sees a disconnect between how the Street and Amgen are modeling share buybacks, especially following the Otezla purchase and the elevated stock price.

Baird: Premium Reflects Unwarranted Enthusiasm 

Amgen's strong execution even in the face of some serious headwinds has been more than reflected in the stock, Baird's Skorney said in a Friday note.

The company's market share for Neulasta slipped from 80% in the third quarter to 74% in the fourth quarter, reflecting the entry of several biosimilars, the analyst said.

Neulasta revenues could suffer further as additional biosimilars launch, he said.

Skorney sees AMG 510 and tezeplumab as the backbone of Amgen's late-stage pipeline, with both programs generating readouts this year.

"While we do not deny there is potential for both of these medications to rapidly grow into multibillion-dollar products, we believe that at the current price AMGN shares reflect this expectation."

The analyst estimates peak sales of about $2.8 billion for tezepelumab and $2.7 billion for AMG 510.

"The current premium reflects a level of enthusiasm that just isn't warranted, in our opinion, given the company's stage of maturity," Skorney said.

Baird attributed the upwardly adjusted price target to the prospects for AMG 510 and tezepelumab.

Amgen Price Action

Amgen shares were down 6.69% at $211.02 at the time of publication.

Latest Ratings for AMGN

DateFirmActionFromTo
Mar 2020Raymond JamesUpgradesMarket PerformOutperform
Mar 2020OppenheimerMaintainsOutperform
Mar 2020CFRAUpgradesHoldBuy

View More Analyst Ratings for AMGN
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