Market Overview

Celgene Corporation Shares Could Head Higher

Celgene Corporation Shares Could Head Higher
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Celgene Corporation (NASDAQ: CELG) has been correcting a bit over the last week along with the rest of the market.

As opposed to some parts of the market (small caps, core international and certain industry sectors), however, Celgene's “correction” has been as easy to tolerate for the bulls, as one can imagine. Will it continue to be this palatable, or will things begin to sour for this top-performing stock?

What The Bulls See

  • Strong net profits of 20.92 percent.
  • Strong annual levered free cash flow of $1.75 billion.
  • A strong balance sheet with more than $6 billion in cash reserves and a current ratio of 5.44.
  • Cheap valuation metric: a price-to-earnings ratio of just under 20 versus estimated 2015 revenue growth of 21.6 percent and estimated EPS growth of 32.9 percent.
  • A stock with a beautiful uptrend in place.

Related Link: Gilead Sciences, Inc. Consolidating Gains?

What The Bears See

  • Expensive valuation metrics: a price-to-book over 13 and a price-to-sales over 10.
  • A relatively high debt-to-equity ratio of 142.96 percent.
  • At $95.64, the stock has room to fall short-term, even if the positive trends remain in place: “Correction support” comes into play at the $89.70-$91.30 range and the long-term uptrend line comes into play at around $83.

Technical Take

Technicians still call Celgene's price chart very bullish overall. They note that the stock has two potential short-term Fibonacci retracement support lines at $91.30 and $89.70. If those fail to hold up, the next key level of support would be the July pivot low at $82.90, which happens to also be where Celgene's uptrend line comes into play.

Any hold of support at any of the above levels, however, should lead to a continuation of the recent bullish trading action. The upside target for that move, should it occur, will be the $105-$110 range, depending on how fast Celgene progresses higher.

Stock chart: 
Stock chart

Posted-In: Long Ideas Technicals Trading Ideas Best of Benzinga


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