Market Overview

PreMarket Prep Stock Of The Day: Amarin

PreMarket Prep Stock Of The Day: Amarin

Benzinga's PreMarket Prep airs every morning from 8-9:00 a.m. EST. During that fast-paced highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to a recording, Benzinga will highlight a stock of the day that was featured on the show.

Stock Of The Day: Amarin

Just about every sector is taking it on the chin over the past week from fears of the coronavirus. Aside from companies related to offering supplies to combat the disease or find a vaccine, there is red across the board.

One widely followed and volatile issue deep in the red is Amarin Corp PLC (NASDAQ: AMRN) that for some reason seems to be a chat room favorite.

A Reverse Split Stock Is Often A Dog

When looking for a long-term investment, one warning sign to shy away from is a reverse-stock split. In October 1998, Amarin did a 1-for-10 reverse split. In a stock split, the shareholder gets more shares at a lower price; in a reverse stock split, the shareholder gets less shares at a higher price.

There are a few different reasons a company does a reverse split and a few of them aren't good. First of all, the company may be forced by the exchange to meet their requirements for a minimum share price. Along these lines, the company may do this to make its share price more appealing and limit being associated with it being a "penny" stock.

Historical Price Action

With the company doing the reverse split, it most likely will never come close to its all-time high made in November 2001 at $288.40. Its all-time low was made during the financial crisis in March 2009 at 46 cents.

Since making that low, it has had one incredible month in September 2018, when it rallied from its August close ($3.16) to $16.27. The catalyst for the rally was the announcement that its REDUCE-IT cardiovascular study of Vascepa capsules met its primary endpoint. There was also speculation the company may be a takeover target.

Dead Money And Range Bound Since Late 2018

Since a takeover never materialized, the stock has been range bound between $11.78 and $26.12, with a majority of the price action between $14 and $22. The brief rallies over that upper end of that range have been the result of positive additional information regarding Vascepa.

In the absence of a catalyst and malaise over the fear of the coronavirus, there has been selling in the health care sector. As a result, the issue is under selling pressure in Thursday's session.

It has come near the bottom end of its trading range, reaching $14.63, and is attempting to rebound.

For range bound or swing traders, it may offer a lower risk-reward setup. For long-term investors looking for a speculative play off drug(s) in their pipeline, it may be appealing. For other long-term investors looking for a company increasing EPS and sales, there are several better stocks to choose from.


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