Biogen (BIIB) shares have started the month with a strong upward price pattern, following a market-wide rally that has many stocks closing in their pre-coronavirus levels. That said, there are no material changes in the company’s business or finances that fully explain the surge of BIIB.
In fact, the stock’s behaviour seems to contrast with the comments of the company’s CEO, Michel Vounatsos, who recently highlighted that “the magnitude and uncertainty surrounding this pandemic clearly introduce unanticipated and potentially unquantifiable risks to our business and results over the near-term”.
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Additionally, the company recently announced an interesting setback in its long-term prospects, after revealing that it will delay its efforts to seek FDA approval for a promising Alzheimer drug known as “aducanumab” to the third quarter, even though it initially planned to submit documents for the drug by early 2020.
Considering the potential short-lived nature of this uptrend, it is important for investors to take a closer look at the company’s fundamentals and growth potential before jumping on board, to make sure you are not actually overpaying your way into this $53bn biotech firm.
Biogen (BIIB) stock outlook
BIIB’s stock trend during the year has been hard to pinpoint, as the company has been on a roller-coaster ride lately due to significant stock market volatility and possibly mixed views about how the Covid-19 outbreak will ultimately affect its performance.
BIIB shares are currently trading above both the 50 DMA and 200 DMA, following positive market sentiment towards health care and, more specifically, biotech stocks. The company is currently valued at nearly 10 times both trailing and future earnings.
Meanwhile, a Biogen stock analysis indicates that the firm has outperformed the S&P 500 by almost 20 per cent, even though its gains have lagged if measured against industry-wide ETFs such as the iShares Nasdaq Biotech (IBB).
Moreover, BIIB is getting closer to its 52-week high of $342.55, being approximately just 7 per cent away from it based on today’s market price.
Biogen stock news
Biogen alerted investors about the potential risks the company is facing as a result of the Covid-19 pandemic and these warnings give us a good idea as to what the future may hold for BIIB depending on the evolution of the outbreak.
The company emphasised three potential risks:
- Supply chain disruptions, which could affect Biogen’s capacity to deliver its treatments to key markets around the globe.
- Regulatory interactions, indicating potential delays in the approval of certain drugs within the company’s pipeline due to an increased focus from regulatory agencies on priority-one Covid-19 treatments, tests, vaccines, etc.
- Clinical trial delays, as a result of containment measures and lockdown protocols that affect the company’s ability to conduct trials in the traditional way. In this particular matter, Biogen expects delays in its timeline, even though it has strategised ways to reduce them.
Meanwhile, other important BIIB stock news includes the formation of a consortium with the Broad Institute of MIT and Harvard, and Partners HealthCare to share a Covid-19 biobank that aims to assist researchers in taking and storing samples from patients who have been infected and have successfully recovered from the virus. These samples can be used to conduct studies on the virus’ molecular structure, etc.
Biogen share price forecast
Now let’s look at the company’s recent financial results to spot some key valuation drivers that help us in forming a comprehensive Biogen share price forecast.
We can mention three elements driving Biogen stock forecast right now and these are: growing revenues from accelerated drug sales, the potential approval of the company’s Alzheimer drug, aducanumab, in the next 12 to 18 months, a decent track record of earnings over the past five years.
Let’s start with sales. Over the past five years, Biogen revenues have grown at a 6 per cent CAGR, fairly in line with industry-wide forecasts that anticipate a 6 to 10 per cent growth in biotech revenues for the next 5 to 10 years.
This year’s revenues may be impacted, negatively or positively, by the outbreak and it is unclear which way it will be as supply chain disruptions may tip the balance towards the negative side, while accelerated drug purchases in certain regions may end up benefiting Biogen.
First quarter revenues this year stalled compared to the previous year, growing by just one per cent, with mixed results from the company’s various revenue segments.
Analysts are anticipating a drop in revenue growth this year, forecasting $13.97bn in sales for 2020, which is 3 per cent less than what the company sold last year.
As I said, it is hard to say which way sales will turn, as it will depend on how the virus situation evolves over the course of the next three quarters.
As for earnings, Biogen has also delivered strong earnings per share over the past five years and net profit margins have moved up from 30 per cent to nearly 40 per cent during that time period as well.
Earnings per share, on the other hand, showed an impressive 15.6 per cent CAGR over the past five years, even though the stock market has not particularly favored the company in terms of valuation multiples, as its P/E has rotated between 10 and 15 over this 60-month period.
Speaking about the worst-case scenario for this year, if no significant supply chain disruptions take place, the earnings may stall as a result of a global economic slowdown. Meanwhile, analysts are forecasting EPS of $32.96 2020, which represents a 5 per cent jump compared to last year when the company reported $31.42 in diluted earnings per share.
Following the company’s historical valuation multiples, the highest the stock may go is $470, a 47 per cent gain based on today’s prices, yet a more moderate Biogen stock forecast puts the price at the lower end of those estimates, at around $314.20, resulting in a 1.5 per cent loss if you buy BIIB today.
Biogen (BIIB): buy or sell?
Analysts believe, Biogen is an interesting long-term buy and hold company, especially if its Alzheimer drug is eventually approved by the FDA. However, at its current market price, it is not recommended buying, as the stock seems to be at the high-end of its valuation based on historical multiples and earnings estimates for this year.
On the other hand, as a short-term trade, Biogen doesn’t have too much upside potential either and certainly not enough fuel to move forward, especially since the stock is nearing its 52-week high and no material changes have occurred to justify further upward movements.
Nearly half of the analysts surveyed by Koyfin agree that the stock is a hold, but a significant portion of them are also pointing that it is a buy or even a strong buy.
Don’t forget that with contracts for difference, it does not matter whether your view of the Biogen share price forecast 2020 is positive or negative. You can always try to profit from any future price fluctuations, regardless of their direction by taking a long or a short position respectively. Follow the latest stock market news and track the BIIB live rates with Capital.com.