Celgene: Breakout in Biotech

08/26/2014 7:00 am EST


Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Breakout specialist Leo Fasciocco looks at the biotech sector for his latest recommendation; the editor of Ticker Tape Digest highlights a company that produces drugs to treat cancer and immune-inflammatory related diseases.

Celgene Corp. (CELG) develops orally administered, small molecule drugs. Its primary commercial-stage products include Revlimid, Vidaza, Thalomid, and Abraxande. It also has licensing deals with Novartis. CELG has also been active in making acquisitions.

The stock has broken out from an eight-flat base. The move carries the stock to a new all-time high.  CELG develops orally administered, small molecule drugs for the treatment of cancer and immunological diseases.

The stock soared from $5 back in 2003 to a peak of $77 in 2008. The stock then fell back to $39 during the bear market that ended in 2008.

The stock then worked its way back and in 2012 broke out from its long-term chart pattern. It has since soared to a new high, which could draw in more buying. 

For 2014, analysts forecast an 18% gain in CELG's earnings to $3.18 a share from $2.68 a year ago. The stock sells with a price-earnings ratio of 28. We see that as reasonable.

Looking out to 2015, Wall Street projects a 40% surge in profits to $4.43 a share from the anticipated $3.18 this year.

This is an ideal stock for a long-term investor, provided earnings meet expectations. Institutional sponsorship is excellent.

A key fund buyer recently was 5-star rated T. Rowe Price Blue Chip Growth Fund which purchased 2.6 million shares. Also, the 4-star rated T. Rowe Price Growth Stock Fund bought 2.6 million shares.

The breakout looks solid coming with a modest expansion in volume. The stock’s momentum indicator is strongly bullish. We are targeting CELG for a move to $106. A protective stop can be placed near $86.

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