Celgene Corporation (NASDAQ: CELG) delivered a two-part shocker in October when it reported quarterly results. Not only did it miss expectations, Celgene issued a weak outlook through 2020. At a share price of around $100 a share, value investors should look at the beaten-down biotech firm.
Celgene reported revenue growth of 10.2% ($3.29 billion) and net income growth of 478% (988 million). Its 2017 guidance fell from a top-end $13.4 billion to $13 billion. Non-GAAP will come at $7.30 - $7.35 a share.
At a forward P/E of 11.4 times, investors have lots of margin of safety.
Celgene need only meet its lowered guidance and the stock’s downside would appear limited. But if the company’s prospective pipeline of drugs treating M.S. play out favorably, revenue will grow at a better pace than what investors expect.
In hindsight, Celgene’s Revlimid dominated the market. But after 2015, competition picked up: elotuzimab, daratumimab, ixazomib, and Kyprolis are some examples of drug alternatives.
Outlook
Celgene’s downbeat 2020 guidance adds caution and elevates risks for shareholders. In return for the lowered outlook, CELG stock now trades at a big enough discount that value investors should consider this company. Much may change in two to three years and in time, the stock may bounce back after the single-digit downward shift in guidance
