A few Wall Street analysts are giving Celgene (NASDAQ: CELG) some positive mention which may put an end to the stock’s downtrend. But the company needs more than a $100 PT (price target) upgrade. It needs to accelerate earnings growth to above 20% a year.
Celgene is not a pure value play at this time. Debt levels rose to 3.9 times equity after the company bought Juno Therapeutics. Buying advanced technologies to secure its future and to broaden its product line-up is good for the long-term. But without the market’s support, the company cannot issue stock to make any more acquisitions.
Gilead Sciences (NASDAQ: GILD) is in a similar situation. The stock trades a low multiples because sales for its HCV and HIV drug are lagging. That could change. An FDA approval for its triple HIV drug could reinvigorate sales of its HIV drug treatment. But if the court decides Gilead infringed on GlaxoSmithKline (NYSE: GSK) and Pfizer’s (NYSE: PFE) patents, Gilead will have to pay a royalty.
Near-term, Gilead’s growth prospects are not great nor are Celgene’s for the next two to three years. That should not matter for value investors looking for two solid biotechnology companies trading at a discount.
