KERX stock is heavily shorted
We've been watching
small-cap stocks closely in recent weeks, since this group doesn't appear to be as
overbought as their large-cap peers. With this in mind, there are a number of low-priced biotech stocks that could be worth monitoring, including
Keryx Biopharmaceuticals (NASDAQ:KERX). With earnings due tomorrow before the open, KERX stock could have upside potential, from a contrarian perspective.
But taking a quick step back, it's worth noting that data from Schaeffer's Senior Quantitative Analyst Rocky White suggests analysts have failed to appropriately adjust their positions on biotechs in general, despite their strong performance on the charts. Specifically, the percentage of "buy" ratings from analysts have edged down to 64% compared to 66% a year ago, even though the average year-to-date return of the stocks under our "Biomedics Genetics" umbrella is 44.1%.
Likewise, Keryx shares are up 27% year-to-date to trade at $7.46, touching a two-year high of $8.38 two weeks ago. Now, the shares appear to be bouncing from their most recent low near the 30-day moving average -- a trendline that served as support from March through early June.
But analysts are mostly skeptical, with more than half handing out tepid "hold" ratings. Plus, the average 12-month price target stands at $8.14 -- a slim 9.3% from current trading levels. A big post-earnings move to the upside may encourage analysts to upgrade the stock and/or raise their price targets, which could result in additional tailwinds.
A short-squeeze situation could also boost KERX stock. Roughly one-quarter of the stock's float is sold short, which equates to almost 13 days' worth of buying power, based on average daily volumes. A mass exodus of these bears would also fuel more upside.
For what it's worth, Keryx Biopharmaceuticals shares have a solid
post-earnings history, including a 6.6% jump in the session after the drugmaker's last earnings report. This time around, the options market is pricing in a 7.8% swing, in either direction, and open interest levels might be pointing toward enthusiasm from these traders. Specifically, calls account for the top seven open interest positions on KERX, with the September 9 strike at the top of the list.