3 Biotechs Bouncing on Earnings

Biotech stocks Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA), AstraZeneca plc (ADR) (NYSE:AZN), and Celgene Corporation (NASDAQ:CELG) are all higher after earnings

Jul 28, 2016 at 2:45 PM
facebook twitter linkedin

It's all about earnings today on Wall Street. Several stocks are making outsized moves following quarterly reports, with names like GrubHub Inc (NYSE:GRUB) and Cliffs Natural Resources Inc (NYSE:CLF) touching new highs. Joining these post-earnings winners are biotech stocks Ariad Pharmaceuticals, Inc. (NASDAQ:ARIA)AstraZeneca plc (ADR) (NYSE:AZN), and Celgene Corporation (NASDAQ:CELG). Let's take a closer look at why ARIA, AZN, and CELG are trading higher today. 

ARIA is on pace to post a second straight win in a session ensuing an earnings report, after the stock jumped 6.4% in its post-earnings session last quarter and is even more impressive this time around. Before this, ARIA had strung together seven consecutive post-earnings losses. The stock was last seen 12.6% higher at $9.48, and on pace for its best close since late August, after the biotech reported better-than-expected earnings and revenue, thanks in large part to demand for its leukemia drug, Iclusig. Year-to-date, ARIA is up over 51%. 

Despite this impressive performance on the charts, short interest represents almost 18% of the stock's float. However, it looks as though these bears may have hedged their positions with call options ahead of earnings. For example, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), call buying transpired at 10 times the rate of put buying during the past two weeks. Rounding out the sentiment landscape, 60% of covering analysts rate Ariad Pharmaceuticals, Inc. a "strong buy." 

AZN, meanwhile, is up 7.5% at $33.89, despite a slight earnings miss. Quarterly revenue topped expectations, though, thanks to the company's new cancer drug, Tagrisso. Separately, addressing lingering M&A speculation, CEO Pascal Soriot said, "we certainly have been very aware over the last few years that as we create value then at some point our pipeline becomes attractive." Today's move puts AZN within pennies of its 2016 breakeven mark, and well above its 320-day moving average, a former layer of resistance. 

This price action will be cheered by AZN options traders, as call buying has more than doubled put buying over the past two weeks at the ISE, CBOE, and PHLX. Analysts do not share this upbeat outlook, though, as 75% rate AstraZeneca plc (ADR) a "hold." 

Lastly, CELG is up 3..1% at $111.44, but unlike AZN, the stock's 320-day moving average has put a cap on its breakout attempt. What's more, today's bounce is a drop in the bucket for long-term CELG shareholders, considering the shares were trading above $136 at this time last year. Fundamentally, though, the company raised its full-year forecast, on top of posting strong quarterly profit and revenue. The company's new cancer drug, Revlimid, performed especially well during the second quarter. 

Celgene Corporation is a favorite among the brokerage bunch. For starters, the stock boasts 14 "strong buy" recommendations, and zero "sells." Secondly, CELG's consensus 12-month price target comes in at $134.90 -- a 21% premium to current levels. However, earlier this afternoon, Jefferies cut its price target on the stock to $137. 

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1