Morgan Stanley Hikes Price Targets on 2 Hot Drug Stocks

Options traders are favoring puts on both CELG and VRTX

Managing Editor
Dec 18, 2017 at 9:46 AM
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Drug stocks are in focus this morning, including Celgene Corporation (NASDAQ:CELG) and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). Both CELG and VRTX received price-target boosts from Morgan Stanley this morning, but one outlook was decidedly more bullish than the other. Here's a look at how CELG and VRTX are reacting today.

CELG Stock Extends Recovery from Post-Earnings Lows

While Morgan Stanley hiked its price target on CELG stock to $103 from $97, the new target still represents a discount to the equity's current price. Specifically, the shares of CELG are up 0.2% at $109.62 at last check. The pharma stock has had a rough year, suffering two big bear gaps in October -- but CELG is up 16% from its Oct. 26 intraday low, and its 20-day moving average is now on the verge of a bullish cross with its 40-day counterpart.

Ahead of today's price-target raise, options traders were leaning toward the bears' camp on Celgene stock. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows CELG with a 50-day put/call volume ratio in the 73rd percentile of its annual range. This suggests puts have been bought at a faster-than-usual clip relative to calls during the past 10 weeks.

Options Traders Are Put-Heavy on VRTX

Morgan Stanley hiked its price target on VRTX stock to $193 from $190 -- this time, a significant increase to the stock's most recent trading price. At last check, Vertex Pharma stock was up 0.2% at $146.15, and 98% higher year-to-date. VRTX is attempting to close the day above resistance at its 40-day moving average, located at $145.90, which has kept a tight lid on the shares for nearly two months.

Options traders have been favoring puts on Vertex stock. The drug concern sports a Schaeffer's put/call open interest ratio (SOIR) of 1.21, which ranks higher than 93% of all other readings from the past year. This indicates that short-term options traders have rarely been more put-heavy on Vertex Pharma stock in the last 52 weeks. However, given that the stock has roughly doubled in value since the end of 2016, it's possible that some shareholders have purchased VRTX put options simply to lock in paper profits or hedge against a short-term downturn.


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