Biogen Earns Top Stock Status; Gilead Sciences Downgraded

Credit Suisse is cautiously optimistic about the U.S. biotech sector heading into 2018

Managing Editor
Dec 20, 2017 at 10:07 AM
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After a volatile 2017, Credit Suisse said it is cautiously optimistic about U.S. biotechs, believing tax reform could be a positive catalyst for big-cap drug companies. Nevertheless, the brokerage firm issued opposing notes for biotech stocks Biogen Inc (NASDAQ:BIIB) and Gilead Sciences, Inc. (NASDAQ:GILD). Below, we will take a closer look at BIIB and GILD stocks.

Credit Suisse Sees BIIB Returning To Multi-Year Highs

Credit Suisse upgraded Biogen stock to "outperform" from "neutral," while also issuing a price-target hike to $385 from $321 -- a level not seen since June 2015. The brokerage firm believes the sales potential for the company's key drug Spinraza is underestimated for 2018, and named BIIB among its top picks for 2018.

The stock is currently up 1.5% to trade at $331.79, bringing its year-to-date advance to 27%. After touching a two-year high of $348.84 on Oct. 18, the security pulled back sharpy after an earnings-induced bear-gap. Nevertheless, BIIB found its footing atop the 80-day moving average, which served as a ceiling last April. 

Options traders have been betting on an even bigger bounce for Biogen. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BIIB's a 10-day call/put volume ratio of 2.55 ranks in the bullish 82nd annual percentile, meaning calls have been bought to open over puts at a faster-than-usual clip.

Credit Suisse Believes Expectations Are Too High For Gilead

Credit Suisse downgraded Gilead Sciences to "neutral" from "outperform" and cut its price target to $80 from $82. The firm believes 2018 expectations for GILD's hepatitis C and lymphoma treatments are too high, and sees continued competitive headwinds.

The news has sent GILD stock down 0.6% this morning to trade at $73.90. Since touching an annual high of $86.27 on Sept. 8, the equity has shed 14.3%. The shares are now sandwiched between potential support at the 180-day moving average and resistance at the 60-day trendline.

Despite these recent technical troubles, analysts are mostly upbeat toward the biotech stock. At last night's close, 11 of the 21 brokerages covering GILD rated it a "buy" or "strong buy," with not a single "sell" to be found. Furthermore, GILD's average 12-month price-target of $85.61 represents a 15.7% premium to the stock's current perch. This implies there is ample room for further downgrades and price-target cuts, should the security continue to struggle.

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