Celgene Stock Dips Amid Buyout Rumors

The pharma stock suffered two huge bear gaps in October

Managing Editor
Jan 17, 2018 at 9:56 AM
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Drug stock Celgene Corporation (NASDAQ:CELG) is trading 1.6% lower at $103.13, after the Wall Street Journal reported the company is in talks to buy Juno Therapeutics (JUNO) (subscription required). According to the Journal, CELG -- who is already the largest shareholder of JUNO stock -- could produce a deal in the coming weeks. This comes after Celgene last week said it would buy Impact Biomedicines for around $7 billion.

Celgene stock has not performed well in recent months, suffering two severe bear gaps in mid-October, which eventually lead to the stock's Oct. 26 52-week low of $94.55. Overall, the shares have shed almost one-quarter of their value in the past three months alone, and have recently been testing the 50-day moving average.

Short interest has seen a surge amid this weakness, rising more than 18% in the past two reporting periods, but accounts for just 1.75% of the stock's total available float. This would suggest there's plenty of room for more bears to jump aboard, which could result in additional tailwinds for Celgene stock.

Despite its recent falls, most analysts have remained optimistic towards CELG stock. Of the 29 analysts in coverage, 16 of them have handed out "strong buy" ratings, and there are zero "sells" on the books. As contrarians, we would note the possibility of bearish analyst attention, given the security's lackluster technical performance.

Meanwhile, options traders are active following the M&A buzz. Call and put volume are both running at well above the expected pace so far, projecting to smash average daily volumes. The most popular option early on is the January 105 call, though it's unclear what strategy traders are utilizing here.

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