AmerisourceBergen Stock Set for Big Surge on WBA Buyout Buzz

ABC shorts could get squeezed today

Feb 13, 2018 at 9:28 AM
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Shares of AmerisourceBergen Corp. (NYSE:ABC) are up 13.9% in electronic trading -- which would mark their best day since mid-2000 -- amid reports Walgreens Boots Alliance (WBA) is considering a full takeover of the drug distributor. According to the Wall Street Journal, WBA -- which already owns a 26% stake in ABC -- is in early stage talks to buy out the remaining shares, though a formal offer has not been made. Today's premarket upside for ABC stock comes even as its sector peers fall on rumors Amazon (AMZN) is expanding the medical supplies division of its Amazon Business marketplace.

More broadly, ABC shares sold off during the recent stock market correction -- shedding 15.8% from their Jan. 29 two-year peak of $106.26 to last night's close at $89.45. However, the pullback was contained in the $87-$89 neighborhood, home to AmerisourceBergen's 200-day moving average and a 50% Fibonacci retracement of its 2017 low and 2018 high.

Today's projected pop could shake even more short sellers loose, too, which could lift the shares even higher. Although short interest has been cut in half from its early May peak, there are still 7.54 million AmerisourceBergen shares sold short -- or 4.3 times the stock's average daily pace of trading.

Analysts, meanwhile, are more mixed toward ABC stock, with six of 12 maintaining a "buy" or better rating. There's not a single "sell" on the books, though, and the average 12-month price target of $105.79 stands at an 18.3% premium to last night's close.

 

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