BMO Sets High Price Targets on 2 Drug Stocks

The shares of AMGN and GILD have faded in recent months

by Josh Selway

Published on Mar 15, 2019 at 9:40 AM

Brokerage firm BMO just began coverage on Amgen, Inc. (NASDAQ:AMGN) and Gilead Sciences, Inc. (NASDAQ:GILD), expecting major upside from both stocks. Let's take a closer look at the bull notes, along with other notable options data on AMGN and GILD shares.

For AMGN, BMO issued an "outperform" rating and $228 price target. This represents all-time-high territory for the equity, which has a record peak of $210.19 from Sept. 27. Since that milestone, the shares have cooled on the charts, down 3.5% year-to-date to trade at $187.76. Moreover, they breached their 200-day moving average back in late January, and this closely watched trendline has acted as a ceiling since.

Most analysts are actually bearish on the drugmaker, with 11 of 18 brokerage firms handing out tepid "hold" recommendations. There's been similar skepticism among options traders, judging by the Schaeffer's put/call open interest ratio (SOIR) of 1.85, which ranks just 4 percentage points from an annual high. This shows a stronger-than-usual put-skew among near-term speculators. While peak open interest of nearly 13,000 contracts resides at the March 180 put, which expires today, the April 180 and 185 puts are also home to heavy open interest. 

Moving on to GILD stock, it also received an "outperform" rating from BMO, along with a price target of $78. The shares have been in a series of lower highs since their October high near $80, settling Thursday at $64.79. A slim majority of covering brokerage firms have "strong buy" endorsements on Gilead Sciences, and the average 12-month price target is $80.43.

For options data, the security is about to watch high open interest levels at the March 70 and 75 calls expire today, though the April 70 call has also been popular. Looking at just the past 10 days in particular, the April 65 call has seen the largest increase in open interest, where mostly buy-to-open activity has been detected.

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