H.C. Wainwright Says Drug Stock's Sell-Off Is Done, Shares Could Double

Most other analysts are bearish on the shares

Aug 1, 2019 at 10:33 AM
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Women's healthcare concern AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG) has underperformed in a big way in the past year, but analysts at H.C. Wainwright see a trend change coming. The brokerage firm this morning began coverage with a "buy" recommendation and $16 price target -- almost double Wednesday's close of $8.26.

The shares have added 8.4% out of the gate to trade at $8.95, but even this move leaves them just below the 20-day moving average and with a one-year deficit of more than 60%. This is likely why most other analysts are skeptical. Of the eight analysts in coverage, seven of them have "hold" or "strong sell"

Such pessimism is seen in high short interest levels as well. Short interest accounts for 31.1% of the total float, and it would take more than 11 sessions for the bears to cover their positions, based on average trading volumes. Some of these traders may be using call options to edge against big upside moves like we're seeing today, since call buying has doubled put buying in the past 10 days at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

AMAG traders will want to pay attention to the upcoming earnings released, tentatively scheduled for Aug. 7. The stock has sold off the day after earnings in three straight quarters, including a 12.3% pullback in May. Going back two years, the equity has averaged a one-day move of 8.5% after earnings.

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