Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL) is having a better day than most. The biotech is up more than 1% on a day when the indexes are struggling to get above water.
Today, at least, Auxilium is the beneficiary of an upgrade to a "Buy" recommendation from MKM Partners. Previously, Analyst Jon LeCroy had a "Neutral" ranking, but now he sees the stock headed to $26 – upside potential of 14.04% to target as we type.
Auxilium is a specialty biopharmaceutical company focuses on developing and marketing products to predominantly specialist audiences.
After getting popped, LeCroy sees value in the biotech's shares, "Auxilium shares are down 30% since March 4, versus up 2% for the S&P 500, on declines in the company's Testim testosterone business and after the huge initial ramp for Stendra (erectile dysfunction) slowed in recent months. We note that in the past several weeks, Testim declines appear to have slowed somewhat and Stendra prescriptions continue to grow. We think the recent pullback in Auxilium shares is overdone and we are upgrading shares from Neutral to Buy."
[Related -Three Stocks Set For FDA News In Early December]
MKM's call is in direct contrast to a "Sell" rating issued by ING Group, who says, "[Auxilium's] weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, weak operating cash flow and feeble growth in its earnings per share."
[Related -Auxilium Pharmaceuticals Inc: Testim Wins Patent Challenge, Cuts Generic Risks]
One has to be wrong, so let's take a look at AUXL's chart and earnings and sales estimates to see where this biotech might be headed.
First up, Auxilium's stock chart shows the company is deep in a downtrend; however, the knife has stopped falling and rebounded after hitting support at $19.50ish. For now, $19.50 should act as a sturdy safety-net. There is ample support from $19 to $16 in the event $19.50 doesn't hold.
On the upside, there are multiple points of resistance at $23 and then the 50-day average of $24.78 – and falling – should act as the next barrier to higher prices. It would not be uncommon to see AUXL give back some of its recent gains and test $21-20, which could be the stock's next move.
As for the fundamentals, Auxilium is forecasted to earn $1.12 a share on revenue of $494.2 million in 2015. Now, AUXL has found it difficult to make a profit, so we'll focus on the top-line.
Wall Street has been willing to pay an average of 4.67 times Auxilium's sales, and at a max of 10.87 and minimum of 1.79. Meanwhile, the company currently has a price-to-sales ratio (P/S) of 2.67, and the industry average stands at a robust 16.04.
At 2015's consensus revenue estimate and the five-year average P/S ratio, AUXL would price out at $45.95, and with the minimum P/S sales ratio since 2009, $17.61 would be the landing spot.
Overall: Patient investors might consider waiting to see if Auxilium Pharmaceuticals, Inc. (NASDAQ:AUXL) backtracks and tests support near the recent pivot-bottom of $19.50. If so, then downside using the half-decade low and current 2015 sales estimate could be limited to a couple of dollars; meanwhile, AUXL shares could have more than $20 of upside with the average P/S ratio.
The possibility of 10 to 1 reward to risk during the next 18 months or so would seem to favor MKM Partners call to "Buy" over ING Group's sell.
No comments :
Post a Comment