Highlighted Trouble at Celgene, Yet Value is Near (CELG)
Celgene Corporation (NASDAQ: CELG) is having a rough day. There are some concerns being brought to light. This morning came a report from Zacks.com detailing Celgene as a current member of the exclusive Zacks #5 Rank List. In short, Zachs named it as one of the “Stocks to Sell Now.”
Zacks pointed out, “Celgene posted fourth quarter earnings of 65 cents per share on January 27, which came in 3% short of the average forecast. The Zacks Consensus Estimate for 2011 declined 7 cents to $3.02 per share over the past month as 6 analysts out of 11 cut back on expectations. Estimate for 2012 dipped 10 cents to $3.71 per share in a span of a week.”
Last month, the company gave a longer-term forecast for 2011 earnings of $3.30 to $3.35 EPS on $4.4 to $4.5 billion in revenues. Even after a 6% drop to $50.00 today, Celgene trades at about 15-times expected earnings and about 5.5-times revenues. Not really expensive at all, but not screaming dirt cheap either. The Thomson Reuters estimates for 2012 are currently $4.06 EPS and $5.1 billion in revenues.
Here is the good news, despite an analyst downgrade. The valuation is finally becoming fair here, something which has long been a problem for the cancer player. The 52-week trading range is $48.02 to $65.79, and shares were just at $60.00 briefly right after the start of 2011. Shares were expensive then, now they are getting more reasonable. The market value is $23.5 billion today.
The big risk is always a timing risk. Chances are that Celgene won’t suddenly get away from investors due to the current weakness. Analysts have cooled to the name in recent days and the weakness here is so close to 52-week lows that it seems more likely a fresh year low will be seen rather than not seen.
JON C. OGG
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