Analysts have been cranking out BS report after BS report as they seek to pump their positions higher. The latest grotesque perversion of reality is in ALXN stock.
On October 23, 2019, Piper Jaffray analyst Christopher Raymond said he remains a buyer of shares of Alexion following what he describes as “yet another beat/raise quarter with near flawless execution both commercially and developmentally.” Despite similar results in the past several quarters, the stock “has languished,” which Raymond attributes to what he views as overblown concerns regarding the tail trajectory for the company’s C5 inhibitor franchise. However, Raymond contends that Ultomiris conversion is “well ahead of schedule,” which the company is coupling “with an almost breathtaking pace of BD-driven pipeline diversification.” He maintains an Overweight rating and $180 price target on Alexion shares.
Also on October 23, 2019, William Blair analyst Raju Prasad said Alexion Pharmaceuticals’ execution “remains undervalued” following the company’s Q3 results. The company continues to diversify its pipeline through expansion into new indications and business development deals, resulting in 22 development programs across 11 assets, Prasad tells investors in a research note. He believes Alexion has the potential to address over 15 different indications spanning ultra rare and rare diseases and addressing sizable patient populations. With 10 potential launches by 2023, the next two years are expected to be “catalyst-rich,” contends Prasad, who keeps an Outperform rating on Alexion shares.
Boy the BS is getting thick in this market.
ALXN is NOT undervalued. The stock trades at rich valuation of 5.4 times sales. The market has valued the company at $24.29 billion. The company has only done $4.5 billion in sales last year. That’s not undervalued.
If you look at the P/E metric, you might be fooled by the 19.4 P/E ratio. I mean 19.4 isn’t horrible; however, when you consider that the company did a $1 billion share buyback in 2017, and just announced another $1 billion share buyback plan on October 23, 2019, it’s clear that Alexion Pharmaceuticals is manipulating its P/E ratio lower through massive share buybacks.
ALXN stock in the daily time frame looks pretty sweet:
However the reason it looks sweet is that it’s being pumped the heck out of. If you’re fine with riding the pump wave fine, but just make sure you aren’t drinking the kool-aid about this stock being so undervalued.
I’m seeing so many stocks being called undervalued by analysts when the P/S ratio shows the exact opposite. I’m also seeing massive share buybacks not being talked about by analysts or the “news” in terms of how they are “cooking the books” when it comes to valuation and the P/E ratio.
Because our BS detectors are going off like crazy, let’s elevate the importance of the P/S metric in our analysis and minimize the P/E ratio if massive share buybacks have been approved by the company’s Board.
ALXN stock does not meet the minimum requirements for inclusion in the GST portfolio at this time.
Disclosure: We do not hold any position in ALXN stock.