When Opportunity Knocks In The Healthcare Industry
Today we’re focusing on two stocks in the real of healthcare that just received some notable analyst activity. The activity is notable because it is bearish in light of recent market expectations and opens up what we see as potentially high-return entry opportunities. In both cases the analysts have reason to lower their targets or downgrade the stocks but also in both cases, the long-term opportunities are still present. If you’re looking for a place to park some money in the healthcare industry and can handle above-average risk Accolade and Allogene Therapeutics is well worth the look.
No Applause For Accolade Results
Accolade (NASDAQ: ACCD) is a disruptor in the field of managed healthcare offering employers a way to provide their employees an end-to-end healthcare experience supported by the cloud. The company just reported earnings and, well, the bottom line results were far less than expected. The company reported a nearly 4X increase in operating expenses to outpace the 100% increase in revenue and post a loss nearly double the consensus expectations. The silver lining is that much of the money was reinvestment on business quality and growth that we see driving results in a later quarter.
The bad news for current shareholders is that four Wall Street investment firms have come out in the wake of the release to lower their price targets. The silver lining here is that their consensus is still expecting roughly 30% of upside in the stock which is just a few hundred basis points below the broader consensus as reported by Marketbeat.com. Price action is down more than 4.0% in the wake of the target adjustments but still above what has been very strong support in the past. We expect to see support at the $37 level thoroughly tested but will be waiting for that support to confirm. If support confirms we see this stock begin bouncing back within days if not later in the session.
Allogene Therapeutics Clinical Trial Put On Hold
Shares of Allogene Therapeutics (NASDAQ: ALLO) plummeted more than 35% in after-hours trading when the FDA put one of its clinical trials on hold. The trial is for a cancer treatment called AlloCAR T which caused a negative reaction in one of the test subjects. The FDA is reviewing the data and making comments at a later time. Until then, there have been at least seven major sell-siders to come out with commentary and only some of it is bearish. The general consensus is that this is a red flag for the company but may soon pass. The most bullish analysts see this as inconsequential in the long run and expect the study to resume at some later time. The therapy was given orphan drug status earlier this year because it had shown a positive risk/reward profile for the test group.
So, of our seven fresh analyst call-outs, all seven lowered their price targets but only two downgraded the stock and there were even two upgrades. Roth Capital upgraded to Buy from Hold while RBC, which carries the highest of the newly-lowered price targets at $45, upgraded to Outperform from Hold. The broader Marketbeat.com consensus target is $37.75. As far as price action, shares of the stock are still down more than 35% and trading at the lowest level since the IPO.
Before you consider Accolade, you'll want to hear this.
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