Spectrum Pharmaceuticals: Undervalued and (Now) Oversold


During the last pullback, Spectrum Pharmaceuticals (NASDAQ:SPPI) began to sell-off on June 30 after shares of the company had reached the first new multi-year high since July 2007. On June 30, SPPI topped at $8.15 and closed at $7.65.

From the high on June 30 to the low on July 14, SPPI dropped about -42%. SPPI hit its intra-day low of $4.76 on July 14 – the day, I indicated shares of SPPI were oversold and undervalued.

During this round, the naysayers ran rampant, exhibiting chicken-with-no-head syndrome.

SPPI began its recent pullback on September 4 after shares hit another new multi-year high of $10. On that day, Zevalin was approved and the stock sold-off. By September 8, SPPI had fallen -30.7% to its lowest point in this current trading range, $6.93.

Just like the previous sell-off, the naysayers have worked overtime to free up the "weak hands," or less informed and inexperienced investors again this round. And this time, just like the last, many shorter-term traders gave up and sold or were stopped-out.

From July 14 of $4.76 to September 8 low of $6.93, SPPI is up +47.5%.

From the low on July 14 to the high on September 4, shares of SPPI advanced about 112%. If the same holds true during the next advance, then SPPI could touch $14.83.

Will shares of SPPI do the unexpected and unthinkable and strive towards a fair market value? I remain optimistic.

Near its 50-day MA, SPPI now appears to be oversold as of Tuesday’s close at $7.08. Since SPPI is also undervalued, shares should be accumulated at these levels.

Disclosure: Long SPPI