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Specializing in biotech stocks, Small Caps, managing optimized portfolios
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Summary

  • Momentum stocks and sectors have posted significant declines in March.
  • Biotech has been caught up in this sell-off and outflows from biotech funds are at their higher levels in three years.
  • Some of the larger biotech stocks are starting to look more attractive after pullback. Biogen Idec is in that category and is profiled below.

Some of highflying stocks (Tesla Motors (NASDAQ:TSLA) and Netflix (NASDAQ:NFLX) and sectors have been taken to the woodshed and beat like a rented mule in the month of March. Large biotech stocks have also been included in the sell-off. Biotech funds showed their biggest outflows in three years recently which should appeal to contrarian investors.

These stocks are inherently volatile but they have real earnings and substantial projected revenue and profit growth. I recently profiled two of these attractive biotech stocks. Today I would like to profile another, Biogen Idec (BIIB). The shares look like they offering a nice entry point for long term growth investors.

Note: Due to the high betas within the biotech sector, I advise to buy these shares in small lots. Using out of money puts or put spreads to pick up premium and/or lower entry points is another strategy I favor.

Biogen Idec (NASDAQ:BIIB) is a major biopharmaceutical concern that develops and markets targeted therapies for the treatment of multiple sclerosis, non-Hodgkin's lymphoma and rheumatoid arthritis.

Biogen dropped from over $350 a share to under $295 a share in the biotech rout in the market last week.

Earnings Trajectory:

The drop feels somewhat like a "throw the baby out with the bathwater" moment. Biogen's earnings trajectory is impressive. The company earned just under $9 a share in FY2013. Current consensus earnings estimates call for Biogen to earn over $11.25 a share in FY2014 and more than $14 a share in FY2015. Revenues should grow over 20% this fiscal year and in the mid-teens in FY2015. The company has easily beat earnings estimates in the last four quarters. The shares sell for under 21x FY2015's projected EPS.

Analyst Commentary:

The median price target on Biogen by the 26 analysts that cover the stock is north of $350 a share. Biogen is Morgan Stanley's top pick among the major biotech concerns. Morgan has a $395 a share on BIIB. BMO Capital upgraded its rating to "Market Outperform" earlier this month with a $422 a share price target. BMO's analysts sees "too many transformational opportunities to ignore" for Biogen. Finally, Deutsche Bank maintained its "Buy" rating and $415 a share price target in late February.

Summary:

Even after the sell-off, Biogen is selling for a higher valuation level than the overall market. However, both its projected revenue and earnings growth are multiples over that expected for the overall market. For patient growth investors, the shares look like an opportunistic buy after the recent sell-off in the biotech sector.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in BIIB over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.