Celgene Corporation (NASDAQ:CELG) is one of the few biotech stocks that Mad Money's Jim Cramer has consistently called a buy. The stock has provided superb returns over the past few years. It has excellent growth prospects from existing products and more potential from ones that are in development. The shares had been in a solid uptrend for most of 2012 and it even traded around $80. However, the recent fears in the market have taken this stock down to levels that even some value investors could love. Here are a few reasons why Celgene shares could be a smart buy on this and any additional dips:
1) Jim Cramer's consistent and frequent buy rating and support of this stock should not be underestimated. His Mad Money show and portfolio picks are widely covered by the media, and that is likely to keep a floor under the stock. Plus, there is good reason for Cramer to suggest buying this stock. He appreciates Celgene's growth plans, the size of the market for its products, and the international expansion potential.
2) Celgene has a very strong balance sheet. With about $2.27 billion in cash and just $1.42 billion in debt, the company has the resources to fund development, make acquisitions, buy back shares, etc. In tough times, investors can minimize risks by investing in companies with significant cash reserves. In addition, biotech and healthcare companies have historically been relatively insulated from recessions. With economic fears likely to continue, investors should consider biotech as a defensive sector.
3) Celgene develops and markets treatments for cancer and
immune-inflammatory diseases. Celgene's treatments address a large and growing market. The company recently reported financial results that confirm the growth trend. For the first quarter it announced Non-GAAP net product sales of $1,245 million, which was a 17% increase from the same period in 2011. Non-GAAP net income for the first quarter of 2012 increased 23% to $484 million and non-GAAP diluted earnings per share rose 30% to $1.08.
The stock is oversold and showing signs that it may have bottomed out. Even the best growth stocks see occasional pullbacks. Smart investors can use this as a buying opportunity and pick up this fast growing company at just about 13 times earnings.
Here are some key points for CELG:
Current share price: $65.09
The 52-week range is $51.70 to $80.42
Earnings estimates for 2012: $4.79 per share
Earnings estimates for 2013: $5.61 per share
Annual dividend: none
Data is sourced from Yahoo Finance. No guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.