Book Profits on This NASDAQ-Listed Biotechnology Stock- AMGN

Apr 11, 2022 12:00 AM PDT | Team Kalkine
Book Profits on This NASDAQ-Listed Biotechnology Stock- AMGN


Amgen Inc.

Amgen Inc. (NASDAQ: AMGN) is a biotechnology business focused on assisting people with serious illnesses. The company creates, manufactures, and sells a wide range of human treatments. It has grown into one of the world's most successful independent biotechnology companies, reaching millions of patients globally and developing a pipeline of potentially game-changing drugs. Its most well-known medications are ENBREL, Prolia, Otezla, XGEVA, Neulasta, Aranesp, Repatha, and KYPROLIS.

Why Should Investors Book Profit?

  • Weak Liquidity Profile: The company's current ratio at the end of FY21 is 1.59x, compared to the industry median of 6.15x. This implies relatively lackluster liquidity profile against the industry median.
  • High Cash Conversion Days: Compared to the industry, the company has a long Cash Conversion Cycle (Days), meaning that it takes more days to convert its sales to cash. As of FY21, its Cash Cycle was 226 days, compared to an industry median of 66 days.
  • Manufacturing Facility Concentration Risk: AMGN's manufacturing facilities continued and efficient operation, particularly in the US territories of Puerto Rico and Thousand Oaks, California, is critical to the global supply of product candidates for commercial sales and clinical trials. A significant disruption in the company's ability to operate its manufacturing facilities could jeopardise its ability to supply product candidates for clinical trials, causing delays in product development.
  • Technical Weakness: AMGN’s prices moved up by 16.90% from the recommended entry price and made a high of USD 251.46 on April 06, 2022. Price reached a crucial resistance level of USD 252 but were unable to break this level, indicating the possibility of a downside correction which may lead the prices towards the resistance turned support level USD 239.On the daily chart, RSI (14-period) is reached an overbought zone at 81.93 levels, supporting a downside correction. However, prices are still sustaining above the trend-following indicators 21-period SMA and 50-period SMA and may act as the support levels for the stock.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuations

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

AMGN's share price has inclined 19.74% in the past six months and is currently leaning towards the higher band of the 52-week range of USD 198.64 to USD 261. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 220.88.

Considering the company's long cash cycle, weak liquidity profile, current valuation, and associated risks. We recommend a "Sell" rating on the stock at the current price of USD 254.65, up 1.03% as of April 11, 2022, at 09:01 AM PDT.

 1-Year Technical Price Chart (as of April 11, 2022, at 09:01 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.