Celgene (CELG) shares are extraordinarily cheap, writes Jefferies’ Michael Yee. Of course, buying cheap stocks just because they are cheap isn’t a great investment strategy, especially with the sector in a bear market. Yet he believes eventually the shares will fight their way back, although he admits the “timing is difficult.”
Where we were: Celgene has badly trailed the market in 2018, as well as biotech peers.
Where we’re headed: The timing isn’t certain, but ultimately Jefferies believes that the market will start to give Celgene credit for its pipeline and robust free cash flow.
While the health-care sector has flourished this year, the rising tide hasn’t lifted all boats. Biotech stocks have been a laggard, with the iShares Nasdaq Biotechnology ETF (IBB) falling 3.3% year to date, and the SPDR S&P Biotech ETF (XBI) off 8%. However, few stocks have been as punished as Celgene which has tumbled more than 35% in 2018.
This could be a great time to buy Celgene biotech stocks cheaply and wait for the share prices to rally again.