Key points
- Healthcare stocks quietly gain momentum to spark the next potential market rally; not all actions are the same.
- Bluebird Bio stock is a special case here, as it requires a massive hike in price targets, and institutional buying could create the next big short squeeze.
- Management has set the stage and the writing is on for its upcoming earnings announcement.
- 5 titles we prefer to Bluebird Bio
Maybe you’re looking back at your portfolio’s 2020-2023 equity curve and noticing an increasingly slowing uptrend. This is not your fault, but rather the effects of the Federal Reserve (Fed) raising interest rates, which makes “riskier” high growth trades less attractive to the market as a whole. Now that the Federal Reserve potentially cuts interest rates again in 2024, it’s time to go “risk on.”
The world of biotech stocks often tends to offer the greatest upside potential for a trade-off between a mindset and market sentiment that accommodates the risk that comes with the process that typically determines the success of these types of stocks.
Because they depend on successful Food and Drug Administration (FDA) approval for the products they produce, these companies bring a lot of upside at a speculative pace, just what the market may soon be looking for as interest rates return.
Because of this trend and a specific announcement that serves as the perfect catalyst, one company has named bluebird Bio NASDAQ: BLUE rose as much as 18% in Monday’s trading session. Before we dive deeper into this, the one thing you should remember about this deal is that a 400% upside could just be the beginning.
Behind the scenes
Why would professional investors and traders want to take a look at the world of medical stocks? To summarize, it’s because space begins to heat up. According to the latest employment report, in the last month the US economy created 353,000 jobs, of which 70,300 went to the healthcare sector alone (almost 20%).
Think about it: If you were – maybe you are – a hiring manager or an entrepreneur, the main reason you would go on a hiring spree is the expectation of busier times ahead, right? That’s why Bluebird will get busy, very soon.
According to this management press release, the first quarter of 2024 is expected to see the first patient studies in Bluebird’s LYFGENIA product pipeline after gaining FDA approval. That not only means better financial prospects and valuations, but also the power of Wall Street itself to turn its attention to the stock.
Other titles like Him and his health NYSE: HIM have already seen the benefits of the positive momentum seen in the sector, as the name rose 9.6% in the past week ahead of the earnings announcement, which is likely to bring with it some surprises for investors.
Understand that the Selected healthcare SPDR fund NYSEARCA: XLV has underperformed the broader S&P 500 index over the past twelve months by as much as 12% can also help you identify the gap the sector needs to fill to catch up with the rest of the market in the coming months.
Why this title?
Not only is Bluebird management now looking to apply accounts receivable to its financial statements, but the accounts that will be driven by deferred revenue from consumers on the first cohort of patients will begin in the first quarter of 2024 after a successful phase three trial of their LYFGENIA line.
This bullish development for the company comes on top of a consensus price target of $6.7 per share, implying a massive 400% upside from where the stock is trading today. However, analysts aren’t the only ones finding value in this name today.
Investment houses like Vanguard Group and The Goldman Sachs Group Inc. NYSE:GS they increased their already high stock holdings by 56% and 68%, respectively. Institutional support is one thing; institutional support in the midst of a potential short squeeze is a whole different ball game.
You can look at MarketBeat’s Short Interest Scanner to find stocks with a large percentage of floating shares held in short positions. Remember that to close a short position you need to buy back the borrowed shares at whatever the market price is.
Thus, as the stock rises aggressively following announcements, price targets, and even institutional buying, these short sellers (holding up to 25% of the float) will likely come to feel the most pain and they will be forced to close their losses. positions; which requires buying shares and fueling an even bigger rally.
Bluebird will announce its next quarterly earnings results on February 29. This date could potentially bring a nice surprise for those watching this developing story closely. Will you let Goldman and Vanguard be the only ones celebrating? Or would you consider joining them?
Before considering Bluebird’s biography, we recommend that you listen to him.
MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and bluebird bio wasn’t on the list.
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