Credit Suisse's Top Biotech Stock Picks Ahead of Earnings

Analysis pinpoints 3 potentially profitable investment prospects

Author's Avatar
Oct 23, 2017
Article's Main Image

Biotech stocks and those in the pharmaceutical sector could be the next big bet for an investor if indeed we are to go with a recent analysis by Credit Suisse.

According to the firm, there are a number of stocks in these sectors that could offer great returns for investors this year. The analysis comes as companies prepare to release third-quarter results. It’s not a surprise though that Credit Suisse is seeing the health sector as a key investment option for anyone. This year alone the industry has grown by 20%. This was better than the average growth for the Standard & Poor's 500 which stands at 14%.

There’s also a feeling that investor sentiment in the health sector will remain robust this year. Credit Suisse is predicting that major merger deals, especially those targeting mid-cap companies, are already in the cards and could be finalized before the year draws to a close. There are also the anticipated tax reforms that could help boost the industry and many other sectors including credit repair companies.

Investors are also happy with current drug pricing trends in the industry. The picks by Credit Suisse have been a mix of large-cap and middle-cap biotech companies. According to Alethia Young, an analyst at the firm, large-cap biotech companies have been quite resilient since January, and it’s expected that they will continue with this momentum for the third quarter.

Without further ado, here are the three major biotech companies that Credit Suisse believes are ideal for investors in this sector:

Large-cap companies

In case you are keen on large-cap companies, Credit Suisse has chosen the following as ideal for investment this year:

Merck & Co. Inc. (MRK, Financial) – Credit Suisse has picked Merck as one of its top bets. The firm has affirmed a target price of $73 for the stock; while the pharmaceutical company is still recovering from a recent cyber attack, it will pull out stronger for the third quarter this year.

Allergan PLC (AGN, Financial) – Credit Suisse believes that Allergan will outperform expectations this year. The stock is likely to gain above 25% with the target price standing at $266 per share. Although sentiment around Allergan appears spilled, because of the expected cash flow improvements and better earnings, the company is expected to maintain its growth momentum.

Johnson & Johnson (JNJ, Financial) – Credit Suisse is predicting that Johnson & Johnson may grow above 10% this year. The analysts have put a target price of $147 per share. Dividend yield is expected to be at around 2.6%. Although Johnson & Johnson is a large company that has ventured into many areas, it’s clear that its pharmaceutical side has been key in driving growth in 2017.

Some of the mid-size companies that Credit Suisse is looking out for include Alkermes PLC (ALKS, Financial) which is targeted to hit $70 per share, Aimmune Therapeutics Inc. (AIMT, Financial) targeted at $36 this year and MyoKardia Inc. (MYOK, Financial), which is expected to hit $35.

Disclosure: I do not own any shares of any stocks mentioned in this article.