New Grades, Price Targets for the Top-3 Stocks in Market’s Hottest Sector
How hot are biotech stocks? One of the bellwethers for the industry, the iShares Biotechnology ETF ($IBB) (left chart), has gained over 24% year to date. Another ETF, the State Street S&P Biotech SPDR ($XBI) (right chart) has gained nearly 29% this year.
Those performances compare favorably to the S&P 500’s year-to-date return of 12%, and the Nasdaq Composite’s return of 15.4%.
We scanned the biotech sector to find the charts with the greatest potential. At the same time, we avoided the smaller, more speculative names in this sector, of which there are many.
Here’s what we found:
1. Repligen Corp. (RGEN)
Repligen ($RGEN) shares have gained 18% year to date, with the majority of that gain coming over the past month.
Repligen makes technical components and materials that fall into the consumable technology category. This means the components that Repligen sells often need to be replaced, which creates repeat business. The products are used in everything from cell and gene therapies to the creation of vaccines.
Shares of Repligen closed at a 52-week high on Monday. The stock has formed a large cup-and-handle pattern (shaded yellow) that suggests a potential rally to the $225 area.
Repligen is scheduled to report earnings on November 3.
GRADE: A-
PRICE TARGET: $225
2. Tempus AI (TEM)
Tempus AI ($TEM) uses artificial intelligence to run genomic diagnostics and accelerate drug development. Tempus AI’s gene sequencing products are used by Merck and Moderna, as those companies attempt to create personalized vaccines.
The stock gained 36% year-to-date, but like Repligen, most of that gain came over the past month. Tempus AI closed at a 10-month high on Monday.
Tempus AI is about to complete an A-B-C-D pattern that suggests the stock will soon reach $90. However, we are maintaining our previous price target of $120, as indicated here. Tempus AI is expected to report earnings on November 10.
GRADE: A-
PRICE TARGET: $120
3. Vertex Pharmaceuticals (VTRX)
Vertex Pharmaceuticals ($VTRX) develops treatments for genetic and chronic diseases. The company is a leader in the treatment of cystic fibrosis and genetic blood disorders.
Vertex reached an all-time high in early September, but has pulled back since then. Over the past two weeks, the stock has found support on its 50-day moving average (blue).
Vertex appears to be forming an A-B-C-D pattern. If that pattern comes to fruition, the stock could rise to $590.
GRADE: B+
Price Target: $590
Bottom Line
In compiling this list, we avoided smaller, more speculative names by using a minimum market cap of $10 billion. We also avoided some names that have had incredible runs, as a reversion to the mean in severely overbought names could prove costly.
In some ways, biotech could be considered a tertiary AI play, as new technologies are opening the door to accelerated drug discovery.
At the time of publication, Ponsi was long RGEN, TEM, and VTRX.
