The biotechnology sector is often the source of great investment opportunities. The risk taken by investors is usually bigger, but so is the potential reward.
The biotechnology industry is considered riskier for investors than other industries. This is because most companies involved in the sector focus on new treatments for various diseases, and most of their expenses go on research and development without the guarantee of ever recovering the investment.
However, the potential is huge if one of the products in the pipeline receives regulatory approval as mass adoption potential sends the stock price rocketing. Here are three companies in the biotech sector to consider
Denali Therapeutics is an American biotech company focusing on neurodegenerative diseases. Headquartered in San Francisco, California, the company saw its stock price quadrupling during the COVID-19 pandemic. However, 2021 brought a correction, and so far, the price is down over -43% YTD.
Is this decline an opportunity to buy into a cheap stock? Analysts surely believe so. Out of the 14 analysts that cover Denali Therapeutics stock price, all of them have issued buy ratings. Most recently, Oppenheimer & Co. maintained its buy rating with a price target of $85.
Ultragenyx is an American company focusing on rare and ultra-rare genetic diseases. Like Denali Therapeutics, Ultragenyx saw its stock price decline in 2021 due to poor earnings. However, this is a company projected to double its revenues by 2025, from the current $352 to $872 million. Therefore, it grows at a pace that may trigger interest from investors willing to take a chance on its stock price after such a decline.
CareDx is another biotech company with a much bigger revenue growth than the sector median of 62.85% vs. 17.03. It recently acquired MedActionPlan, in an attempt to reach to transplant patients.
Despite the stock price decline in 2021, no analyst has issued a sell rating for the company stock price. Out of the 14 analysts covering the stock, 8 have buy ratings, and 6 have neutral ones, with various price targets. For example, Raymond James Financial has maintained its buy rating with a price target of $90, while Goldman Sachs has a similar rating but with a price target of $95.
2021 has not been great for biotech companies. However, opportunities exist, especially for those companies with high revenue growth.