Short-Squeeze Target Anavex Life Sciences Gains Traction

Key Points

• Anavex Life Sciences short interest spiked in November, setting it up for a short squeeze.
• The company released positive results from a trial and has already applied for approval in the EU.
• Analysts are responding positively, and data suggests that a positive upgrade cycle will strengthen in 2025. 

Anavex Life Sciences NASDAQ: AVXL is a short-squeeze candidate because its share prices are rising on good news, institutional and analyst support is growing, and the short-sellers are selling into the rally. Short interest topped 23% at the end of November and is unlikely to have fallen much since because they spiked to a one-year high, showing a high conviction—plenty of fuel for a short squeeze. 

However, the rally beginning in late October was sparked by positive results from a 2b/3 study that showed a more than 36% reduction in Alzheimer's progression within the target group. Estimated at over $15 billion in potential sales, it is good news for the pharmaceutical company and investors, and it is compounded by numerous details that suggest a short squeeze is coming. The once-daily treatment makes it easy to use and safer than competitors, not taken orally. It is unlikely to require the same level of monitoring and is an industry-disrupting product. 

The treatment, labeled Anavex 2-73 and named blarcamesine, was even more effective, nearly 50%, within a smaller subgroup. It may also be effective in treating a wide range of CNS disorders. If so, the potential for market value tops the $20 billion mark for annual sales. Sales may begin soon. The company has already filed for marketing approval in the EU. It may receive it as early as H1 2025, setting it to begin generating significant revenue by the end of the year. 

Analysts and Institutions Provide Tailwinds for Anavex Stock Price

Analysts are bullish on the stock but have yet to adjust their revenue and earnings forecasts for EU approval of blarcamesine and its market-disrupting potential. The analysts' coverage is also light, with only four tracked by MarketBeat, which means a strong upgrade cycle is coming, including increasing coverage. As it is, the forecasts are robust, expecting the company to generate upward of $8 billion in annual sales and $40 per share in earnings by 2032. Still, no revenue or earnings are forecasted for 2025, and the $8 billion target is cautious compared to blarcamesine’s potential, so the earnings estimate upgrade cycle could begin in early 2025 and be vigorous.

The analysts' sentiment and stock price targets are bullish and warming. The consensus of four is a Buy with a price target of $43, about 400% above the critical resistance target. The freshest targets align with that outlook, set after the blarcamesine news was released, and are likely to be followed by increasing coverage and price targets in 2025. The critical detail is that the consensus is well above the $10.50 resistance target and will likely be reached quickly if the target is broken. 

Institutional activity provides additional lift to this biopharma market and is likely to continue or strengthen its trend in 2025. The institutions, which own only about 32% of the stock, have bought on balance every quarter in 2024, and total activity ramped up in Q4. Q4 buying activity outpaced selling by nearly 1.5:1, hitting an almost two-year high as institutions like Charles Schwab and Vanguard Group gain exposure to the opportunity. 

Anavex Life Sciences' Strong Technicals Point to Robust Upside

The technical outlook for Anavex stock is robust. The market shows strong, rising support at significant moving averages, echoed by the MACD and stochastic indicators. The takeaway is that upward price pressure is building, and there is still room for the market to run before becoming overbought. A move above the critical resistance point is likely. 

The simple target for bullish traders is a move above the critical $10.50 level equal to the price magnitude of the reversal pattern that came before it, which is $7.15. That puts the market near $17.65, well below the analyst consensus. The bull-case scenario is a move above the critical resistance equal to the percentage gain from the bottom of the head-and-shoulders reversal pattern to the neckline, which is 230%. A move of 230% puts this market at $35, still well below the analysts' consensus but well on the way.