Vertex Pharmaceuticals Powers Up to All-Time Highs

Boston based Vertex Pharmaceuticals (NASDAQ: VRTX) got some positive headlines on Wednesday as Oppenheimer raised their price target for the stock to $265, about a 20% premium to where shares opened the session. This pushed shares up to all-time highs and means that they’re now up 6% in 2020 alone. For a $60 billion company that tacked on 35% in value to its shares in 2019, this isn’t a bad start to the new decade by any stretch.

Most of last year’s gains came in the final three months of the year, with fundamental growth and momentum powering the engine. In the company’s Q3 earnings report, released at the end of October, we saw that revenue and product sales were both up 21% year on year while non-GAAP EPS also beat expectations. July’s Q2 release painted a similar picture with double-digit percentage growth pretty much across the board and analysts’ expectations comfortably topped.

Great Pipeline

As CEO Jeffrey Leiden noted with October’s release, "2019 has been a year of significant progress for Vertex across all parts of our business. The company also continues to successfully execute on our strategy of creating transformative medicines for serious diseases through serial innovation. The rapid progress of our pipeline is expected to yield proof-of-concept data in multiple diseases in 2020, which will position Vertex for continued growth in the years ahead."

With topline numbers like these and comments like that, it’s not hard to see why Vertex is one of the most attractive pharmaceutical stocks out there at the moment. Their drug and treatment pipeline is looking stellar and as recently as last month the European Commission approved the use of their Kalydeco treatment for infants with cystic fibrosis.

Vertex Pharmaceuticals Analyst Coverage & Technical Analysis

It’s been a popular stock with analysts too. Bank of America initiated coverage with a Buy rating back in October and a $220 price target which Vertex has already passed. Guggenheim and Cowen were out with fresh Buy ratings a few weeks later while Piper Jaffray topped the expectations in December when they came out with a raised price target of $284. Institutions are also heavily involved with almost 95% of the float being held by them.

Having traded sideways with a lot of choppiness from 2017 through most of 2019, it looks like the stock is finally starting to take the next leg up with a lot of positive energy behind it. In the past two years, shares are up 170% compared to 47% and 30% for the two leading biotech / pharma indices, XBI and IBB respectively. Even its own peers like Merck (NYSE: MRK) and Novartis (NYSE: NVS) are ‘only’ up 50% and 30% respectively in the same timeframe. And as we talked about in our Best Pharmaceutical Stocks to Buy article last November, these are companies at the top of their game.

It’s a stock that trades well from a technical perspective also. Looking at the weekly chart, we can see that through most of 2018 and 2019 it was bouncing up off a rising uptrend while bouncing back from solid resistance at the $195 mark. Once it cleared this level it was plain sailing to the $220 level where it consolidated for 2 months. It now looks to be pushing on again through short term resistance into fresh all-time highs and blue sky territory.

Vertex Pharmaceuticals Stock Price Looking Ahead

Wall Street will be watching closely for the company’s next earnings report, due towards the end of this month. Investors considering getting involved could do worse than buy a stock with the momentum that Vertex has right now. As always though, the biotech and pharma industry can be fickle and is open to risks that other industries don’t even know about. A dodgy trial result or negative comments from the FDA can send investors running for the exit, as can any negatively from Congress regarding drug prices. As we head into a Presidential election year, there’s a good chance this will become a talking point for candidates at some point. 

Still, there’s plenty of pharma and biotech names out there that will catch and take the heat way faster than a company like Vertex will, given the form that it’s in.