Amid Bumpy Biotech Trade, I'm Eyeing These Two Stocks
Here's my plan for Xeris and ADMA Biologics.
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The market may have gapped up too much on Monday morning and scared away the "chase" buyers. It was a giant gap, and now there is almost nothing that is trading near the highs of the day. Breadth is still strong at better than 3-to-1 positive. There are around 350 new 12-month highs, which is still very low and reflects the fact that the indexes aren’t very close to the February highs.
There is some weakness in the pharmaceutical sector, and names like Johnson & Johnson JNJ and Eli Lilly LLY are among those that the market is attempting to figure out the impact of Trump’s proposed rule that requires that pharmaceutical companies give U.S. buyers the lowest price in the world. There is substantial uncertainty about how that will work.
The biggest technical issue right now is how well the market holds on to these gains. Action of this sort tends to create a big supply of buyers under the surface that are looking for better entry points. They don’t want to chase something that gaps up 3%, but they may buy it if it pulls back. That is the biggest technical positive that exists right now.
I’m looking for some new buys but haven’t done too much. I’m still overweight in the biotechnology sector, which has been choppy due to concerns about new Food and Drug Administration personnel and the drug pricing issues. Xeris Biopharma XERS, which had a very good report last week, is pulling back today, and I’ve added to my position. Management will be giving an update on June 3 about the company pipeline, and I expect that to be quite positive.
Another name I’ve discussed recently is ADMA Biologics ADMA. ADMA develops plasma-based biologics for the treatment and prevention of infectious diseases. The stock has been a winning growth name and was recently ranked number one in the IBD50. But in its most recent quarterly earnings, it reported a one-time item that was due to a manufacturing error. The stock sold off sharply on the news, although analysts remain quite bullish on the name.
Raymond James raised its price target to $32 from $25 and reiterated its "strong buy" rating. The analyst stated that fundamentals are trending positively, and guidance for 2025-2026 was raised, and there is still a lot of room for upside. It is also noted that tariffs are not an issue for ADMA.
Mizuho Securities also covers the stock and increased its target price to $35 from $32 while maintaining its outperform rating.
The stock has fallen back to support levels and could see a bit more downside to the 200-day moving average, but what is happening here is that traders who employ the CANSLIM growth stock methodology are dumping the stock, because it has breached technical sell rules and triggered stops. It is now dependent on value buyers providing support, and that usually takes a bit of time. A transition from being a growth name to being a value name is difficult, but the fundamentals here have only improved, so I’m confident that the stock will find some solid support.
Quite often, there is a large gulf between the time when a growth stock becomes a value stock, and that can produce quite a bit of downside. That isn’t the case with ADMA, which is why I’ve been accumulating at the current levels. As always, my plan is to aggressively trade the volatility.
At the time of publication, DePorre was long XERS, ADMA.
