Buying Mereo BioPharma After JPMorgan's Boosts Price Target
After the big bank said that the market overreacted to a setback for the firm, I'll be accumulating.
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They may have been a little tired after the long weekend, but the dip buyers showed up on Tuesday morning and have the indices off the overnight lows. There is still plenty of red, with about 67% of stocks trading lower, but there are some pockets of speculative action, and there doesn’t appear to be any real panic.
The most significant negative is that the Magnificent Seven MAGS names are lagging with a drop of 1.5%. Meta META, Nvidia NVDA and Amazon AMZN are struggling to hold key support areas, and the group is no longer regarded as the safe haven it once was. I believe that both NVDA and META offer good values, and I intend to add to those positions as the charts develop. Neither has good support and is starting to fill some gaps on its charts. I’ll feel pretty comfortable adding as we move through the seasonally weak period and start anticipating third-quarter earnings reports.
One surprisingly strong sector is biotechnology. The iShares Nasdaq Biotech ETF is up 1.6% and there are quite a few interesting charts in the group. It should be no secret that this is one of my favorite groups. It has lagged for years, but may finally be seen as an undiscovered value. I am holding names like Xeris XERS, Harrow HROW and uniQure NV QURE in the sector.
Another name in the group that I’m increasing is Mereo BioPharma Group MREO. The company has a drug for brittle bone disease and expects to have data before the end of the year. Some investors had hoped the data would be sufficient to end the trial in July, but when that didn’t happen, the stock was cut in half. Nothing really changed other than a delay in data, and I expect to see some positive speculation build.
On August 25, JPMorgan JPM increased its price target on MREO to $8 from $7 and reiterated its overweight rating. JPMorgan viewed the market reaction as an overreaction and emphasized that the trial is continuing to its final analysis, expected around the end of 2025.
There are still a few months before data will be released, but the stock is washed out at this point and appears to have support. I’ll be slowly accumulating as it develops.
A couple of other names on my radar that look good are EOS Energy EOSE and TeraWulf WULF. I also have an eye on Mobilicom MOB, which is a provider of cybersecurity and smart solutions for drones, robotics and autonomous platforms.
While overall market action is poor, there is still some very good trading in individual stocks. Pressure on the Magnificent Seven is not killing the market.
At the time of publication, DePorre was long META, NVDA, XERS, HROW, QURE, MREO, EOSE, WULF and MOB.
