Editor's Note: TheStreet.com has always believed that offering a wide variety of opinions and viewpoints -- rather than a monolithic "house view" -- helps readers make better-informed investment decisions. In that spirit, we bring you "360 Degrees." This weekly feature is designed to take advantage of our stable of reporters and contributors, who will offer analysis of specific stocks from all angles -- fundamental vs. technical vs. short-term trader and long-term investor. Today's subject, Genentech ( DNA), was chosen by the readers last week ; please see our poll below to help determine the next stock to get the "360 Degrees" treatment.
On the Verge by Helene Meisler
The following appeared in the March 8 edition of TheStreet.com's Top Stocks where Helene Meisler puts her 20-plus years of experience in technical analysis to work for subscribers. Click here for information and to sign up for a free trial. I am always hesitant to recommend a stock in a group that is getting so much attention, but Genentech is down and out yet on the verge of breaking above a downtrend line. From a contrarian perspective, this is an enticing profile. The stock refused to make a lower low, and should it rally above that downtrend line (I am anticipating that it will cross it), which is just shy of $86, it could get itself to $88. The stock's refusal to make a lower low and potential to break out above a downtrend line are positive technical developments. That said, this is a call for short-term traders only, who can take a shot at the upside; I recommend using a stop at $81. Long-term investors should use rallies to take profits as DNA is now trading below its 200-day moving average.
Fully Valued by Justin Ferayorni
Genentech's stock has enjoyed a great run over the last couple of years with the spectacular successes of Avastin and Herceptin. Wall Street now expects Avastin to reach between $6 and $8 billion in sales by the end of the decade after notching "just" $1.1 billion in 2005, its second year on the market. The street's confidence in these peak estimates has been tested though as Avastin's penetration into non-small cell lung cancer and breast cancer has proceeded more slowly than expected in recent quarters. Until we have better clarity on the ultimate size of Avastin opportunity, I believe the stock will sit in a trading range of roughly $80 to $100 per share. I believe the stock is fairly valued currently and should return between 15% and 20% per year from here. If a competitive threat to Avastin emerges though, Genentech could have a lot of valuation to lose.