Biotech stocks have a global market opportunity for a COVID vaccine and treatment. They've flown off the charts this year and Regeneron (REGN) - Get Report, a veteran of the biotech space, is looking interesting.
Regeneron, a more than $60 billion player by market cap, has its hand in the COVID jar. Some of its treatments have worked on animals already, the company has said. But the stock is up 65% and the earnings growth picture is solid, but not explosive.
So why even consider it? Ken Berman, strategist at Gorilla Trades, notes that Regeneron has risen in line with 5 biotech stocks he likes, as that group is up 66% year-to-date, "so it's nowhere out of the range," Berman said. So if the group has substantial upside and Regeneron maintains its position in the broader pack, it could be a good pick.
But earnings per share is only expected to compound at a roughly 4% rate over the next 5 years, according to FactSet figures, with some expectations showing that the average EPS growth rate annual will be a bit higher than that. So even if the stock is priced fairly, it will need a new catalyst to power it to lofty levels.
For starters, Berman says Regeneron has a few cash cow products working for it, which provides some stability to the stock. But "the COVID situation -- they seem to be one of the larger players right now and they're getting a lot of publicity for that," said Berman.
The keys to watch for when it comes to big gains for Regeneron: progress on getting a COVID drug approved and market share for that drug.