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Why Are Most Analysts Recommending a ‘Buy’ for Vertex?

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Analyst recommendations for Vertex

Vertex Pharmaceuticals (VRTX), based in Boston, Massachusetts, is a global biotechnology company focused on developing innovative drugs for serious life-threatening diseases. The company’s principal focus areas include hereditary disorder CF (cystic fibrosis) and drugs for HIV (human immunodeficiency virus) and HCV (hepatitis C virus).

The above table details 20 brokerage firms and their estimated prices for Vertex Pharmaceuticals. The consensus 12-month target price is $133.20. This translates to a ~53.7% return compared to Vertex’s closing price of $86.60 on February 18, 2016.

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According to a Bloomberg consensus of 23 brokerage firms recorded on January 14, 2016, 69.6% of the firms recommended a “buy” for Vertex. But on February 16, 2016, after the company’s 4Q15 and fiscal 2015 earnings release, revised ratings showed that 76% of analysts now recommend a “buy” for Vertex stock. The remaining 24% have recommended a “hold,” and none have recommended a “sell.”

Analyst recommendations for peers

According to the Bloomberg survey of 21 analysts on February 18, 2016, 71.4% issued a “buy” rating for Alexion Pharmaceuticals (ALXN), and 28.6% believe the stock is a “hold.”

The ratings of 25 analysts in a Bloomberg consensus dated February 19, 2016, showed 52% recommending a “buy” for Amgen (AMGN), 44% recommending a “hold,” and 4% recommending a “sell.”

A Bloomberg consensus of 25 analysts on February 17, 2016, showed 56% recommending a “buy” for Regeneron Pharmaceuticals (REGN) and 44% recommending a “hold.”

Promising business aspects might result in an improved valuation for Vertex Pharmaceuticals. However, success or failure of any drug results in volatility in the stock. To diversify the risk of investing directly in the equity of Vertex Pharmaceuticals, investors can look for options such as the PowerShares QQQ ETF (QQQ). The fund holds 0.43% of its total holdings in Vertex stock.

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