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Why Most Analysts Recommend a ‘Buy’ for Alexion Stock

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Bottom-line forecast

Analysts expect Alexion Pharmaceuticals’ (ALXN) interest expense to decline by 5.32% from $24 million in Q2 2017 to $22.72 million in Q2 2018. The tax provision of the company is expected to increase by 38.12% from $53 million in Q2 2017 to $73.20 million in Q2 2018. This increase still represents a decrease in the effective tax rate from 19.90% in Q2 2017 to 16.07% in Q2 2018.

Alexion Pharmaceuticals is expected to report a net loss of $362.34 million in Q2 2018 as compared with a net income of $165 million in Q2 2017. This estimate translates into a net loss per share of $1.70 in Q2 2018 as compared with a net income per share of $0.75 in Q2 2017.

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Analysts’ recommendations

In July 2018, 18 of the total 19 analysts covering Alexion Pharmaceuticals have given the stock a “buy” or a higher rating, while one analyst has given the stock a “hold” rating. The mean rating for the stock is 1.74 with a target price of $158.89, which implies an upside potential of 17.5% over the stock’s trading price of $135.26 on July 18, 2018.

In comparison, for peers Celgene (CELG), Bristol-Myers Squibb (BMY), and Abbott Laboratories (ABT) analysts have a mean rating of 2.25, 2.57, and 1.8, respectively, and a target price of $112.54, $57.53, and $69, respectively.

Price performance

So far in 2018, Alexion stock has fluctuated from $124.05 on January 2 to a low of $105.45 on April 25 and steadily recovered to $134 levels in the third week of July 2018.

Currently Alexion stock is trading at a forward price-to-earnings multiple of 15.86x. Its price-to-sales ratio is 8.33 and enterprise-value-to-revenue ratio is 8.55. Its return on equity stands at 5.81%.

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