Up 91% in the Past Year, Is This Biotech Stock Red Hot or a Red Flag?

• Puma Biotechnology (PBYI) relies on one product. It has weak fundamentals and has struggled to grow sales.
• PBYI stock has surged 91% over the past year, driven by technical momentum and speculative trading spikes.
• Despite technical “Buy” signals, analyst sentiment is mixed, with most rating PBYI as “Hold” or “Sell.”
• With stagnant revenue, declining earnings, and only one product, PBYI lacks compelling long-term investment appeal.

Today’s Featured Stock

Valued at $303 million, Puma Biotechnology (PBYI) is a small cancer biotech whose only marketed product, Nerlynx (neratinib) was launched in the United States for the treatment of early stage HER2-positive breast cancer in patients who have been previously treated with Roche’s Herceptin-based adjuvant therapy. The drug was also approved in the European Union. 

Meanwhile, several additional studies on Nerlynx targeting different types of breast cancer patient populations as well as other types of cancer are currently underway. Puma markets Nerlynx in the U.S. and has several sub-licenses in various regions outside the U.S. to commercialize Nerlynx in international markets. 

What I’m Watching

I found today’s Chart of the Day by using Barchart’s powerful screening functions to sort for stocks with the highest technical buy signals; superior current momentum in both strength and direction; and a Trend Seeker “buy” signal. I then used Barchart’s Flipcharts feature to review the charts for consistent price appreciation. PBYI checks those boxes. Since the Trend Seeker signaled a new “Buy” on Dec. 9, the stock has gained 8.24%.

Author’s Note: Note on the chart above that in the last 6 months there were two spikes in both volume and price. This might be a sign of a takeover. These spikes seem to coincide with sales by Michael Patrick Miller, a director of Puma and several other biopharma companies.

Barchart Technical Indicators for Puma Biotechnology

Editor’s Note: The technical indicators below are updated live during the session every 20 minutes and can therefore change each day as the market fluctuates. The indicator numbers shown below therefore may not match what you see live on the Barchart.com website when you read this report. These technical indicators form the Barchart Opinion on a particular stock.

Puma Biotechnology scored a new 52-week high of $6.27 on Dec. 29.

• PBYI has a Weighted Alpha of +59.22.
• Puma has a 100% “Buy” opinion from Barchart.
• The stock gained 91.05% over the past year.
• PBYI has its Trend Seeker “Buy” signal intact.
• The stock recently traded at $6.02 with a 50-day moving average of $5.32.
• Puma made 16 new highs and gained 18.24% in the last month.
• Relative Strength Index (RSI) is at 64.32.
• There’s a technical support level around $5.95.

Don’t Forget the Fundamentals

• $303 million market capitalization.
• 8.23x trailing price-earnings ratio.
• Revenue is expected to be down by 3.90% this year and down another 0.68% next year.
• Earnings are estimated to decrease 11.59% this year and decrease an additional 20.29% next year.

Analyst and Investor Sentiment on Puma Biotechnology

• Wall Street analysts tracked by Barchart have given 2 “Hold” and 1 “Sell” opinions on the stock with price targets between $2 and $5.
• Value Line ranks the stock “Average.”
• CFRA’s MarketScope Advisor rates the stock as “Buy.”
• Morningstar thinks with the stock’s recent runup, it’s 8% overvalued.
• 192 investors following the stock on Motley Fool think it will beat the market, while 219 think it won’t.
• 11,990 investors are monitoring the stock on Seeking Alpha, which rates the stock a “Hold.”
• Shorth interest is low at 6.81% of the float.

The Bottom Line on Puma Biotechnology

Individual investors are cautious about this stock, and I’ll have to agree with them. Although the company has had steady sales of between $225 million and $250 million for several years, it seems to have only one marketable product and has shown no growth. This is not an investment, and it appears any price movement has been short lived and speculative. There are lots of better investments elsewhere. 

Additional disclosure: The Barchart Chart of the Day highlights stocks that are experiencing exceptional current price appreciation. They are not intended to be buy recommendations as these stocks are extremely volatile and speculative. Should you decide to add one of these stocks to your investment portfolio it is highly suggested you follow a predetermined diversification and moving stop loss discipline that is consistent with your personal investment risk tolerance.

On the date of publication, Jim Van Meerten did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.