IPOs, Buy Them When They’re Down
It’s hard to know what to buy and what to sell with market conditions the way they are but it looks like a good time to start nibbling on these two recent IPOs.
Bausch + Lomb (NYSE:BLCO) and PepGen (NASDAQ:PEPG) both IPO'd in 2022 and have seen their shares plummet in the wake of the offering, not because they are poor companies or bad investments, but simply because the market conditions changed.
The takeaway is that now these stocks are trading well off the post-IPO highs and the analyst's quiet period is over. The sentiment on Wall Street is that both of these stocks are buyable and should be trading at higher levels than they are.
PepGen Has Triple-Digit Potential
PepGen is a clinical-stage biopharma researching and producing compounds for the treatment of neuromuscular and neurological diseases.
The company has several compounds in testing phases including treatments for muscular dystrophy. At least 4 analysts have come out so far with ratings and they agree, that the stock is a firm Buy with two Buy ratings and two outperform ratings.
More importantly, the Marketbeat.com consensus estimate of $24.25 is more than 120% above the current price action and that target is well off of the high target.
The high target of $40 was set by SVB Leerink and adds another 65% to the consensus.
Turning to the chart, the price action is moving higher in the wake of the commentary and looks like it will continue higher. The risk now is resistance at $12 and it may be strong based on the sharp decline in price action following the IPO.
While we expect to see resistance cap gains at this level, the pause may be short-lived due to the upside potential. Even the low price target of $16 offers about 60% of upside and it is right at the top of the established range.
A move to that level would be bullish, but we would expect a move to new highs without another catalyst to drive it.
Bausch + Lomb - A Diversified Play On Eye Care
Bausch + Lomb is a diversified play on healthcare, specifically, eye care, that operates in three segments including consumer products, ophthalmic pharma, and surgical.
The stock price fell sharply despite opening at the low-end of its expected range which we are viewing as a deep-value entry point due to the established nature of the business.
The analysts are a little less enthusiastic, rating the stock a weak Buy, but the 4 Hold-equivalent ratings are worth a Buy to us at this stage of the game.
The Marketbeat.com consensus price target is also on the tepid side compared to PepGen, but this is a different kind of business and one that comes with both better visibility and far less risk.
As it is, the consensus target is still more than 40% above the current price action. Turning to the chart, the price action in this stock suggests a bottom is in place at the $16.00 level, but support may get retested before a new rally can begin.
Longer-term, analysts at Wells Fargo see this company’s growth as supported by our aging population, the shift to contacts and daily/disposable contacts, and the company’s pipeline of ophthalmic treatments.
