Buy Jazz Pharmaceuticals (NSDQ: JAZZ)
Buy Jazz Pharmaceuticals (NSDQ: JAZZ) up to $130 per share.
Jazz Pharma is both profitable and fast growing – an unusual combination in its industry. Its recent acquisition of Celator Pharmaceuticals last fall gives it a new drug candidate for Acute Myeloid Leukemia (AML). In the meantime, the company is working to expand the treatment protocol for its narcolepsy drug, Xyrem, which helps insulate it against future generic competition.
Jazz will report earnings on or around Feb. 23. I will post the conference call information as soon as it is released.
On that call I’ll be listening to hear more details of the size of the market potentially served by its AML drug candidate and the progress the company is making on its new indications for Xyrem. Bullish commentary on these two revenue streams should send the stock higher.
Earnings are expected to grow 12% in 2017 and another 20% in 2018 as it starts collecting revenue from some of its new drug programs. My target is based on 13 times a 2018 estimate of $13.50.
This stock is optionable, and for subscribers who prefer to play the options side, I recommend the following trade:
Buy to open the March 24, 2017 call on Jazz Pharmaceuticals (JAZZ) with a strike price of $130.00 at $4.70 or lower. Symbol (JAZZ170324C130)
Please note the options on Jazz are not very liquid so do not chase the price on these options.
Stock Talk
Toby Teffeteller
Good morning Linda,
I am a brand new subscriber so perhaps I am not locating all the information. I don’t understand what this means, “My target is based on 13 times a 2018 estimate of $13.50.”
regards,
Toby
Rick
Toby,
Welcome to the service. If you highlight the “Portfolios” tab at the top of the page and select the Open Trades portfolio, you will see that Linda has established a target price of $175 for JAZZ. Her comment in the alert was just to provide her basis for that target.
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Linda McDonough
Welcome Toby- thanks for subscribing.
All of my price targets for the stocks in the portfolio are reached by multiplying a Price to Earnings (often referred to as a PE) ratio to earnings one year out. So for example on JAZZ, the company is expected to earn $13.50 per share in 2018. The “multiple” or Price to Earnings ratio that I use for this stock is 13, which is conservative considering earnings are growing 21% in 2018.
Multiplying the 13 PE times the 2018 estimate of $13.50 gets you the $175 target.
A good rule of thumb is that if a stock is trading with a PE less than the growth rate of earnings, it offers good value. Please let me know if this makes sense and if you have any other questions, I’m happy to help.
Best,
Linda
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George Goldman Parvu
Hi Linda , I like to ask if you recommend for small investors with small capital , any penny stocks ,
like; Medical Marijuana,Nano -Tech, Bio-Tech….etc …?? Thank you.
Linda McDonough
Hi George,
Almost all of the stocks that I recommend are profitable, which steers me away from some of the pure plays in the industries you mention. However I do love stocks in industries undergoing huge change so certainly am always looking for new ideas in some of the groups that you mention.
Often times you’ll see me choosing stocks that are beneficiaries of the growth in the groups you mention. For example, Charles River Labs (CRL) does outsourced clinical trials for many of the small biotech companies that do not have their own labs.
Ichor Systems (ICHR) makes equipment for companies making those nano chips. So while, I may not be recommending the exact stock in the industries you note, I am looking for secondary, less risky ways to play these trends.
Please let me know if you have more questions.
Best,
Linda
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Daniel Cassidy
If I don’t get filled on that JAZZ option do I cancel at the end of the day if I don’t get filled?
Linda McDonough
Daniel,
With options, especially ones that are not super liquid, I would always cancel at the end of the day and re-start it the next day. There is always the risk of some overnight event that leaves you with a bad price on the option. It’s a bit tedious but I think wise.
Best,
Linda
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Michael S.
Filled Spread PUT Option for JUN 125/145 for 1200 credit per contract.
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