Is There More Upside For Regeneron At $620?


Regeneron Pharmaceuticals’ stock (NASDAQ:REGN) has rallied 66% year-to-date to its current level of $622, significantly outperforming the S&P500, which is down 4%, due to a rapid increase in the number Covid-19 cases resulting in heightened fears of an imminent global economic downturn. Is the rally in Regeneron warranted or are investors getting ahead of themselves? We think it is warranted! Our conclusion is based on current stock-specific factors and our detailed comparison of Regeneron stock performance vs the S&P 500 and the 2008 Recession. Parts of the analysis are summarized below.

How Did Regeneron Stock Fare During The 2008 Downturn And What Does It Mean For The Stock This Time Around?

We see REGN stock declined from levels of around $18 in October 2007 (the pre-crisis peak) to roughly $14 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 23% of its value from its approximate pre-crisis peak. This marked a much lower drop than the broader S&P, which fell by about 51%.

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Regeneron staged a strong recovery post the 2008 crisis, with the stock rising to about $24 in early 2010 – marking 33% gains from the pre-crisis peak. In comparison, the S&P fared much worse with its losses from the pre-crisis peak standing at about 27%.

Looking at 2020, Regeneron stock had only rallied upwards from $375 in early January to $400 on February 19, when broader markets made the peak, and further upwards to $456 on March 23 when the markets made their lows. The rally continued and REGN stock is now up another 36% from Mar 23 levels. Why is that? Unlike the 2008 crisis, the current crisis is health related, and Regeneron is one of the few companies that has advanced in development of a treatment for Covid-19, and this has helped its stock surge higher.

Is The Recovery Warranted & Can We Expect Further Gains?

The rally across industries over recent weeks can primarily be attributed to the U.S. government’s fiscal stimulus and lower interest rates, which have made stocks attractive to investors once again. The gradual lifting of lockdowns globally has also helped the demand for some non-essential goods recover.

There were some specific levers for Regeneron as well – as its antibody treatment for Covid-19 advanced into phase 3 trials. Regeneron’s treatment for Covid-19 is based on a cocktail of two antibodies that bind to the coronavirus’ spike protein, limiting the ability of viruses to escape. While there are other companies developing a treatment as well as vaccine for Covid-19, Regeneron’s treatment may be useful in the long-run, as it can help elderly and patients with compromised immune systems, who often do not respond well to vaccines.

As such, the recent gains may hold for the stock, and a further rally will be subject to the outcome of its antibody cocktail in human trials. Looking at fundamentals, Regeneron has been on a strong run, with solid revenue and earnings growth over the recent years, partly led by strong growth in Eylea, a drug used to block the growth of new blood vessels in the eye.

While Regeneron stock has outperformed thus far, which S&P 500 component stocks have the best chance of outperforming the benchmark index? Our 5 In the S&P 500 That’ll Beat The Index: TWTR, ISRG, NFLX, NOW, V look promising.

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