What’s Next For Roche Stock?

RHHBY: Roche logo

Swiss pharma giant Roche’s stock (OTCMKTS: RHHBY) has seen an 8% rise in a month, outperforming the broader S&P500 index, which remained flat. However, RHHBY stock is down 20% YTD. Some of Roche’s clinical trial findings weren’t favorable this year. Its Alzheimer’s treatment – Crenezumab – failed to slow or prevent cognitive decline in Alzheimer’s patients. The company’s immunotherapy – Tiragolumab – could not meet its endpoint in a late-stage clinical trial for a lung cancer subtype. Both of the above drugs would have been potential blockbuster drugs if successful.

RHHBY stock performance in the near term will be driven by its Q2 results due next week on July 21. We expect Roche to see a fall in diagnostics sales sequentially, given that Q1 benefited from higher revenue due to the Omicron spread. The company saw its top-line expand 11% in Q1 (on a constant exchange rate basis), with the diagnostics business seeing a 24% rise and pharmaceuticals up 6%.

Assessing Roche’s stock movement based on its historical performance is not very helpful, given that there is an equal chance of a rise or a fall for RHHBY stock over the next month. Of 129 instances in the last ten years that RHHBY stock saw a twenty-one-day increase of 8% or more, 66 resulted in RHHBY stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 66 out of 129, or about a 51% chance of a rise in RHHBY stock over the next month. See our analysis of Roche Stock Chance of Rise for more details.

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Calculation of ‘Event Probability‘ and ‘Chance of Rise‘ using the last ten years’ data

  • After moving -1% or more over five days, the stock rose on 53% of the occasions in the next five days.
  • After moving -1% or more over ten days, the stock rose on 59% of the occasions in the next ten days.
  • After moving 8% or more over a twenty-one-day period, the stock rose on 51% of the occasions in the next twenty-one days.

This pattern suggests a slightly higher chance of a rise in RHHBY stock over the next five, ten, and twenty-one days.

Roche Return (Recent) Comparison With Peers

  • Five-Day Return: MRK highest at 1%; PFE lowest at -4%
  • Ten-Day Return: MRK highest at 2%; BMY lowest at -6%
  • Twenty-One Day Return: LLY highest at 12%; BMY lowest at 1%

Although there is an equal chance of a rise or a fall for Roche stock over the next month, we estimate Roche’s valuation to be $59 per share, reflecting over a 40% upside from its current market price of $42. At its current levels, RHHBY stock is trading at 15x forward adjusted earnings, compared to the last three-year average of 17x, implying more room for growth.

While RHHBY stock looks undervalued, the Covid-19 crisis has created many pricing discontinuities, which can offer attractive trading opportunities. For example, you’ll be surprised how counter-intuitive the stock valuation is for Syneos Health vs. Amerco.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

 Returns Jul 2022
MTD [1]
YTD [1]
Total [2]
 RHHBY Return 0% -20% 46%
 S&P 500 Return 1% -20% 71%
 Trefis Multi-Strategy Portfolio 1% -23% 208%

[1] Month-to-date and year-to-date as of 7/15/2022
[2] Cumulative total returns since the end of 2016

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