It isn’t often that you can find the right story at the right time to give you a good chance of multiplying your wealth; these so-called multi-bagger stocks get their name because their price sees a pop of more than 100%. Driven by a good story and other factors to help the jump happen.
Investors need to be almost at the right place and at the right time; today, the stars are aligning to bring you a good story in bluebird bio (NASDAQ: BLUE). This stock is quickly adopting the characteristics that make a multi-bagger of a play. This stock is already up more than 50% in February alone, and there are plenty of reasons to believe it has much more to go.
While the rest of the market focuses on the hype surrounding technology stocks, and more so on names like NVIDIA (NASDAQ: NVDA) that keep on delivering blockbuster financial results and breaking past its all-time high prices, there is a new reason to start looking into this medical stock.
All the right reasons
Professional traders look to understand the economy to spot the right industries and sectors that promise the potential to spit out some of these winning stocks; today, a leading indicator is flashing green for the medical field.
According to the latest employment situation report, the United States economy added up to 353,000 jobs in the past month, 70,300 of which were scooped up by the healthcare industry.
A hiring spree into a low-beta sector like the Health Care Select Sector SPDR Fund (NYSEARCA: XLV) means institutions could come sniffing around. Well, that is just what investment houses like the Vanguard Group and The Goldman Sachs Group (NYSE: GS) did, and here’s the stock they picked.
According to the latest 13-F filings (which track ownership in a stock), Vanguard added 56% to their stake in Bluebird stock, followed by Goldman’s addition of 68% just in February; why are these behemoths looking into a tiny $340 million company?
Management released their outlooks for the 2024 year recently in a press release, which included the expectation to start reporting accounts receivables (to be translated into revenue and potential earnings) as their sickle-cell and LYFGENIA treatments received Food and Drug Administration (FDA) approval and are ready to take on patients.
Now, even after taking a handful of patients (85 to 105 expected), this does not guarantee economies of scale and provides an affordable price point for a diverse demographic to buy Bluebird’s products. This is why aid from the U.S. government acts as a key catalyst to make this medical stock pop in the coming months.
Knowing what you know now, it should be no surprise that analysts land on a price target of $6.7 a share for this stock, implying a massive 285% upside from today’s prices. Sadly for bearish short-sellers, this cocktail of tailwinds could turn out as a potential short squeeze.
You can consult MarketBeat’s short interest monitor to see how Bluebird bears got carried away to short up to 25% of the available shares. As the stock keeps moving aggressively, these short sellers will relax maximum pain and need to close out their positions, which involves buying the stock and further pushing up the rally.
The game just changed
Remember the massive multi-bagger path that came from Carvana (NYSE: CVNA)? The stock went from below $5 to more than $70 in less than a year because of the same factors that could push Bluebird on a similar path upward.
So, what is behind all the buying and bidding of the stock higher and higher by double-digit clips one week in a row? Well, investors are looking forward to Bluebird’s upcoming quarterly earnings announcement, where the market expects to see the accounts receivable booked as revenue and earnings and much more.
Apart from the initial accounts receivable number (which will likely drive the stock that day), investors also want to hear what outlooks management has to give regarding future patient volumes to drive even further revenue and book potential earnings.
So far, management points to 85 patients on the low end and 105 patients on the high end for the first quarter of 2024, leaving anything outside of this range (whether to the upside or downside) as a potential catalyst for the stock to make an aggressive move.
All in all, you are looking for the number of patients to not only beat the initial guidance for the first quarter but also to be projected higher for the rest of the year; therein lies the caveat for this growth story, but the price action may suggest that a big announcement is to be had in the coming weeks.
