Wolfe Research has initiated coverage on shares of Incyte (NASDAQ: NASDAQ:INCY), a biopharmaceutical company, with an Outperform rating and a price target of $84.00.
The research firm noted that Incyte's stock price has remained relatively unchanged over the past five years, despite a significant increase in the company's revenue.
This performance contrasts with peers in the mid-to-large cap biotech sector, such as ALNY and VRTX, which have seen their stock prices surge alongside revenue growth.
Incyte's stock has underperformed with an 11% decline in share price, despite a 95% increase in revenue over the same period. Wolfe Research suggests that this could be due to the company's earnings before interest and taxes (EBIT) margins, which have been fluctuating between 25% and 10% in recent years.
Another contributing factor is the upcoming loss of exclusivity for Jakafi, Incyte's key revenue-generating drug, expected to occur in late 2028.
The firm posits that the primary concern for Incyte is whether it can generate enough revenue growth to at least partially offset the anticipated rapid decline in Jakafi revenue, which is projected to be $3.6 billion by 2028. According to Wolfe Research, the stock is likely to be influenced by potential catalysts and the revenue potential of its pipeline over the next year or so.
Incyte's current situation presents a unique case where a biotech company's stock performance does not align with its revenue growth, a scenario that is not commonly observed among its industry counterparts.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Incyte's financial position and market performance. The company's market capitalization stands at $12.73 billion, reflecting its significant presence in the biotech sector. Incyte's revenue for the last twelve months as of Q2 2024 was $3.86 billion, with a notable growth rate of 9.78% over the same period.
Two key InvestingPro Tips are particularly relevant to the article's discussion. Firstly, Incyte "holds more cash than debt on its balance sheet," which could provide financial flexibility as the company navigates the challenges ahead, including the potential revenue decline from Jakafi. Secondly, the company has been "aggressively buying back shares," which may indicate management's confidence in the company's future prospects despite the stock's underperformance.
It's worth noting that Incyte is currently trading near its 52-week high, with a price that is 93.95% of its peak. This recent stock performance, coupled with the company's ongoing share buybacks, suggests that investor sentiment may be improving despite the concerns highlighted in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 9 additional tips that could provide further insights into Incyte's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.