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It is still possible, but the charts – and the overall market – need to start acting better. On the plus side, the AMRN share has not completely broken down. On the downside, Amarin’s chart does not look so good. They really do not entice me to get tall.
How about the basics?
On February 25, Amarin reported its fourth quarter results. GAAP earnings of 2 cents per share beat expectations by 4 cents as analysts looked for a loss. Revenue of $ 143.3 million increased by 85% compared to the previous year, beating estimates by more than $ 5 million.
The management repeated its guidance from earlier this year and demanded revenues from 650 to 700 million dollars. Analysts have finally caught up, and consensus expectations are now at $ 695 million. Amarin ended the quarter with $ 644.6 million in cash, a small pull from the previous quarter’s balance of $ 673.2 million.
The shares fell by 2% in the aftermath of the report.
Values Amarin stock
We are talking about a company with virtually no long-term debt, more than $ 600 million in the bank and intense revenue growth. In addition, the Amarin share is turning towards profitability. Current assets are almost four times as large as current liabilities, which indicates that there is no short-term concern about the balance sheet.
So what gives?
I think this may be a case of “what have you done for me recently?” In other words, Amarin shares have risen from under $ 5 to more than $ 20 in a relatively short time. After closing at $ 17.50, it is simply biding its time before resuming higher. We will look at the charts in a minute, but from a basic perspective it is difficult to be too bearish.
Based on $ 695 million in consensus revenue for this year, that would represent ~ 62% sales growth. Next year estimates top $ 1 billion. Analysts expect a loss of 7 cents per share for 2020. But based on Amarin’s better-than-expected results for the quarter, management may be able to push this figure to a steady pace.
For me personally, the pressure on growth is more important than short-term profit. Vascepa drives the company’s growth here in the United States. It was just approved in Canada in December (and sold in February). Also in December, European regulators approved Amarin’s marketing application, with approval expected by the end of 2020. Finally, clinical trials have begun in China and should be completed by 2020.
In short, Amarin seems to be doing everything right. It will have to fight through some patent disputes (with a decision that will hopefully come at the end of March), but short of any catastrophic result, this company looks clean.
It is a reasonably speculative healthcare game. Shopping with about ten times this year’s revenue may seem expensive, but not if Amarin delivers. It is also a potential M&A target, as biotechnology and major drugs are constantly looking for growth.
Trading in Amarin shares
The foundation and the long-term potential are checked. Unfortunately, the technology may be better for the Amarin share.
In mid-December, Amarin rose to $ 26, but reversed highs and closed lower on the day, close to $ 23. It was a tough day for the bulls. The next day, stocks lost $ 22 and the 20-day moving average, which then became resistance. It was the first sign that speed had slowed down and now benefited the bears.
Amarin has since lost moving averages of 50 days and 200 days, as the downstream resistance (blue line) continues to push down the stock price. It filled the big November gap and temporarily took out $ 17 the other day.
Here is what I’m looking for in the next few days after the earnings report. I have to see Monday’s low of $ 16.80. Below that and the $ 16.50 mark, the $ 14 level will technically be on the table.
Things get difficult when you take into account the wider market. We have seen the S&P 500 shed about 8% in just a few trading sessions. It is not strongly recommended to buy a stock that is in a downward trend and that is enduring an adverse reaction after revenue (at least so far).
I do not know if the Amarin share will hold the recent declines or not. But what I do know is that stocks need to regain resistance to downward trends to show that bulls are gaining momentum. It would be even more convincing if the stock could recover 20-day and 200-day moving averages, putting the 50-day moving average and $ 20 on the table.
Let’s see how the Amarin stock trades for the rest of the week. I like this company in the long run, but right now the charts are not favorable.
Bret Kenwell is the director and author of Future Blue Chips and can be found on Twitter @BretKenwell. At the time of writing, he had no position in any of the above-mentioned securities.