Actavis Plc (NYSE:ACT) with its market capitalization of $73.10B is a specialty pharmaceutical company focused on developing, manufacturing and distributing generic, brand and biosimilar products. Its business is focused principally in the Urology and Women’s Health therapeutic categories, as well as Gastroenterology and Dermatology.
Shares of Actavis are In a Uptrend
Shares of Actavis are piping hot today as the stock makes a new 52-Week high $277.99 per share in the market session as shown in the chart above. You will observe that the stock has been consistent in its northbound surge in the last 10 months. In addition, the bullish momentum has led the stock to trade at a 58% premium to its 52-week low of $174.94.
The shares of Actavis have been surging in recent months as the stock heads above its 20, 50 and 200-day moving averages. In fact, shares of Actavis have surged about 4% as the stock records 8 new highs in the last one month. Another interesting point to note is that the stock has an RSI of 64.84, which suggests that the bullish action has a long way to go before the stock becomes “Overbought.”
Fundamental Reasons to be Bullish on Actavis
Actavis is a raging bull that does not appear to be slowing down because the fundamentals also support the bullish thesis on the stock. For instance, the stock has a P/E ratio of 20.25, which is makes it pretty much cheap in relation to the industry average. Hence, I am not surprised that analysts’ recommendation on the stock has been mostly positive. For instance, 10 analysts consider Actavis a “Strong Buy”, 10 analysts rate the stock a “Buy” and 2 analysts have a “Hold” recommendation on the stock.
It might interest you to know that the stock’s revenue is expected to grow by 46% this year and by another 22.80% next year. The company’s earnings are also expected to grow by 43.60% this year, 21.60% next year and then continue growing at a compound annual rate of 22.81% over the course of the next 5 years.
The Actavis-Allergan Deal Continues to Gain Traction
Actavis has grown to prominence in the biotech sector primarily because of its penchant for carrying out strategic acquisitions. The company recently acquired Forest Labs, Warner Chilcott and Allergan. The Allergan acquisition, when it is completed, promises to be a major profit-driver for the Actavis; hence, we have another reason to be bullish on Actavis.
The main reason the Allergan acquisition promises to be a major profit driver for Actavis is that the acquisition allows Actavis to extend a presence beyond its generic business to opthamology and aesthetics. It might interest you to know that Allergan’s blockbuster drug, neurotoxin Botox has netted more than $2 billion in annual sales as it continues to maintain the lead for the removal of facial wrinkles.
In addition, the merger will also provide some cost synergies that are currently estimated around $2 billion. For instance, Allergan will benefit from the lower tax rate that Actavis enjoys because it is domiciled in Ireland.
How To Trade ACT Options
I am bullish on Actavis and I recommend buying ACT call options. I recommend buying the ACT May 2015 275.000 call (ACT150515C00275000) at an asking price of $21.10. However, you should watch the contract closely in order to adjust your trade accordingly when Actavis releases its Q4 and Full Year 2014 report on February 18.
— Daily Option Alerts