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Bull of the Day: Ligand Pharma (LGND)

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One of the hottest areas of the market has been the drug stocks. Over the last month alone, there are five drug stocks in the S&P 500 that are up over 10%. With so many stocks on the move, you may feel like you’ve missed the boat. Today’s Bull of the Day is a stock in this industry which has seen a few earnings estimate revisions to the upside. This could help support a continued moved higher.

Ligand Pharma (LGND - Free Report) is a biopharmaceutical company, which focuses on developing and acquiring technologies that help pharmaceutical companies to discover and develop medicines worldwide. Its commercial programs include Promacta, an oral medicine that increases the number of platelets in the blood; Kyprolis and Evomela, which are used to treat multiple myeloma; CorMatrix portfolio of vascular, cardiac, and pericardial tissue repair products; bazedoxifene, which is used for the treatment of postmenopausal osteoporosis; Carnexiv that is used as replacement therapy for oral carbamazepine formulations; Nexterone, a Captisol-enabled formulation of amiodarone; Noxafil-IV, a Captisol-enabled formulation of posaconazole for IV use; Exemptia for autoimmune diseases; and Vivitra for breast cancer.

The bullish undertone for this stock stems from analyst estimates for next quarter, the current year and next year. Just ninety days ago, analysts expected to see 83 cents EPS for next quarter, $2.08 for the current year, and $3.53 for next year. After a round of revisions these numbers have swelled to $1.09 for next quarter, $2.35 for the current year and $3.58 for next year. Looking out two years, the company is slated to earn $4.37. This puts the mean growth rate estimate from analysts at 27.5%.

Revenue growth has been substantial for the last several years. After growing revenues by 51.5% last year, the company is looking to grow revenues 23% this year and 30.5% next year. These bullish growth numbers should lead to some solid returns for investors.

Of course the stock has already gone on a bit of a run here. After being pinned to $105 last April the stock found a bid and started to move. The stock crossed over the 50-day moving average in late April and has only closed once below it since. Now that 50-day sits all the way down at $127.66 while the stock is trading at $134.85. It looks like shares are consolidating near the 52-week high which is a good thing. The Commodity Channel Index has come down from overbought territory to the zero line and bounced. This sort of continuation pattern is something I’ve traded with great success over the last several years.

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