Why Cubist Pharma Is Poised to Pull Back
While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Cubist Pharmaceuticals opened Thursday down 2% after Wedbush downgraded the drug developer from "outperform" to "neutral."
So what: Along with the downgrade, analyst Gregory Wade reaffirmed his price target of $65, representing just 3% worth of upside to yesterday's close. While momentum investors might be attracted to the stock's solid year-to-date return, Wade believes the appreciation potential remains limited given Cubist's lack of significant revenue and profit growth.
Now what: Wedbush sees the stock's risk/reward trade-off as pretty balanced at current levels.
"CBST's 12-18 month top-line growth prospects appear to us to face significant challenges as CUBICIN stalls, and meaningful growth (on a percentage basis) from the pipeline and acquired assets is 12+ months out," noted Wedbush. "We see no room for multiple expansion from here, as well."
With Cubist shares up about 60% from its 52-week highs and trading at a 40-plus P/E, I'd agree that upside looks somewhat limited.
More reliable ways to build wealth
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.
The article Why Cubist Pharma Is Poised to Pull Back originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Cubist Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.