SRPT - Sarepta Therapeutics stock to enter S&P MidCap 400: Should you buy?
2024-05-30 08:07:15 ET
Sarepta Therapeutics (NASDAQ:SRPT) is set to make a significant move by entering the S&P MidCap 400 index, replacing Shockwave Medical. This change, effective before trading begins on June 3, 2024, follows Johnson & Johnson’s acquisition of Shockwave Medical.
Market sentiments: Balancing upgrades and downgrades
The inclusion in the S&P MidCap 400 is a noteworthy milestone for Sarepta, as it can increase the stock’s visibility and attract more institutional investors, potentially boosting the stock price. In recent developments, Sarepta has experienced a mix of positive and challenging news. RBC Capital recently downgraded Sarepta from “Outperform” to “Sector Perform.”
This decision comes ahead of an important FDA decision on June 21, 2024, regarding Sarepta’s drug Elevidys, used for treating Duchenne muscular dystrophy (DMD). RBC cited the stock’s significant appreciation over the past six months and the anticipation of the FDA’s decision as reasons for the downgrade.
On a more optimistic note, Oppenheimer upgraded Sarepta to “Outperform,” anticipating a likely FDA nod for an expanded label for Elevidys. Initially approved under the accelerated approval pathway for a narrow patient group, Elevidys is now under review for broader use, potentially enhancing its market reach and sales significantly.
Oppenheimer’s analyst, Hartaj Singh, is confident about the expansion, given the FDA’s history of approving drugs aimed at severe diseases and the expert commentary backing the drug. Despite the optimism, Sarepta’s journey with Elevidys has not been without controversy.
Financial fortitude: Riding on the success of Elevidys
The FDA’s accelerated approval of Elevidys faced criticism from the Institute for Clinical and Economic Review (ICER). Critics pointed out that the approval was granted despite the drug missing its primary endpoints in trials and being based on surrogate endpoints. The high price tag of $3.2 million for Elevidys also sparked debates about its value given the mixed trial results.
Financially, Sarepta has shown robust performance. The company posted strong Q1 2024 results, swinging to a net income of $78.2 million from a loss in the previous year, with a significant revenue increase driven by Elevidys. The drug contributed approximately $134 million in revenue for the quarter, highlighting its commercial success despite the regulatory hurdles.
As Sarepta prepares for potential changes in its business landscape with the upcoming FDA decision and its inclusion in the S&P MidCap 400, investors are closely watching these developments. The company’s ability to navigate regulatory challenges and capitalize on its commercial opportunities will be crucial in determining its future trajectory.
Now, let’s see what the charts have to say about Sarepta Therapeutics’ stock performance and potential trading opportunities. This technical analysis will provide deeper insights into the stock’s trends and possible future movements.
Navigating the range: Indicators at crossroads
Sarepta’s stock has gone nowhere for more than four years now and mostly traded within a wide $80-$160 range. Currently, it is trading near the higher end of this range having twice tried to break above $140 this year unsuccessfully.
SRPT chart by TradingView
The stock is at an interesting place right now because though its 50-day moving average is above its 100-day moving average displaying bullish momentum, the RSI indicator is on the verge of reaching the oversold zone. This means neither bulls nor bears are in control.
Investors who are bullish on the stock must ideally wait for it to give a weekly closing above $142 or buy it near the lower end of its long-term trading range. However, a bullish uptrend will only be confirmed once it breaks above $160 and starts trading at higher levels.
Traders who want to short the stock must also ideally wait for it to reach near $140 levels where they can initiate a short position with a stop loss at $163.5. If the stock loses bullish momentum at those levels once again, it can again fall to the lower end of its trading range near $80 where profits can be booked.
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