Merrill Lynch upgraded Celgene (CELG ) to buy from neutral, citing the stock's valuation.
Analyst Thomas McGahren said he's been positive on Celgene for a while now, but it was too rich. He's upping his recommendation to a buy rating with a $65 target as the stock has drifted downward recently to a good entry point; the stock was off 20% following Oct. 3 news of a drug approval delay. He says the company is a profitable oncology-focused biotech offering a potential blockbuster franchise in Revlimid, Thalomid. He sees 54 cents 2005 earnings per share on revenue of $437 million, and $1.06 2006 earnings per share on revenue of $642 million. He says the $65 target is based on a p-e of 49 times 2007 earnings per share estimate of $1.60, discounted back one year at 20%.