Why I'm Expecting a Price Bounce Back for ADMA
This biologics name has been a big winner and a recent setback won't stand in the way.
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After a couple of days of vigorous action, we have some profit-taking hitting on Tuesday morning. Earnings reports were generally good, especially in the banking sector, but China-related and oil stocks are weak, and Nvidia NVDA is down on the possibility of import restrictions on AI chips. Strength in Apple AAPL is covering up some weakness, with breadth running close to flat and small caps lagging.
There isn’t any major news flow driving the action. The selling is mainly just the recognition that things are a bit extended, and expectations for earnings season may be elevated. There still aren’t any major economic worries to stop the market uptrend.
I’m managing positions and looking for new ideas. One name that I’m starting to accumulate is Hims & Hers Health, Inc. HIMS. The company provides health-related products geared specifically for men's and women's needs. It recently launched a weight loss program and has been selling a generic GLP-1 drug similar to Wegovy or Oxempic. There has been some controversy over the generic versions, but the FDA has announced that it is reviewing these compounded generics.
Analysts were very positive about this development and several increased price targets. Jeffries wrote that all data signs point to a third-quarter beat when the company reports in November. Last quarter, the company experienced revenue growth of over 50%. I’ll be aggressively trading the name.
Another stock I’m watching for a trade is ADMA Biologics ADMA. This has been a big winner since I initially picked it, but it was hit hard last week when the news broke that their auditor is resigning. No details were provided, but the company stated that it does not expect any restatements of its financial reports and that it stands by its estimates.
Resignation of an auditor is typically a red flag, but there are situations where it occurs for reasons that have nothing to do with financial reporting, such as conflicts of interest or fee disagreements.
This is a risky situation, but I expect that the company will name a new auditor very quickly, and the stock will pop back up. Currently, it is drifting lower due to the uncertainty and the inclination of some investors to immediately sell on this sort of news.
Both of these trades are special situations, but both companies have very strong revenue and EPS growth that reduce risk to some extent.
I’ll continue to look for more opportunities, but it will be interesting to see if the dip buyers step up. They have consistently bought all pullbacks lately.
At the time of publication, DePorre was long HIMS and ADMA.
