Roche Getting A Little More Benefit Of The Doubt

Roche (OTCQX:RHHBY) shares have given back some gains recently, retreating about 5% of a 52-week high set in early July, but all in all things are looking better for this giant Swiss drug and diagnostics company, and the market has noticed. Estimates over the next three years are about 10% higher than they were just before first quarter earnings, and there doesn’t seem to be quite the same fretting over Roche’s vulnerability to biosimilars, nor the lackluster profile of PD-L1 inhibitor Tecentriq versus competing drugs from Merck (MRK) and Bristol-Myers (BMY).

Between what looks to be strong momentum in the U.S., a solid pipeline both within and without oncology, and the flexibility to stay active on M&A/in-licensing, I’m comfortable owning Roche going into the second quarter earnings report next week. With a fair value in the mid-$30s based upon low single-digit revenue growth, mid single-digit FCF growth, and current exchange rates, I still see enough upside to justify owning these shares.

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Roche Getting A Little More Benefit Of The Doubt