Wednesday turned out to be a nightmare for shareholders of Cempra Inc (NASDAQ:CEMP) and Adeptus Health Inc (NYSE:ADPT), as the healthcare stocks collapsed in the wake of negative FDA briefing document and disappointing earnings results. Brokerage firms Baird and Jefferies chime in on the events. Let’s take a closer look:
Cempra shares collapsed 57% in Wednesday’s trading session after the FDA raised liver safety issues in its briefing documents for CEMP’s Friday Adcom of solithromycin, a new macrolide antibiotic to treat community-acquired pneumonia, or CAP.
In reaction, Baird analyst Brian Skorney downgraded shares of Cempra from Outperform to Underperform, while slashing the price target to $6.00 (from $33.00), which implies a downside of 26% from current levels.
Skorney commented, “The bears turned out to be right on this one and we were wrong. We stuck with the company, against our better judgment, despite head-scratching dilution, questionable commercial strategy and material manufacturing issues and we are truly sorry for not seeing this outcome sooner. Time to turn the other way on the stock. Cash is $5 per share. Look for them to burn through this over the coming quarters.”
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Brian Skorney has a yearly average return of 4.4% and a 42.7% success rate. Skorney is ranked #671 out of 4173 analysts.
Out of the 11 analysts polled by TipRanks, 7 rate Cempra stock a Buy, 3 rate the stock a Hold and 1 recommends a Sell. With a return potential of 258%, the stock’s consensus target price stands at $29.03.
Adeptus Health Inc
Adeptus Health investors are heading for the hills after the emergency medical care provider reported weaker-than-anticipated results for the 2016 third quarter, primarily a result of weak volumes in its non-hospital outpatient department markets, collections issues and higher costs associated with hospital openings. Adeptus Health shares are collapsing 66% as of this writing.
Reacting was Jefferies analyst Brian Tanquilut, which downgraded ADPT stock from Buy to Hold, while reducing the price target to $13.00 (from $17.00).
Tanquilut noted, “We are downgrading ADPT to Hold given our concerns about its balance sheet and cash flows. As A/R DSOs have risen from 54 days LY to 119 days at end-3Q16 and the company is now burning cash ($22MM in 3Q16 vs. cash generation of $11MM in 2Q15), ADPT is in a tight liquidity position and will have to raise more cash through debt/equity offerings in the next few months. Deteriorating SSS revs and EBITDA trends are also likely to keep pressure on ADPT shares near term.”
As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Brian Tanquilut has a yearly average loss of 9.3% and a 32% success rate. Tanquilut has a 45.7% average loss when recommending ADPT, and is ranked #3948 out of 4173 analysts.
Out of the 6 analysts polled by TipRanks (in the past 3 months), 3 are bullish on Adeptus Health stock, 2 remain sidelined, and 1 is bearish on the stock. With a return potential of 285%, the stock’s consensus target price stands at $35.25.