Sign InAxcella Health Inc. Shows Promising Surge in Stock Price Driven by Potentially Game-Changing News
Summary
Axcella Health Inc., a clinical-stage biotechnology company, experienced a significant increase in its stock price due to positive news about its lead candidate, AXA1125, securing a methods-of-use patent and potential treatment for fatigue associated with Long Covid, making it a promising investment with a consensus target price of $6 despite its current lack of profitability, but investors may want to wait for a better entry point following a short-term retraction. (Analysis date: September 12, 2023)
Fundamental Analysis
Axcella Health Inc., operating under the ticker AXLA on NASDAQ, is a clinical-stage biotechnology company. The company experienced a significant increase in its closing price on September 12, 2023, with a 59.17% increase, moving the stock from its previous low of $0.60 to a closing price of $1.14. This represents a significant improvement in investor sentiment towards the company.
The company has a relatively small market cap of $84.01 million, which classifies it as a small-cap company. However, the stock witnessed an impressive volume of 111.13 million transactions on the last trading day, significantly above its average trading volume of 16.22 million.
The company's earnings per share (EPS) is reported at -$1.73, and it operates on a negative price-to-earnings ratio of -0.66. This suggests that the company is not profitable at the moment, a common occurrence among clinical-stage biotech firms.
The significant surge in AXLA's stock price appears to be driven by a series of potentially transformative news regarding its lead candidate, AXA1125, which is currently under development to treat fatigue associated with Long Covid. The company secured a methods-of-use patent for this drug, which can be a game-changer in today's global health environment.
Technical Analysis
The stock recorded a Relative Strength Index (RSI) of 72 on its last trading day, signaling it is overbought. The 50-day moving average (MA50) and 200-day moving average (MA200) stand at $0.24 and $0.43, respectively. Given the recent closing price of $1.14, it depicts a strong bullish trend in the short term as well as the long term. Moreover, the three-month Moving Average Convergence Divergence (MACD) of 0.06, along with the increase in volume, indicates growing positive momentum.
The consensus target for the company is $6 - indicating that industry analysts are bullish about the prospect of this stock. In terms of recommendation trends, the company received a "buy" recommendation from two analysts, while no analysts recommended a "hold", "sell", or "strong sell".
However, the company does not have a resistance level defined; we can use the year's high at $2.49 as a reference. On the downside, the stock has a support level at $0.98, and stop-loss is suggested at $1.10, providing a safety net against potential price drops.
Price Prediction and Recommendation
Given the encouraging news about Axcella’s treatment candidate and the consensus target price of $6, the stock holds promise despite currently being unprofitable. In the short term, the stock could face a minor correction due to being overbought.
For the next trading day, September 13, 2023, expect a slight retraction from the last close of $1.14 due to the overbought situation. However, over the upcoming week, the price might continue its upward trajectory given the recent catalyst and the strong bullish trend indicated by the moving averages.
Evaluation
By weighing the potential growth from AXLA's recent patent against its current unprofitability and overbought status, Axcella Health Inc. can be categorized as a "Hold". Investors could benefit from waiting for a better entry point following a short-term retraction. Long-term investors particularly could find Axcella’s prospects appealing, given the significant upside potential the patent and existing buy recommendations suggest.
