Incyte’s Sell-Off Momentum May Create New Support After Investors Take Profits

Incyte (NASDAQ:INCY) shares plummeted today after the company released its second quarter earnings report. Although the report showed top- and bottom-line growth, revenue generation came largely in the form of milestone payments from collaborators. Of the company’s $86.5MM in revenue (which beat analyst estimates), product sales accounted for $29.7MM and a milestone payment from Eli Lilly (NYSE:LLY) provided $40MM. Net income on the revenue, however, was a meager $4MM. The poor margins disappointed investors, although compared to last year’s Q2 loss of $51.9MM, the positive bottom-line should improve outlook. Expenses increased for Incyte in the quarter as it continues to develop its pipeline products and initiate clinical trials.

Shares created and then bounced against their 52-week high for the last few weeks and this sell-off may be the result of tension built around breaking resistance. The selling momentum can be seen as overdone, and investors should look for INCY to even out this week before creating a new support price near $20.00. Analysts give Incyte a Buy rating with an average price target back near $26, although these may be revised soon per the latest earnings report.