Summary:

• Exelixis, Inc. (NASDAQ: EXEL) has grown 5.43% only on Monday, June 17^th while the S&P has only had growth of 0.26%
• P/E Ratio of 9.82X and a PEG (Price/Earnings to Growth) Ratio of .47 indicates that the company may be severely undervalued as of its current stock price
• Exelixis, Inc. is an oncological biotech corporation which produces new drugs to try and revolutionize cancer treatment at a time where the FDA is approving an increasing record-breaking number of drugs
• Cancer treatment is sought out as one of the essential types of medicine as there are 14.1 Million new cases in 2012 which is expected to rise to 23.6 Million cases by 2030
• Target price of $29.28 per share offers 38.52% of upside for potential investors

Exelixis Inc. In Brief

Exelixis, INC. (Exelixis stock trades on NASDAQ: EXEL) is a California based biotechnology company specializing in the treatment of different types of cancer. Their mission has sought out to produce and distribute oncological treatments extending the lives of many throughout the globe.  Although Exelixis is rapidly growing as a highly profitable pharmaceutical distributor, its roots lay in the research and unique pipeline in which the company’s scientists discover the chemical composition of these treatments. To produce these treatments, Exelixis utilizes clinical trial pipelines to test their newest compounds on subjects with otherwise untreatable cancer. Through this process, Exelixis founded one of the more wide-spread products called Cabozantinib (distributed as Cabometyx and Cometriq) which has the potential to be useful in fighting a wide array of cancers. While this drug was originally aimed at treating Medullary Thyroid Cancer, Exelixis is currently conducting studies to check the effectiveness of this drug on other types cancers such as that of the Liver and Renal Cell. Additionally, Exelixis also offers Cobimetinib (sold as Cotellic) which is a compound proven to fight metastatic melanoma and has shown proven results on a broad spectrum of cases.

Although Exelixis has made major breakthroughs in the past regarding their products, they still are constantly spending millions on research and development to conduct serious clinical trials. Currently, they discovered potential cancer-fighting compounds such as XL092 and XL888 which are believed by the company to be potentially life-saving for many patients. Overall, it seems that Exelixis has declared a war on cancer and is slowly working its way to victory by discovering essential treatments.

Potential Reasons For Growth

The company’s outlook for valuation is very positive in terms of revenues and stock price. When it comes to treatments for some of the most prevalent types of cancer, it is a mere fact that Exelixis’s products have a very inelastic demand curve. Due to this inelastic demand for cancer treatment, it is not surprising to see why the company is growing revenues at an astronomical annual growth rate. In 2019, the LTM Revenue of Exelixis amounted to 853.7 million dollars which amounts to 88.7% of growth in just one year. This combined with a relatively low P/LTM EPS (Price-to-Last-Twelve-Months-Earnings-Per-Share) ratio along with a PEG ratio of .47 indicate that Exelixis may be severely undervalued.

Although the surge in revenues over the past couple of years has been astronomic, it can be explained by a couple of clear factors. The main catalyst for higher revenues is the fact that treatments like Cabozantinib are being found to be useful for many different types of cancers at a higher success rate. The success with their pipeline and treatments on patients creates a larger market for the company to potentially save many lives. Additionally, the company has signed partnerships with some of the biggest biopharmaceutical corporations in the world such as Bristol-Myers Squibb (BMS) and Genentech (part of the giant Roche group) to conduct properly funded clinical trials. Exelixis scientists believe that they can use these clinical trials to discover whether the compound behind Cabozantinib has potential to fight and attack many different types of cancers. Lastly, compared to their competitors in the oncology biotechnology sector, Exelixis stands as one of the most profitable companies raking up 50% of their revenues in LTM Ebitda. The success both in the revenues and conducting an efficient pipeline put Exelixis in relatively incredible financial health for the upcoming years.

Exelixis Stock Market Value Projection

By means of DCF valuation method, I predict a target Exelixis stock price of $29.28 dollars per share for the future allowing for 38.52% upside for investors. This corresponds to the performance of the algorithm in the sense that Exelixis is expected to appreciate towards new heights. Assuming an effective tax rate and even slight continual revenue growth without any extreme charges, it is a relatively safe assumption that Exelixis’s stock price will appreciate in value. An additional factor in Exelixis’s future success is the small long-term debt balance which they plan to pay off in 2020.

I Know First Bullish Exelixis Stock Forecast

The I Know First AI algorithm currently has a positive outlook for COR. The stock is bullish over the 1 month, 3 months and a year horizon. It is most bullish for the 1-year period with a signal of 199.38 and predictability indicator of 0.78.

Conclusion

These catalysts for growth along with the expansion and inelastic market gives Exelixis investors a very positive outlook for the future. Their historical stock price has been relatively volatile over the last 3 years floating from anywhere in between $15 per share to $30 per share while laying at $20.77 as of June 19^th, 2019. I have a bullish outlook for this stock due to both the very positive financial health of the company, rapid revenue growth, and an inelastic market for which their drugs are essential.

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