The iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB), the largest biotech exchange traded fund by assets, is up 20% year-to-date, a solid showing following a rare slump for the biotech sector in 2016. Some market observers believe biotechnology stocks and ETFs can repeat their bullish 2017 performances in 2018.
There are supporters of the biotech space. Healthcare stocks are also showing attractive valuations relative to other defensive sectors, which are richly valued. Biotechnology historically trades at multiples that are elevated relative to broader benchmarks, but after last year’s of struggles for biotechnology names, some analysts see value with some big-name biotech stocks.
Biotech “trades more than 25% below its 15-year average based on historical and forward price-to-earnings ratios. Compared with the broader market, biotech stocks are also trading at a discount and far below their historical average,” according to State Street.
“As FDA works towards accelerating the drug approval process, it is highly unlikely to have a scenario where growing drug approvals and faster turnaround times on Phase trials are met with lower deal activity. The numerous major drug readouts in 2018 will further add to the count of promising and near-approval drugs,” according to a Seeking Alpha biotech analysis.
Biotechnology historically trades at multiples that are elevated relative to broader benchmarks, but after last year’s of struggles for biotechnology names, some analysts see value with some big-name biotech stocks.