Why Bluebird Bio Stock Dived Into the Red on Tuesday

Investors were clearly feeling blue about Bluebird Bio (BLUE -9.15%) on Tuesday. Collectively, they traded the commercial-stage biotech stock down by more than 9% in Tuesday’s trading, not long after an analyst cut his price target on the shares. That price decline was far more dramatic than the 1% slip of the S&P 500 index on the day.

A deep price cut from HSBC

After market close on Monday, HSBC‘s Morten Herholt reduced his Bluebird Bio fair value assessment to $1.02 per share. That represents a 56% cut from his previous level, which was $2.31. Herholt has been generally bearish on the company for a while, as he maintained his reduce (sell, in other words) recommendation on the biotech company’s stock.

It wasn’t immediately clear why Herholt chopped his price so drastically. He’s not the only analyst or investor who’s down on the stock, though.

While Bluebird has notched several important successes, its business progress has not been encouraging. The company, which specializes in gene editing treatments, won a major regulatory victory when its Zynteglo transfusion-dependent beta-thalassemia (TDT) drug earned marketing authorization in the European Union in 2019.

Getting the expensive drug to market was quite a challenge, though, and less than three years later, European authorities withdrew that authorization.

In need of a bigger win

Since they are heavily dependent on what occurs in their labs, biotech stocks tend to be very volatile investments. While Bluebird has proven it can successfully bring a product to market, it has yet to demonstrate that it can score a meaningful long-tail win with one of its drugs. Despite the company’s potential, investors will likely continue sitting on the fence until it does.