Biotech stocks have been getting destroyed, but one analyst says the sell off is 'misguided'

Wikimedia CommonsSome investors have been worried about a bubble in biotech stocks, and Wednesday's sell off seemed to prove those fears.

Biotech stocks fell more than 3%, their biggest one-day drop this year.

But the industry is still one of the best-performing in the market: it's up 35% over the past 12 months and 9.3% year-to-date, compared to year-to-date gains of 3% for the Nasdaq and just 0.10% for the S&P 500.

In just the last four trading days, the "IBB" ETF that tracks the biotech sector is down more than 6.5% and shares of IBB were down more than 1% in pre-market trade on Thursday.

But according to analysts at Piper Jaffray, investors getting rid of biotech stocks are "misguided":

"Almost like clockwork, the biotech tape began a meltdown yesterday, a little over 1 year since we went through this last time. Once again, we see misguided concerns regarding the biotech valuations, which unfortunately represent a blend of the true earnings growth companies as well as those which are just ramping into earnings growth and thus have disproportionately high but not representative P/E multiples ... Obviously 2014 turned out to be a stellar year for biotech, and we believe industry fundamentals remain strong. 2015 should still be a good year for the industry, once we pass through this latest round of selling."

The analysts cited their previous research on the industry, noting that earnings growth and upside to estimates would help biotech perform well this year.

"We expect the trends of delivering meaningful upside to estimates to continue, with Alexion Pharma, Amgen, Biogen, Gilead Sciences and Vertex Pharma seemingly best positioned to do so for the year," they wrote earlier in March.