(FORTUNE Magazine) – Michael King's self-proclaimed "day from hell" started just after midnight on May 19. That was when Banc of America Securities released a report by the biotech analyst urging clients to sell shares of Genentech on fears that its anticancer drug, Avastin, was about to flop. With the stock at $38, King slashed his price target from $34 to $30. Three hours later, Genentech stunned the oncology world with news showing that Avastin had dramatically improved survival rates in colon-cancer patients. Its shares soared above $50 later that morning, forcing an embarrassed King to slap a buy recommendation on the stock, along with a new price target of $73.

And so it goes in the world of biotech stocks, where, years after the famously profitless dot-com startups that romanced and then jilted investors went away, a relatively small company like Genentech still can boost its market value by over $8 billion with one press release.

This isn't the first such run-up. The last biotech stock boom coincided with the euphoric race to map the human genome in 2000. Shares in Genentech, for example (with the greatest stock symbol ever for a genetic-engineering company: DNA), hit a split-adjusted $122.50 early that year.

But while the dot-coms and the biotechs share an ability to confuse analysts and excite investors, the comparison isn't perfect. Biotech companies survive precisely because in more than a few cases, including Genentech's Avastin, the promise of changing the world is becoming a reality. "The difference between biotech and dot-coms is that these guys are actually making products that will earn money," says Thomas Dietz, biotech analyst for investment boutique Pacific Growth Equities. "There's no question about the business model. It's just a question of getting the drugs."

The biggest problem in valuing biotechs is the uncertainty surrounding their drugs' ability to succeed in clinical trials and then win approval from the Food and Drug Administration. "In a lot of cases, the trial outcomes are like lottery tickets," says King.

Once a company's number has been called, however, there's little debate about the minimum value of the winning ticket. Meirav Chovav of UBS Warburg, one of the few biotech analysts who'd been bullish on Genentech before the Avastin breakthrough, guesses that the drug will be a $2-billion-a-year gusher within four years. Avastin alone is worth $30 a share to Genentech's stock today, she reckons. Since the shares have risen only about $20 since the announcement, "I actually think this under-represents the value of the drug," she says.

Even those who warn against overheated stock prices in biotech--the Nasdaq biotech index is up 26% this year--worry about missing the boat. Morgan Stanley analyst Caroline Copithorne downgraded the sector on May 21 because the group had become too pricey. She warned clients repeatedly, however, that she might be wrong, reminding them that her downgrade was mostly a "valuation call, always difficult in biotech." --Adam Lashinsky