UPDATE: Evercore ISI Downgrades Cepheid (CPHD) to Sell; Analyst Sees Risk of Multiple Compression
Evercore ISI downgraded Cepheid (NASDAQ: CPHD) from Hold to Sell with a price target of $53.50. Analyst Vijay Kumar noted a 42% rally since April and warned slowing growth and Q4 risk could lead to multiple compression.
"Shares of CPHD have rallied ~42% since reporting earnings on 4/23 vs. the S&P 500 at ~12%, largely due to strength in 1Q commercial clinical revenues, optimism around new product pipeline potential and a general benefit from being included in several key biotech indices/ ETFs that have rallied notably (high correlation vs. NBI Biotech Index on a 1 and 2 year basis)," said Kumar.
"Commercial clinical revenue growth slowed in 2Q despite a pull forward of ~$2MM of revenues from 3Q, and sequentially revenues came in flattish, something that was last seen in 2008," continued the analyst. "Furthermore, the 3Q’15 guidance range of ~$125-128 MM came in below Street estimates (~$136 MM), and implies a second straight Q of deceleration in commercial clinical revenue growth. Even adjusting for ~$5MM of HBDC revenues (related to 300 systems order from India) that were pulled from 3Q guidance and $2 MM related to revenue pull forward, the 3Q guidance came in below ST estimates."
"Despite these moving parts, management tweaked up the low end of the revenue guidance (~$2 MM) for FY15 to a range of $544- $553 MM. This implies a sequential 3Q to 4Q step up in revenues in range of $23-$32, which is well above the historical norm and raises uncertainty on the back of recent revenue trend," Kumar added. "We believe that until the 4Q has been derisked, this will likely weigh in on multiples, compressing it from recent highs to more in-line historical averages of ~6x forward revenues and ~11.5x EV/Gross Profits."
For an analyst ratings summary and ratings history on Cepheid click here. For more ratings news on Cepheid click here.
Shares of Cepheid closed at $62.93 yesterday.