Leerink Partners Upgrades Neogenomics (NEO) to Outperform
Leerink Partners analyst Puneet Souda upgraded Neogenomics (NASDAQ: NEO) from Market Perform to Outperform with a price target of $25.00.
The analyst comments "Bottom Line: We are upgrading NEO to Outperform from Market Perform. The company delivers on its one-stop shop business model in oncology diagnostics and is getting back on track, in our view – with strong momentum, profitability, and attractive valuation that cannot be ignored. We are raising our price target to $25 at 3.4x EV/Sales (vs. $12, 1.5x before). Key drivers of growth include: ❍ (1) 10% CAGR, steady and profitable growth that appears conservative and a guidance that leaves ample room for beats and raise. ❍ (2) Shift to NGS testing a primary growth driver. Today ~33% of mix, growing 20%+ with more upside from CGP PanTracer LBx and RaDaR ST MRD (not in mgmt.'s NGS growth calc). ❍ (3) Rapid AUP growth. Higher pricing with NGS testing lifts AUP meaningfully. AUP growth is a mgmt. priority aided by rolling off of low value, high vol contracts in '26. ❍ (4) Mgmt. transitions are now history. CEO Tony Zook emerging into his role, COO Warren Stone executing well and CFO Abhishek Jain is a strong add. ❍ (5) Profitability is key. NEO guiding to HSD adj EBITDA growth with room to grow higher on GM expansion, and op margin (LIMS, RCM efforts). ❍ (6) Commercial momentum in oncology Dx ramping with 140 sales reps today and further expansion targeting 165 reps by YE as well as improved northeast TAT driving growth and Epic Aura integration offering even more upside. ❍ (7) 10% 2027 growth probably too conservative. Our view is that mgmt. thinks that 10% 2027 org growth is disappointingly conservative."
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Shares of Neogenomics closed at $9.02 yesterday.