BTIG upgraded NeoGenomics (NASDAQ:NEO) to “buy” from “neutral,” with a price target of $10, after the company reported third quarter results. The stock closed at $7.13 on Wednesday.
“When we downgraded shares at $9, our view was that a fair amount of good news had been priced into the stock – less draconian cuts to reimbursement, synergy capture of Clarient and continued share gains,” writes analyst Dr. Sean Lavin.
Over the past few months, he said the shares have fallen over 20% likely on concerns around the use of cash (potential for dilutive M&A) and Clarient integration risk.
“While these concerns haven’t been entirely allayed, we believe third quarter results have demonstrated strong execution, steady fundamentals and improved cash collections, all of which offer potential for upside,” he added. “At the shares’ current valuation, we believe shares offer an attractive risk-reward.”
Mr. Lavin said his price target of $10 is based on a multiple of 3.5 times estimated 12-to-24-month revenue. “We believe NeoGenomics shares should trade somewhere between a large-scale lab provider and higher-end diagnostic company,” he added.
