Stifel starts Cerus at buy; PT $7

Stifel initiated coverage of Cerus (NASDAQ:CERS) with a “buy” rating and $7 price target. The stock closed at $5.21 on Aug. 27.

“Over time, we see significant potential upside as the company executes against its high-value commercial and pipeline opportunities not yet adequately reflected in its valuation,” writes analyst Mathew Blackman.

He said that during the past 12-plus months, Cerus’ blood pathogen-reduction technology has “demonstrated commercial momentum,” spurred by building recognition of existing and/or emerging infectious threats to the global blood supply. “This recent positive inertia suggests the current portfolio should support mid-to-high teens sales growth into early next decade,” he added.

Mr. Blackman also said Cerus has a robust pipeline with “multiple, large opportunities that, with time, could unlock significant incremental value.” However, he pointed out that the company still has clinical hurdles to clear, regulatory challenges to overcome, crisp commercial execution that needs to continue in a market averse to change, and the company remains cash-flow negative.

However, “with billion-dollar-plus addressable market opportunities that appear only marginally appreciated, we believe there is upside as clinical/regulatory/commercial milestones are successfully crossed,” Mr. Blackman said.

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