William Blair downgraded Lucira Health (NASDAQ:LHDX) to “market perform,” citing changes to the testing market that have played out over the last couple of months coupled with lack of demand for the company’s at-home molecular COVID-19 test.
“This combination causes us to reduce our revenue estimates substantially in 2021 and 2022 ahead of next week’s earnings call,” writes analyst Brian Weinstein. The stock closed at $5.98 on May 3.
Mr. Weinstein said that while testing trends have been slowing since a peak in January, other companies involved in COVID-19 diagnostics have non-COVID-19 businesses that are profitable and are in strong cash positions as a result of harvesting meaningful cash during the pandemic.
In addition, some of the companies in the space have made progress on emerging use-cases for testing via government contracts, school testing, retail offerings, or even back-to-office campaigns that certain employers are using, he added.
“In contrast, Lucira does not have another, profitable business to fall back on and came to market later in the pandemic,” Mr. Weinstein said. “As a result, the company did not bank the meaningful cash flow others in the space did.”
He said that this was all known at the time of the IPO, but with “no publicized, large-scale ‘wins’ over the last couple of months and with the demand for testing starting to fall off faster than originally expected, the impact to the Lucira modeling is more of an issue than reductions we have seen with other companies.”