Shares of Affymetrix Respond to Morgan Stanley Downgrade
In a report published Monday, Morgan Stanley analyst Daniel Brennan downgraded Affymetrix (NASDAQ: AFFX) from Equal-weight to Underweight based on unattractive risk-reward.
Although Affymetrix expects positive growth and profitability in 2014, Brennan noted the company's massive 160% increase in 2013. The analyst reported that current valuation reflects the company's positive advances and growth.
Morgan Stanley commented, “As next gen sequencing (NGS) pricing declines and instruments become easier to use, we expect the migration away from arrays to continue, given far more extensive information provided from NGS, a key risk given arrays represent ~60-65% of AFFX revenues. Cytogenetics has been AFFX's biggest growth driver, but we see growth slowing in post-natal market, and in pre-natal where NGS will dominate. Arrays will continue to have a home in population studies, consumer markets, Ag/bio, and expression diagnostic testing, but we expect NGS to continue to encroach and even where arrays remain, expect mkts to be very price competitive.”
Brennan reassessed estimates. The analyst increased expected 2014 and 2015 organic growth from 2.2% to 3.5%, and 2.1% to 2.5%, respectively. Morgan Stanley has a $7.20 price target on Affymetrix. The analyst based these improved expectations on new contract wins and strength from cytogenetics.
Shares of Affymetric closed at $8.55 on Friday and are down as much 8.917% at $7.85.
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