Raymond James Sees 'Lingering Risks' At OraSure, Downgrades To Market Perform
Shares of OraSure Technologies, Inc. (NASDAQ: OSUR) are up 20 percent year-to-date. Raymond James’ Nicholas Jansen downgraded the rating for the company from Outperform to Market Perform, saying the shares were within 3 percent of the previous price target of $8.
Factors Driving Outperformance
Analyst Nicholas Jansen mentioned that OraSure’s outperformance was driven by upside to the company’s 4Q and 1Q numbers, growing profitability, and the potential Zika opportunity.
Jansen believes that OraSure’s strength lies in its DNA Genotek franchise, which contributes 25 percent of its revenues. He added that more options, including work on Ebola and Zika, were available for the company and could lead to modest appreciation in its shares.
Risks To Future Performance
While OraSure’s partnership with AbbVie Inc (NYSE: ABBV) is on a solid footing, the challenges facing the Hepatitis C market have increased, thus affecting the performance of AbbVie’s drug.
“The five-plus year contract that was signed in June 2014 has its first six-month notice exit clause at the end of this month, which is worth monitoring,” Jansen added. An end to this relationship implies OraSure would no longer be profitable in the short term.
Other risks facing the company include ongoing competitive HIV pressure, and “likely peaked near-term gross margin trends.” These factors along with limited visibility into more meaningful revenue upside in 2016 warrant a more balanced risk/reward at the current levels, the analyst commented.
Latest Ratings for OSUR
|Sep 2016||BTIG Research||Downgrades||Buy||Neutral|
|Aug 2016||Stephens & Co.||Upgrades||Equal-Weight||Overweight|
|Aug 2016||Canaccord Genuity||Maintains||Buy|
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