Goldman Sachs Reiterates Buy Rating, $46 PT on Cepheid

In a report published Friday, Goldman Sachs Group reiterated its Buy rating and $46.00 price target on Cepheid

. Goldman Sachs noted, “While the 3Q preannouncement was an area of focus, we believe shares were weak following the meeting, largely due to investor disappointment over guidance. Management expects ‘commercial' revenues to generate a five-year CAGR of high-teens to 20%. This excludes HBDC revenues and is not entirely comparable to the Street's consensus revenue CAGR of 24% (2012-15E). For reference, we estimate HBDC will contribute an average of over 200bp to growth annually in those years. Lower FY2013 GM guidance was largely due to allocation of the MedTech tax to COGS (we had previously applied it in G&A). When adjusting for this, guidance came in 70bp lower than our forecast. On operating margins, FY2013 guidance was 300bp lower than our forecast (including options), as R&D investments are likely to be higher than previously expected. While this lack of operating leverage was disappointing, we remain bullish on CPHD'S top-line growth potential. In that regard, we remain focused on improved manufacturing execution going forward but also place an emphasis on the potential for new products (protein detection, FFPE compatibility, high-level multiplexing) to sustain CPHD's industry leading top-line growth profile. Lastly, we believe this combination of strong top-line and limited operating leverage supports our incorporation of M&A potential.” Cepheid closed on Thursday at $35.18.