UPDATE: ISI Group Downgrades Cepheid to Sell, Raises PT on Key Drivers Constraining Revenue Multiple

In a report published Friday, ISI Group analyst Vijay Kumar downgraded the rating on

from Cautious to Sell, but raised the price target from $32.50 to $34.00. In the report, ISI Group noted, “We are downgrading CPHD shares to Sell as we see >10% downside from current levels. Our new PT of $34 equates to ~5x FY14 EV / Revs (in-line with historical average). While the revenue multiple has ranged from 3x (financial crisis) to ~7x, we see three key drivers constraining the multiple in the medium term. (1) We see the base business slowing due to increased competition in the HAI space; (2) we believe that CPHD's new products cater to different markets(CT/GC in the physician space vs. traditional hospital markets), limiting upside; and (3) we expect pricing pressures and structurally higher COGS to limit long term margin opportunities. Our revenue estimates remain broadly below consensus for FY14-15 and we expect consensus to continue to drift lower over the next few quarters.” Cepheid closed on Thursday at $39.09.