UPDATE: Lake Street Initiates Coverage On EXACT Sciences

Lake Street Capital Markets initiated coverage on EXACT Sciences Corporation EXAS with a Buy rating and $33.00 price target.

Analyst Bruce D. Jackson noted that since “Cologuard has obtained a $492.72 per test reimbursement rate from Medicare, we think there is upside potential for test revenue during 2015 that can feed positive sentiment on the stock.”

“There may be questions about 2016 and beyond as to whether commercial insurance companies will cover the test (they will, in our opinion) and the sustainability of that price (it’s not, in our view), but ultimately we think this experienced management team can capture a significant share of a large potential market.”

The firm pegged “the future addressable market potential for Exact at $4 billion. This is based on a blended ASP of $220 per test and roughly 17 million tests a year (80 million eligible people, a 65 percent current compliance rate, 3-year screening interval).”

Jackson observed that “Exact has $299 million in cash that can be used for development projects and acquisitions to expand the product portfolio.”

The $33 price target was based on 5x the firm’s 2019 EV/Revenue estimate of $839 million discounted at 10 percent.

Jackson suggested using “share price pullbacks to accumulate shares.”

EXACT Sciences recently traded at $26.28, down 1.9 percent.