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Investors Can Find A Compelling Entry Point In NeoGenomics After Recent Weakness

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Shares of NeoGenomics, Inc. (NASDAQ: NEO) have been under significant pressure over the past few months, while the company’s Q3 results reflected “strong execution, steady fundamentals and improved cash positioning – all of which offer potential upside, in our view,” BTIG’s Sean Lavin said in a report. He upgraded the rating on the company from Neutral to Buy, while maintaining the price target at $10.

NeoGenomics’ shares have lost 20 percent over the past few months, due to concerns surrounding a potentially dilutive M&A and integration risk. Although these concerns have not been “entirely allayed,” there are signs of “steady fundamentals and encouraging integration,” analyst Lavin commented.

Q3 Results

NeoGenomics reported its revenue in-line with BTIG’s estimate, although marginally missing consensus expectations. Adj. EBITDA came in higher than expected. While base volume growth was strong, cost per test declined 6 percent, despite management’s focus on the Clarient integration.

Lavin expects “new contract wins and above-average demand in cancer testing to better insulate NEO from broader risk.”

Integration Update

The most important takeaways from management’s integration discussions were “the imminent completion of billing integration and solid salesforce retention, which tend to be the most disruptive factors in lab M&A,” the analyst wrote.

Strong Cash Position

Referring to concerns surrounding the potential for dilutive M&A, Lavin stated that NeoGenomics’ strong cash flow generation has placed the company better to deploy capital. He added, “While we didn’t have a strong opinion on this topic, we view less dilution as a step in the right direction.”

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Latest Ratings for NEO

DateFirmActionFromTo
Feb 2021Morgan StanleyMaintainsOverweight
Feb 2021NeedhamAssumesBuy
Feb 2021Raymond JamesDowngradesOutperformMarket Perform

View More Analyst Ratings for NEO
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