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Myriad Genetics' Sell Thesis Is 'Largely Played Out'

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Myriad Genetics' Sell Thesis Is 'Largely Played Out'

Ladenburg Thalmann upgraded shares of Myriad Genetics, Inc. (NASDAQ: MYGN), premised on valuation, as it views that the sell thesis has largely played out.

Q2 Largely In Line

Analyst Kevin DeGeeter noted that the company reported second-quarter non-GAAP earnings of $0.26 per share on revenues of $196.5 million. The metrics were ahead of the consensus estimates, the analyst noted. The analyst also indicated that the company's third-quarter non-GAAP earnings per share guidance of $0.23 to $0.25 and revenue guidance of $188 million to $190 million were in line.

Raising Estimates

Ladenburg Thalmann raised its third-quarter revenue estimate to $189 million from $187 million, while retaining its non-GAAP earnings per share estimate at $0.25. The firm also raised its full-year non-GAAP earnings per share estimate to $0.99 from $0.98 and revenue estimate to $751.9 million from $742.4 million.

Challenges To Sustainable Growth

The firm also outlined some challenges the company faces in restoring the company to sustainable growth:

  • Poor internal R&D productivity.
  • Risk of continued pricing pressure for hereditary cancer testing as payers renew in-network contracting.
  • Limited upside potential from companion diagnostics.
  • Diminished balance sheet flexibility to support aggressive share repurchase and M&A.

Upgrading Rating

Ladenburg Thalmann's ratings on Myriad Genetics now goes to Neutral from Sell. The firm noted that then company's shares closed Tuesday's session at $15.40 compared to its $16 price target. The firm also believes the company has potential for near-term stabilization in demand for hereditary cancer testing.

The firm said its Neutral rating reflected unfavorable upside or downside on growth outlook, given the company's struggles to identify new high margin revenue streams to offset the maturing hereditary cancer franchise. However, the firm removed its price target. The firm expects the company's shares to be rangebound until it can provide a path toward sustainable double-digit revenue growth.

That said, the firm sees limited avenues to meaningfully accelerate revenues over the next several quarters, given that hereditary cancer testing, GeneSight and Vectra DA account for 96 percent of testing revenues. The firm believes the Assurance Health acquisition reduces the company's balance sheet flexibility and the potential for incremental buybacks and acquisitions to spur growth.

In pre-market trading, the company's shares jumpstarted and were up 13.38 percent at $17.46, representing a one-month high.

Latest Ratings for MYGN

DateFirmActionFromTo
Sep 2019DowngradesNeutralUnderperform
Aug 2019MaintainsHold
Aug 2019DowngradesOverweightEqual-Weight

View More Analyst Ratings for MYGN
View the Latest Analyst Ratings

Posted-In: Analyst Color Biotech Earnings News Guidance Upgrades Health Care Price Target Best of Benzinga

 

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