NEW YORK – First Analysis Securities on Thursday upgraded NeoGenomics' shares to Strong Buy from a prior Outperform rating after the firm's shares fell 8 percent following its Q4 earnings report and outlook.
The company reported its earnings before the market opened Thursday, announcing revenue increases of 40 percent up to $106.9 million and exceeding the Wall Street estimate of $104.2 million. However, the firm cautioned on a conference call after the earnings were released that its first quarter 2020 revenues would be weaker than previously expected due to the timing of projects with pharma partners, with multiple projects having concluded in Q4 2019.
In a research note, First Analysis analyst Joseph Munda called the expected Q1 downturn,"transitory" and said "a rebound in both revenue growth and earnings" was likely in the second quarter.
Despite the rating upgrade, First Analysis maintained its target on NeoGenomics' share price at $35.
Munda also said the increasing contribution of next-generation sequencing testing to the company's overall test mix is expected to result in higher revenue per test, as well as a higher average cost per test. However, once the company finishes integrating Genoptix, which it acquired in late 2018, NeoGenomics executives noted there will be opportunities to lower the cost per test, Munda said.
First Analysis lowered its first quarter revenue estimates for 2020 to $107.4 million from $113.6 million, a 5 percent decrease. The investment bank also lowered expected adjusted EPS to $.03 per share from $.09 per share.
On Friday investment bank SVB Leerink raised its price target on NeoGenomics' stock to $33 from $32 and maintained its Outperform rating.
"The Pharma segment is the most important area for [NeoGenomics] longer term and is likely to deliver 20 percent+ growth after navigating 1Q20 headwinds," SVB Leerink analyst Puneet Souda said in a research note. "Despite the slow start management is expecting, their backlog is stronger than ever at $130M, and the company acquired an additional ~$15M backlog when they recently acquired the oncology assets from Human Longevity."
In early morning trading Friday on the Nasdaq, NeoGenomics' shares were up 1 percent to $27.77.