NEW YORK – Investment bank Oppenheimer on Monday downgraded Invitae to a Perform rating, seeking more clarity on the integration of its hereditary cancer and women's health business after the acquisition of ArcherDx last year and other segments of its business.
Last month, Invitae conservatively projected around $450 million in revenues in 2021 after factoring in continued COVID-19 impact. However, the consensus Wall Street estimate for this year's revenues was much more optimistic at $513.7 million.
"While we view 2021 guidance for revenues of $450M-plus as potentially conservative, in our view, opportunities for further multiple expansion may be limited contributing to increased risk of underperformance for Invitae shares," Oppenheimer analyst Kevin DeGeeter wrote in a note to investors. He wrote that while ArcherDx allows Invitae to expand into somatic cancer testing and liquid biopsy, the investment firm is unconvinced that the company has made a strong case for expanding its business with this acquisition beyond pharma collaborations. As such, Oppenheimer's 2021 revenue estimate for Invitae is $450.7 million.
Furthermore, DeGeeter noted that other diagnostics competitors in the space, such as Exact Sciences, invested in providing COVID-19 testing, which has helped grow revenues. Invitae "has generated no material COVID-19 testing revenue," DeGeeter wrote, adding that although Oppenheimer raised its price target from $48 to $51 in early January, "we do not view current valuation as an attractive entry point for new money."
Although earlier Oppenheimer supported the company's overarching strategy of providing lower cost testing to broaden access to genetic testing, DeGeeter said the investment firm wants "more transparency on segment performance and revenue impact from aggressive M&A activity."
In early Monday trade on the New York Stock Exchange, shares of Invitae were down a fraction of a percent at $49.33.