NEW YORK – Investment bank Evercore ISI on Tuesday downgraded Qiagen's stock to an In Line rating from a previous Outperform rating and assigned a per-share price target of $42.
In a note to investors, Evercore ISI analyst Ross Muken and others said that although Qiagen appears that it will hit most of its long-term 2020 financial targets issued in 2016, recently issued long-term guidance of constant exchange rate growth of 8 percent to 9 percent by 2023 appears to be less of a sure thing.
With Qiagen having introduced a number of new products and revamped its business mix over the last year or so, "the conversation is transitioning to a show-me story and execution needs to be near perfect to hit targets as shares already bake in the accelerated growth," Muken and colleagues wrote. "Rarely in [life science] tools do we see flawless new product/emerging application launches of high-end technologies associated with regulatory approvals and market penetration."
Furthermore, the Evercore analysts noted, "new product launches require elevated levels of investment, suggesting EPS growth to be modestly above revenue growth." They also noted that ultimately, Qiagen's consolidation of molecular diagnostics firm NeuMoDx — a merger that could be completed by next year for up to $234 million subject to milestones — will be dilutive.
In terms of the expected performance of individual product portfolios, Qiagen's bioinformatics and next-generation sequencing portfolios are likely to continue to benefit from an overall uptick in sequencing adoption; latent tuberculosis testing is still underpenetrated; and the QiaStat Dx syndromic testing business will likely grow alongside the overall syndromic testing market, the Evercore analysts noted.
However, the QiaStat and NeuMoDx businesses "all hinge on significant menu expansion goals," Muken and colleagues wrote. "Regulatory approvals are never a given and there is a strong chance one or several could be pushed out, which would disrupt timelines and potentially jeopardize growth."
In summary, the analysts said they remain bullish on the long-term thesis and believe Qiagen is set up for accelerated growth, but "it is just that this growth is largely priced in. … In the end, we are big fans of this management team and believe they will get things done, [but] we would just like to see more wiggle room to the upside in shares (or at least have a differentiated view on growth or EPS)."
Qiagen plans to report its second quarter 2019 earnings on July 30 after the close of the market. In mid-morning trading on the New York Stock Exchange, Qiagen's shared were down around 2 percent to $39.37.