We maintain our Neutral recommendation on Luminex Corp. (LMNX) with a target price of $18.
Luminex boasts of a broad product portfolio. The company’s instrument base consists of the Luminex 100 (LX100), Luminex 200 (LX200) and FlexMap 3D systems. The Luminex 100 and 200 are compact analyzers that integrate fluidics, optics and digital signal processing to perform up to 100 bioassays simultaneously in a single tube or well of a microtiter plate using only a small amount of sample.
In March 2010, Luminex and Northrop Grumman Corp. (NOC) agreed to create next generation autonomous biodetectors for monitoring the environment and alerting authorities regarding the release of potentially harmful airborne agents. We believe that the broad product portfolio will drive growth in the coming quarters.
The company’s significant international presence is also encouraging. Additionally, Luminex has an interesting pipeline. Should it successfully develop, the company can look at further growth.
However, we remain concerned about the company’s dependence on partners which have inherent risks and the highly competitive industry in which Luminex operates. Competitors will always look to grab market share by offering lower prices, new services or services, which are different from those offered by Luminex.
Considering these factors, we believe that Luminex’s current valuation adequately reflect its fairly balanced risk/reward profile. As such, we see limited upside from current levels and expect the company to perform in line with the broader market.