Given the company's market leading position in its three core technology platforms, an increased focus on the applied markets and emerging geographies, and its robust new product pipeline, the firm thinks that ABI is poised for significant future growth and appreciation. They reiterate Buy rating and $42 price target and would look to add shares at these depressed price levels.
ABI remains the market leader in its 3 core platforms: mass spec, sequencing, and real-time PCR. Given the company's leverage to pharmacogenomics, proteomics, molecular diagnostics and DNA forensics, the firm anticipates that ABI's LT organic growth rate, margin structure and cash flow should be at the forefront of the Life Science Tools peer group. Additionally, the upcoming debut of its new next-gen sequencer (from Agencourt) is a prime example of the company's ability to innovate internally as well as via strategic acquisitions.
The crux of DB's upgrade of ABI shares in Sep. was the company's success in the applied markets, and that fundamental view remains unchanged.
On the valuation side, the company's forward EBITDA multiple is at 9x, well below its historical average and that of the comp group (11.4x). Additionally, the company has a forward operating cash flow yield of 7.6%, well above the previous 2 years and significantly above the comp group average of 2-3% (with a free cash flow yield of 6.3%). Given the strength in fundamental valuation vs. current trading levels, the firm thinks that now is an opportune time to add shares of ABI.
Notablecalls: Given the schmeissing this stock has experienced over the last week, I'd keep it on my radar for a possible bounce over the next couple of days.