Cepheid Diagnosed as Fair Value

Cepheid, Inc. (CPHD - Analyst Report) is a molecular diagnostics company that makes systems for genetic analysis. The Sunnyvale, California-based company announced FDA clearance for its Xpert MRSA/SA SSTI test and Xpert MRSA/SA BC test. Cepheid also announced California legislation that mandates MRSA surveillance and testing in hospitals.

At the end of the second quarter, the management lowered its 2008 revenue and earnings guidance. The company no longer expects to be profitable, excluding stock compensation and amortization of acquired intangibles. We lowered our fiscal 2008 and 2009 estimates. The company is focused in driving growth primarily by penetrating further in the clinical market and launching new products.

At its current price of $13.83 per share, Cepheid is trading at 3.8x our 2009 revenue estimate of $214 million, which is at a discount to the group multiple of roughly 6.6x. At this stage, we believe most of the second quarter revenue and earnings shortfall and revised guidance for 2008 have been factored in the stock price. We believe CPHD is appropriately valued at roughly 4.2x 2009 revenue estimate. Our price target moves to $15.50.

Read the full analyst report on CPHD