Pacific Biosciences of California, Inc. ( PACB Quick Quote PACB - Free Report) is well poised for growth, backed by a robust upside in its Sequel System and progress of its sequencing technology.However, tough competition remains a concern.
Over the past three months, shares of the company have gained 178.2% compared with the
industry’s rise of 3.2%.
The company with a market capitalization of $3.23 billion develops, manufactures and markets sequencing systems. Moreover, it has a trailing four-quarter earnings surprise of 28.6%, on average.
Let’s take a closer look at the factors that substantiate the company as a Zacks Rank #3 (Hold) stock at present.
Sequel System Drives Growth: Pacific Biosciences’ flagship platform, the Sequel system, has been fortifying its footprint worldwide. Sequel system is a nucleic acid sequencing platform based on Single Molecule, Real-Time(SMRT) Sequencing technology. It has been a significant contributor to the company’s top line for a while now. Pacific Biosciences installed 20 Sequel II systems during the third quarter of 2020, expanding the installed base of Sequel II by 14% to 168 as of Sep 30. Utilization on installed Sequel II systems returned to pre-pandemic levels or even higher than that. It is encouraging to note the continued customer adoption of the Sequel II systems. Management expects the proportion of consumable revenues from Sequel II systems to grow consistently as the installed base for Sequel II expands steadily.
In October 2020, the company introduced the Sequel IIe System, the next instrument evolution powered by its SMRT Sequencing technology. The new Sequel IIe System makes HiFi sequencing accessible to any project where high accuracy, long read lengths and affordability are crucial. This development is expected to boost Pacific Biosciences’ flagship platform, the Sequel system.
Unique Technology: Pacific Biosciences’ SMRT sequencing technology has some inherent advantages over the first and second-generation sequencing techniques.
In October 2020, the company inked a research collaboration deal with Invitae, focusing on the investigation of clinically-relevant molecular targets to be used in developing an advanced diagnostic testing for epilepsy. To support this alliance, Invitae is widening the scope of its PacBio sequencing capacity to meet the buoyancy in demand for clinical applications, based on highly accurate genomic information. In the same month, Children’s Mercy Kansas City, one of the nation’s top pediatric medical systems, signed a pact with Pacific Biosciences. The aim of this deal is to further understand the most challenging pediatric diseases using PacBio’s highly accurate HiFi sequencing technology.
What’s Denting the Stock’s Prospects? Cutthroat Competition: The DNA sequencing market is highly competitive due to the presence of established players like Illumina and Thermo Fisher Scientific Inc. Low-cost sequencing products from Illumina continue to gain traction, which is a concern for the company. Moreover, Pacific Biosciences is a relatively small company compared to these second-generation sequencing technology firms. Which Way Are Estimates Headed?
For 2020, the Zacks Consensus Estimate for revenues is pegged at $75.1 million, indicating a decline of 17.4% from the year-ago reported figure. The same for earnings stands at 17 cents per share, suggesting an increase of 130.9% from the year-ago reported figure.
Some better-ranked stocks from the broader medical space are
Align Technology ( ALGN Quick Quote ALGN - Free Report) , Cardinal Health ( CAH Quick Quote CAH - Free Report) and Thermo Fisher Scientific ( TMO Quick Quote TMO - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Align Technology has a projected long-term earnings growth rate of 18.3%.
Cardinal Health has a projected long-term earnings growth rate of 5.5%.
Thermo Fisher has an estimated long-term earnings growth rate of 18%.
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