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Here's Why You Should Retain PacBio (PACB) Stock For Now
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Pacific Biosciences of California, Inc. (PACB - Free Report) , popularly known as PacBio, has been gaining on the back of its slew of strategic deals over the past few months. A robust second-quarter 2021 performance, along with strength in its Sequel system, is expected to contribute further. However, stiff competition and production bottlenecks persist.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 320.4% compared with 16.1% growth of the industry and 30.9% rise of the S&P 500.
The renowned global provider of sequencing systems has a market capitalization of $5.57 billion. The company projects 11.2% growth for 2022 and expects to maintain its strong performance. PacBio surpassed the Zacks Consensus Estimates in one of the trailing four quarters, missed the same in two and broke even in one, the average negative surprise being 11.83%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Strong Q2 Results: PacBio’s solid second-quarter 2021 results buoy our optimism. The company saw robust increases in both its Product, and Service and other revenues during the quarter. The company also gained from strength in its Instrument and Consumables revenues during the reported quarter. PacBio’s expanding base of Sequel II/IIe systems raises our optimism. The company’s robust performance across geographies is another plus. Gross margin expansion also bodes well for the stock.
Strategic Deals: We are optimistic about PacBio’s slew of strategic deals over the past few months. The company, in August, acquired Circulomics, whose Nanobind technology is expected to accelerate the former’s efforts to make sample extraction and library preparation easier for its customers.
PacBio, in July, signed a definitive merger agreement under which it will acquire San Diego, CA-based Omniome. The buyout will enable PacBio to become the only company having both largely accurate long-read and short-read sequencing platforms under its wings. The same month, PacBio announced an intent to expand its multi-year collaboration with Invitae to develop a production-scale high-throughput HiFi sequencing platform to include the sequencing technology developed by Omniome.
Strength in Sequel System: We are upbeat about PacBio’s flagship platform — the Sequel system — which has been fortifying the company’s footprint worldwide. Research work on COVID-19 has lately been done by several diagnostic labs using the Sequel I system. PacBio placed 38 Sequel II/IIe systems during the second quarter of 2021, thus bringing the total installed base of Sequel II/IIe systems to 282 as of June 30, 2021. During its second-quarter earnings call in August, the company confirmed that its placements during said period included 10 Sequel IIs and 28 Sequel IIes. Around one quarter of its Sequel II and IIe placements were to new instrument customers.
Downsides
Production Bottlenecks: PacBio must successfully manage new introductions and transitions of its products, including the SMRT Cell 8M and Sequel II/IIe systems. However, the company may incur significant costs during these transitions and they may not result in the anticipated benefits. The introduction of future products, including the SMRT Cell 8M and Sequel II/IIe Systems, has and may in the future lead to the company limiting or ceasing development of further enhancements to its existing products.
Stiff Competition: PacBio operates in a highly competitive market where its competitors offer nucleic acid sequencing equipment or consumables. There are a significant number of companies offering nucleic acid sequencing products and/or services. Many of these companies currently have greater resources. They may be able to respond more quickly and effectively than PacBio to new or changing opportunities, technologies, standards or customer requirements.
Estimate Trend
PacBio is witnessing a negative estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has widened from a loss of $1.01 per share to a loss of $1.07 per share.
The Zacks Consensus Estimate for the company’s third-quarter 2021 revenues is pegged at $33.1 million, suggesting a 73.4% improvement from the year-ago quarter’s reported number.
Key Picks
Some better-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Image: Bigstock
Here's Why You Should Retain PacBio (PACB) Stock For Now
Pacific Biosciences of California, Inc. (PACB - Free Report) , popularly known as PacBio, has been gaining on the back of its slew of strategic deals over the past few months. A robust second-quarter 2021 performance, along with strength in its Sequel system, is expected to contribute further. However, stiff competition and production bottlenecks persist.
Over the past year, this Zacks Rank #3 (Hold) stock has gained 320.4% compared with 16.1% growth of the industry and 30.9% rise of the S&P 500.
The renowned global provider of sequencing systems has a market capitalization of $5.57 billion. The company projects 11.2% growth for 2022 and expects to maintain its strong performance. PacBio surpassed the Zacks Consensus Estimates in one of the trailing four quarters, missed the same in two and broke even in one, the average negative surprise being 11.83%.
Image Source: Zacks Investment Research
Let’s delve deeper.
Strong Q2 Results: PacBio’s solid second-quarter 2021 results buoy our optimism. The company saw robust increases in both its Product, and Service and other revenues during the quarter. The company also gained from strength in its Instrument and Consumables revenues during the reported quarter. PacBio’s expanding base of Sequel II/IIe systems raises our optimism. The company’s robust performance across geographies is another plus. Gross margin expansion also bodes well for the stock.
Strategic Deals: We are optimistic about PacBio’s slew of strategic deals over the past few months. The company, in August, acquired Circulomics, whose Nanobind technology is expected to accelerate the former’s efforts to make sample extraction and library preparation easier for its customers.
PacBio, in July, signed a definitive merger agreement under which it will acquire San Diego, CA-based Omniome. The buyout will enable PacBio to become the only company having both largely accurate long-read and short-read sequencing platforms under its wings. The same month, PacBio announced an intent to expand its multi-year collaboration with Invitae to develop a production-scale high-throughput HiFi sequencing platform to include the sequencing technology developed by Omniome.
Strength in Sequel System: We are upbeat about PacBio’s flagship platform — the Sequel system — which has been fortifying the company’s footprint worldwide. Research work on COVID-19 has lately been done by several diagnostic labs using the Sequel I system. PacBio placed 38 Sequel II/IIe systems during the second quarter of 2021, thus bringing the total installed base of Sequel II/IIe systems to 282 as of June 30, 2021. During its second-quarter earnings call in August, the company confirmed that its placements during said period included 10 Sequel IIs and 28 Sequel IIes. Around one quarter of its Sequel II and IIe placements were to new instrument customers.
Downsides
Production Bottlenecks: PacBio must successfully manage new introductions and transitions of its products, including the SMRT Cell 8M and Sequel II/IIe systems. However, the company may incur significant costs during these transitions and they may not result in the anticipated benefits. The introduction of future products, including the SMRT Cell 8M and Sequel II/IIe Systems, has and may in the future lead to the company limiting or ceasing development of further enhancements to its existing products.
Stiff Competition: PacBio operates in a highly competitive market where its competitors offer nucleic acid sequencing equipment or consumables. There are a significant number of companies offering nucleic acid sequencing products and/or services. Many of these companies currently have greater resources. They may be able to respond more quickly and effectively than PacBio to new or changing opportunities, technologies, standards or customer requirements.
Estimate Trend
PacBio is witnessing a negative estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its earnings has widened from a loss of $1.01 per share to a loss of $1.07 per share.
The Zacks Consensus Estimate for the company’s third-quarter 2021 revenues is pegged at $33.1 million, suggesting a 73.4% improvement from the year-ago quarter’s reported number.
Key Picks
Some better-ranked stocks from the broader medical space are Henry Schein, Inc. (HSIC - Free Report) , IDEXX Laboratories, Inc. (IDXX - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) .
Henry Schein’s long-term earnings growth rate is estimated at 13.9%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDEXX’s long-term earnings growth rate is estimated at 19.9%. It currently has a Zacks Rank #2.
Intuitive Surgical’s long-term earnings growth rate is estimated at 9.7%. It currently carries a Zacks Rank #2.